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President's Climate Change Plan Hinges on Natural Gas

Obama and Natural Gas

  • President Obama’s plan for addressing US greenhouse gas emissions depends heavily on expanded fracking of US shale gas resources.
  • Reducing power sector emissions will be expensive, unless implemented with maximum flexibility.
  • The President’s endorsement of climate adaptation was helpful, if overdue.

President Obama’s much-anticipated speech on climate change emphasized measures affecting our production and use of energy, which accounts for 86% of US emissions of the greenhouse gases implicated in global warming.  In its recognition of the ongoing importance of fossil fuels to the economy and inclusion of climate adaptation, it probably represents the most balanced approach on this subject from this White House.  However, many of the components of this plan could prove costlier than other solutions that have been debated in recent years.

Some context is necessary.  In 2009 the US Congress, controlled by the President’s party, took up comprehensive climate legislation centered on “cap-and-trade.” In principle, that would have limited emissions while enabling emitters with high abatement costs to purchase offsets from others who could cut emissions less expensively. Unfortunately, the Waxman-Markey Bill’s version of cap-and-trade was so distorted by handouts to favored constituencies that its effectiveness at reducing future emissions was highly questionable.  By the time it died in the Senate, it looked more like a piñata of revenue allocation than a serious effort to address climate change.

So depending on your perspective, the President’s new climate plan is either a punishment for Congressional failure to pass a climate bill, or the unavoidable sequel to legislative stalemate. Its prescriptive approach to parceling out emissions cuts to different sectors, with a heavy focus on electricity generation, might prove effective at reducing some emissions but will certainly be more expensive than a broad, market-based approach.

The hallmark of the speech was the President’s instruction to the Environmental Protection Agency (EPA) to develop carbon emissions standards for both new and existing power plants.  This feature had been leaked in advance, and it was hailed by many environmentalists.  How much it will cost us depends on how EPA constructs the regulations necessary to put it into effect. 

If they approach the power plant carbon standard in a manner similar to the corporate average fuel economy (CAFE) rules applied to each automaker’s new car fleet, then the resulting flexibility could moderate both its cost and adverse consequences. Conversely, if they cap emissions at each individual power plant–analogous to specifying the mpg of each new car–we should expect a wave of power plant closures, including at some gas-fired plants necessary to manage peak loads and back up wind and solar power.  The implications for utility bills and electric reliability are significant, so the details will matter enormously.

The President has a point when he says that past predictions of economic harm associated with previous environmental regulations largely failed to materialize, due to the ingenuity of American businesses. However, I believe his dismissal of concerns about EPA regulation of CO2 emissions is overly cavalier, because it ignores two fundamental facts. 

First and foremost, energy-related CO2 has little in common with the pollutants the EPA has regulated in the past.  It results neither from small impurities in fuel, such as sulfur or mercury, nor as a minor byproduct of combustion with air, such as NOx.  Along with water and heat, CO2 is a primary and unavoidable outcome of all hydrocarbon combustion. We can’t clean it up cheaply by purifying the fuel or adding a catalytic converter or scrubber to an exhaust pipe or smokestack.  We must either send it to the atmosphere, as we’ve done since the invention of fire, or chemically separate it from the exhaust, and then compress it and bury it underground, or react it chemically to produce new fuel or some other product.  So far, both of the latter options are expensive and energy-intensive.   There’s simply no free lunch to be had in dealing with emissions from the fossil fuels without which, as the President admitted, “Our economy wouldn’t run very well.”

The other problem, familiar to my long-time readers, is scale.  President Obama said that his new plan would “double again our energy from wind and sun”, as it doubled in the last four years. Unfortunately, that further doubling would only yield enough electricity to displace 9.5% of the electricity generated from coal last year, saving less than 3% of total US emissions. New nuclear power plants require many years to build, and those now under construction only offset the announced and plausible retirements of existing nuclear units.  Thus, any shortfall in electricity supply due to the retirement of additional coal plants must be made up mainly by natural gas, which a new report from the Breakthrough Institute calls the “Coal Killer“. 

