Obama’s Climate Plan Points to Increasing Importance of Natural Gas
An article I wrote was published yesterday, Why a Global Shale Gas Boom is Key to Combating Climate Change. Because I had actually written the article a week ago, I didn’t know that it would come out at the same time as the release of the President’s big speech on climate change. As I demonstrated in the post, the U.S. has been the most successful country over the last decade in reducing its emissions; most of that is due to fuel switching from coal to natural gas. Natural gas generates more than 50% less greenhouse gas emissions than coal, not even including the many harmful particulate pollutants coal emits. To achieve similar benefits around the world, we need to replicate America’s shale gas revolution around the world.
While most of the news about the speech will be about how Obama is planning to accelerate renewable energy, I believe the biggest area of near-term action on reducing emissions will come from some underreported sections that will encourage the replacement of coal with natural gas for energy generation, both in the U.S. and globally.
Emissions Reduction Laundry List
The President’s plan is actually not one thing; it is a laundry list of federal actions, many of which are already being done. It is broken into three parts: (1) mitigating emissions in the US, (2) adapting to inevitable climate change, and (3) using diplomacy to lead international emissions reductions. Each of these has areas that will help accelerate fuel switching.
First, the big news from the speech, and a potential “game changer” in how the U.S. generates its electricity is new EPA regulations. These come in two parts: regulation of emissions from existing power pants and regulation of emissions from new ones. The first has been proposed, but delayed over and over, the second has bee speculated, but never proposed. Both are actually required by law (the Clean Air Act) under a 2007 Supreme Court ruling. The President’s speech only directs that EPA start the rulemaking process, but the markets are showing that they believe these will go through – as coal stocks are taking a beating. EPA regulations will firmly entrench natural gas as the fuel of choice for electricity generation.
Second, the section on adapting to climate change will not, by its nature, do much to encourage fuel switching, but there is one section that discusses a Department of Energy review of how climate change will impact energy generation. Thermal power plants, like coal or nuclear power, require a huge amount of water for steam generation and cooling. Most of that water is returned to the environment, but it has to exist in the first place. In times of drought, which most climate projections anticipate the American West is likely to face more of, coal plants will become very difficult to operate in the summer – when demand is highest. Natural gas power plants do not face this problem.
Exporting Natural Gas
Finally, as I identified in my article, the most important thing that we can do to reduce global carbon emissions is to make sure the shale gas revolution is exported around the world. In the Administration’s plan, they explicitly state a policy to promote “fuel switching from coal and oil to natural gas and renewables” abroad. They cite a State Department program called the Unconventional Gas Technical Engagement Program that helps link American gas producers with potential customers in countries around the world who have large shale gas reserves.
This, combined with other policies amounts to a major initiative to export US shale gas technology and expertise. The other major initiative on gas is a push to encourage the development of “a global market for natural gas.” That is a clear code for the approval of LNG exports. Market forces will eventually encourage a switch from coal to natural gas around the world as gas becomes a true global commodity – and new technology brings new shale gas to market. The US government can help push this forward.
In the end, I don’t think the President’s speech amounts to a single major new proposal. On the other hand, it is a series of worthy actions that will slowly reduce American carbon emissions. Natural gas will play a big part in that switch – and this Administration knows how important it will be.
- For those who want an inside edge in the energy sector.
- Written by veteran energy analysts and insiders with a track record of accurately predicting trends.
- 100% FREE!
- And Much More...
Total Energy USA Conference and Exposition
November 19-21, 2013 - Houston, TX
Platts Global Energy Outlook Forum
December 12, 2013 - New York, NY