A comprehensive analysis by C2ES concludes that increased natural gas use can help reduce U.S. greenhouse gas emissions in the near to medium term, but deeper long-term reductions will require broader deployment of other low-carbon energy sources as well.
"Leveraging Natural Gas to Reduce Greenhouse Gas Emissions" examines the climate challenges and opportunities posed by the current natural gas boom. The report synthesizes information from a series of background papers and workshops in Houston and Boston attended by several dozen experts and representatives of industry, environmental organizations, and state agencies
Among the report’s key findings:
- U.S. greenhouse gas emissions are back down to mid-1990s levels, in part because electricity generators are using more natural gas, which emits half as much carbon dioxide as coal. Further reductions can be achieved by substituting natural gas for coal and oil in the transportation, manufacturing and building sectors.
- Simply substituting natural gas will not achieve the deeper emissions cuts needed in the longer term. Zero-carbon energy sources such as solar, wind and nuclear are critical. Strong support also is needed to perfect and deploy technologies to capture carbon emissions from coal- and natural gas-fired power plants and bury them underground.
The potential climate benefits of increased natural gas use can be maximized only if further steps are taken throughout the natural gas system to reduce leaks of methane, the principal component of natural gas and a potent greenhouse gas.
Following is a summary of opportunities and challenges identified in the report, and key next steps:
- Increased direct use of natural gas in homes and businesses by replacing certain electric appliances, such as space and water heaters, with natural gas models.
- Reduced reliance on petroleum and reduced emissions by substituting natural gas for diesel and gasoline in fleets and heavy-duty trucks.
- Manufacturing growth with reduced emissions by using natural gas in more efficient combined heat and power systems.
- Expanded use of natural gas-powered fuel cells and microturbines producing efficient, on-site energy that makes use of waste heat.
- Funding expensive infrastructure to deliver natural gas to more homes and businesses.
- Ensuring that natural gas complements -- not crowds out -- zero-carbon energy such as nuclear, wind, and solar.
- Overcoming regulatory hurdles and a lack of incentives for on-site (distributed) power generation.
- Identifying and addressing methane leaks from the production, transmission, and distribution of natural gas.
- Educating consumers about the full-fuel-cycle efficiency of natural gas appliances.
- Encouraging innovative funding models and incentives to extend natural gas lines to consumers and promote on-site power generation.
- Informing manufacturers about the increased efficiency and resilience of combined heat and power systems.
- Aligning state policies to overcome perceived conflicts between utilities and combined heat and power operations, encourage development of distributed generation technologies such as microturbines, and address the high cost of expanding natural gas infrastructure.
- Agenda of our June 4, 2013, launch event.
- Photos of our launch event
- Blog post: Leveraging the natural gas boom to cut carbon
- Press release on report.
- Our Leveraging Natural Gas Webinar Series.
Video of our launch event
Remarks by Eileen Claussen and Michael Webber
CEO-Level Discission on the greenhouse gas reduction benefits of natural gas
At the moment, our attention is riveted by the events unfolding at a nuclear power plant in Japan. Over the past year or so, major accidents have befallen just about all of our major sources of energy: from the Gulf oil spill, to the natural gas explosion in California, to the accidents in coal mines in Chile and West Virginia, and now to the partial meltdown of the Fukushima Dai-ichi nuclear reactor. We have been reminded that harnessing energy to meet human needs is essential, but that it entails risks. The risks of different energy sources differ in size and kind, but none of them are risk-free.
Coverage of Natural Gas Emissions & Flows Under a GHG Cap-and-Trade Program
Prepared for the Pew Center on Global Climate Change
Senior Vice President, ICF International
This paper provides an overview of the different point-of-regulation options for covering greenhouse gas emissions
from natural gas under a cap-and-trade program. The paper assesses the percentage of emissions covered under the different options and the type and number of entities and facilities regulated.
Greenhouse gas (GHG) emissions associated with natural gas make up nearly 18 percent of total U.S. GHG emissions.1 Regulation of GHG emissions from the natural gas sector under a cap-and-trade program presents challenges different from those associated with coal or petroleum for several reasons:
- End users of natural gas number in the millions and include not only large industrial facilities and electricity generators, but also a wide variety of smaller users in the commercial and residential sectors.