For the first time in a generation, it appears we have enough gas to take on such a challenge. Replacing half of 2012’s coal-fired power generation would require a 50% increase in the quantity of gas sold to US generating plants last year, supported by another 20% increase in US dry gas production, to nearly 29 trillion cubic feet per year. That level of output would be consistent with the Energy Information Administration’s current forecast for US production by the mid-2020’s.  Of course the power sector would have to compete with other sectors that are also seeking more gas, including manufacturing and transportation, so the future price of natural gas–even with abundant shale sources–is uncertain.  The bottom line is that President Obama’s plan for reducing CO2 emissions from the power sector depends mainly on raising US natural gas production through expanded hydraulic fracturing of shale deposits.

I should also briefly mention a few other aspects of the speech. The President wants to promote energy efficiency and renewable energy by having the federal government lead in their adoption.  This sounds like motherhood and apple pie, and there’s no question that efficiency measures have a role to play in reducing both energy consumption and emissions.  However, they shouldn’t be divorced from a broader perspective encompassing financial and operational efficiency.  I would wager that the federal government could cut its energy consumption from buildings just as quickly, and perhaps less expensively, by reducing its vast inventory of owned and leased buildings.

Federal adoption of renewable energy should also be guided by financial and operational considerations.  For example, it is desirable for the military to ensure that as many of its aircraft, ships and vehicles as possible are capable of using alternative fuels, and to certify new systems on such fuels. However, it would be counterproductive verging on irresponsible to prioritize the purchase of uncompetitively priced alternative fuels, when budget cuts and sequestration are grounding fighter squadrons and otherwise impairing readiness.  Funds are fungible, as CFOs are wont to say, and every extra dollar spent on renewable vs. ordinary jet fuel is a dollar that can’t be spent on training or maintenance.  And investments in high-cost renewables could achieve more if diverted into support for innovation on improved energy technologies capable of competing without endless subsidies.

The President’s remarks on the Keystone XL pipeline were consistently vague. Some supporters of the project were encouraged, while opponents could still conclude a rejection was inevitable.  From my perspective the only new element was his apparent dismissal of any objections on the basis of potential leaks and other local concerns from the final decision.

Finally, there’s the issue of adaptation.  President Obama effectively acknowledged that if the climate models that underlie his plan are correct, we face additional warming and other consequences, no matter how much we reduce emissions. He proposes to “protect critical sectors of our economy and prepare the United States for the impacts of climate change that we cannot avoid.”  This is overdue and ought to attract bipartisan support, irrespective of whether our elected representatives are convinced that human activities are responsible for the changes we see in the climate.  Too many people and too many assets have been placed in the path of natural disasters that could become more frequent or severe, if the globe continues to warm. Adaptation offers “no regrets” opportunities, though building more resilient infrastructure is only part of the appropriate response.  Expect to hear more about this subject in the weeks and months ahead.

The Executive Branch actions outlined in the President’s speech constitute a Plan B for climate change.  They may yield emissions reductions, though likely at a higher cost than broader, more even-handed measures that have become politically unpalatable. However, in a persistently weak economy the resulting higher energy prices are also likely to threaten an emerging source of US competitive advantage. Instead of solving the politics of climate change, the President’s plan could deepen the polarization that already exists on this issue.

Photo Credit: Obama and Natural Gas/shutterstock

Geoffrey Styles's picture

Thank Geoffrey for the Post!

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Ivor O'Connor's picture
Ivor O'Connor on July 2, 2013

Quoting from above: “President Obama said that his new plan would “double again our energy from wind and sun”, as it doubled in the last four years. Unfortunately, that further doubling would only yield enough electricity to displace 9.5% of the electricity generated from coal last year, saving less than 3% of total US emissions.”

Which means coal is responsible for 30% of CO2?

Doubling every four years: 10%@2017, 20%@2021, 40%@2025, 80%@2029, 160%@2033 meaning we would need to start converting excess energy to methane for the transport sector like Germany is already starting to do…

I’ve only read this article once and missed the part of how much Obama wants to lower CO2 by.

Geoffrey Styles's picture
Geoffrey Styles on July 2, 2013

Simple extrapolation of exponential growth doesn’t offer much value without exploring what would be required to enable that to happen. Assuming wind and solar could continue to double every four years ignores numerous grid, financial, permitting and other challenges.  The point here is that although doubling again by 2017 is not a slam dunk, even if it happened it wouldn’t make more than a small dent in emissions. 

Ivor O'Connor's picture
Ivor O'Connor on July 2, 2013

I like wildy extrapolating because it shows that if things continue the way they are going all will be good.

I’m more concerned with a simple summary. We are suppose to reduce CO2 by how much? 17% by 2020?

So 3% via renewables leaving 14%? If Coal is responsible for 30% of the CO2 and gas is 50% less then we’d have to replace all coal plants with gas plants?

John Miller's picture
John Miller on July 2, 2013

Geoffrey, coincidentally you and I have posted  on similar subjects today.  While you do a thorough analysis of President Obama’s overall climate policy speech, I have analyzed how the policy could feasibly achieve his implied goal of reducing U.S. 2005 carbon emissions by 17% in 2020.  Our two independent (peer) reviews come to similar conclusions: significantly reducing U.S. carbon emissions will require the use of natural gas to displace coal in the Power Sector. 

Compared to other recent posts, our two posts should provide a reasonably balanced analysis of Obama’s recently proposed climate policy, which he apparently intends to implement around Congress through different executive orders.  

Geoffrey Styles's picture
Geoffrey Styles on July 2, 2013

How many writers got their start because they weren’t seeing what they wanted to read? 

The complication to the simple comparison you’re looking for is that the other moving parts won’t stand still for the next 7 years.

Ivor O'Connor's picture
Ivor O'Connor on July 2, 2013

lol, good point. “How many writers got their start because they weren’t seeing what they wanted to read? “

Geoffrey Styles's picture
Geoffrey Styles on July 2, 2013

As Richard Feynman said, the same equations have the same solutions.  It’s no coincidence we’d come to the same conclusion.

Rick Engebretson's picture
Rick Engebretson on July 2, 2013

As usual, I think you are quite right about the vital role your industry will play going forward. Not having followed this new plan closely, partly because there is no plan, I think there is none the less something of great importance this global discussion reflects.

If we look at atmospheric O2 instead of CO2, we come up with a different discussion. Fossil carbon has no energy value unless in reacts with atmospheric O2. And atmospheric O2 is now seen as public property. All the climate and pollution implications of CO2 are the mirror image of clean O2. An “emissions” debate becomes a “consumption” debate. And public property has big implications, globally.

I don’t know any policy stuff. But when those that create half the energy reaction (O2) by protecting the environment realize they create essential energy value and don’t get paid, the regulatory landscape will change.

Ivor O'Connor's picture
Ivor O'Connor on July 3, 2013

I think you are both right. Obama is pushing for 100% fracking. However he probably knows that will not happen because nobody wants their ground water polluted. So pitting fracking and coal at each other may result in a big gain for renewables. We might look back and thank Obama for the “unintended consequences”.

Or there may not be any problem. Listening to his speech he did say we will not subsidize foreign coal plants unless they use sequestration. Clearly he thinks “sequestration” is a possible solution. Politicians have a way of changing the meaning of words. So if this is the case our coal companies can continue to merrily mine coal so both fossil fuel companies can grow, grow, grow…

Geoffrey Styles's picture
Geoffrey Styles on July 3, 2013

Ivor,

The President talks a good game on natural gas, while his administration has tightened access to federal lands. Such a disconnect has multiple possible explanations. As for “nobody wants their groundwater polluted”, the actual risks, as distinct from the distortions in presentations like “Gasland”, are quite low.  For example, after all the concerns at Dimock, PA, the EPA determined that the only contaminants were naturally occurring and unrelated to fracking: http://yosemite.epa.gov/opa/admpress.nsf/0/1A6E49D193E1007585257A46005B61AD

At Pavillion, WY, after several years of study EPA just concluded its findings were “inconclusive” and turned the matter back to the state: http://yosemite.epa.gov/opa/admpress.nsf/20ed1dfa1751192c8525735900400c30/dc7dcdb471dcfe1785257b90007377bf!OpenDocument

Oil and gas drilling and hydraulic fracturing have risks, but the number of verified cases of contamination is extraordinarily low, relative to a total number of fracked wells in the US that is now around 1 million. 

Re renewables, the relationship between those and gas is complex; there are both competitive and synergistic aspects.  But at least at this stage of development, adoption of intermittent renewables like wind and solar would be far more difficult without ample gas-fired electricity.

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