- Although the principal GHG concern for the sector is carbon dioxide (CO2) emissions from natural gas combustion, the sector also generates non-energy CO2emissions and fugitive emissions of methane (CH4), which are difficult to measure and monitor.2
- There are a number of different types of entities in the natural gas supply chain from production to end use making it difficult to apply the standard upstream vs. downstream dichotomy traditionally used to think about the point of regulation for petroleum and coal under cap-and-trade programs.
- Both physical possession and, in many cases, ownership of the natural gas commodity change multiple times within the value chain as natural gas moves from producers to end-use consumers.
These factors have made the treatment of natural gas a challenging issue in the design of a federal economy-wide GHG cap-and-trade program.3 Bills introduced in Congress have reflected a range of different approaches.4 Even different versions of the Lieberman-Warner bill (S. 2191) incorporated different approaches.
A particularly important design issue is whether to directly regulate GHG emitters or to regulate firms for the embedded emissions of the fossil fuels that they produce, process, transport, or distribute.5 For fossil fuels like natural gas, embedded emissions are the GHG emissions that will ultimately be emitted once the fuel is combusted (see box below for a discussion of the direct vs. embedded emissions and upstream vs. downstream points of regulation). A point of regulation for natural gas coverage under cap and trade that regulates embedded emissions would cover emissions by end users indirectly through the regulation of entities/facilities that produce, process, transport, or distribute natural gas.6 Under a cap-and-trade program, these entities/ facilities would be required to acquire and retire emission allowances equal to their embedded emissions—i.e. the CO2emissions from combustion of the natural gas that these entities/facilities produce, process, transport, or distribute. In theory, entities regulated for their embedded emissions would pass the cost of allowances on to consumers of natural gas thus providing the same economic incentive for emission reductions on the part of emitters as would a cap-and-trade program that regulated direct emissions.7
The reason for interest in regulating embedded emissions is that it may be possible to, in effect, cover the direct emissions of many diverse emission sources by regulating the embedded emissions of relatively few entities that produce, process, transport, or deliver fossil fuels. For example, GHG emissions from many millions of motor vehicles could be covered under cap and trade via regulation of the embedded emissions of approximately 150 U.S. oil refiners plus some importers of fuel. That said, there is concern as to whether in practice the price signal established by regulating embedded emissions is an efficient or effective way to ensure GHG reductions from end users.
In considering the point-of-regulation options, one must consider what percentage of GHG emissions from the natural gas sector each option would cover and how many and what kinds of entities/facilities would need to be regulated. The latter question is important from the perspective of allowing for the accurate measurement of direct emissions by regulated entities/facilities or embedded emissions from natural gas produced, processed, transported, or distributed by regulated entitities/facilities. Moreover, all else equal, a cap-and-trade program that limits the number of entities/facilities that must be monitored for compliance limits the associated administrative costs borne by government and industry. One should also consider the efficiency with which different point-of-regulation options achieve emission reductions because of differences in compliance options and responsiveness to price signals among entities at different points along the natural gas value chain. This last question is the subject of a forthcoming paper.
The following sections of this paper review the emissions profile of the natural gas sector, identify the key entities and associated facilities in the natural gas supply chain, provide an estimate of the emissions coverage and number of entities and facilities regulated under various point-of-regulation options, and provide a summary of the analysis.
About the Author
Joel Bluestein is Senior Vice President of ICF International and is a nationally recognized expert on the impacts of environmental and energy regulation with over 30 years of experience in the energy and environmental arenas. Prior to 2007, he was President of Energy and Environmental Analysis, Inc., now an ICF International company, which was nationally known for its analysis of natural gas supply, transportation, and market issues and provided strategic planning and regulatory support to all segments of the natural gas industry.
Mr. Bluestein has been directly involved in the development of emission trading programs and participates in the national debate on new environmental policies and their energy implications. He has testified before the Senate Environment and Public Works Committee on natural gas supply issues and their implications for multi-pollutant regulation of the electric generating sector. His work has included technology and market assessments, R&D planning, energy conservation project analysis, and long-term energy demand forecasting. He holds a degree in Mechanical Engineering from the Massachusetts Institute of Technology and is a registered Professional Engineer.