Energy & Technology
- In 2012, natural gas constituted 25 percent of total U.S. energy consumption – and 24 percent total global energy consumption – and provides roughly one fifth of all U.S. electricity generation.
- About 24 percent of U.S. carbon dioxide emissions are related to natural gas, 1,296 million metric tons in 2011.
- No one sector dominates natural gas consumption; rather, the electric power, industrial, residential, and commercial sectors are all significant end users.
- Replacing diesel with natural gas could reduce fuel lifecycle greenhouse gas emissions from heavy-duty vehicles by up to 29 percent , depending on leakage rates.,
- Comparing coal to natural gas, natural gas power plants emit half as many greenhouse gas emissions.
- Natural gas-fired electricity power plants are expected to continue to increase in importance – accounting for 37 percent of the planned capacity for 2012 and 60 percent of capacity additions between 2010 and 2035.
- Natural gas can supplement intermittent energy sources such as solar and wind, potentially allowing for more opportunities for clean and renewable energy deployment.
- The natural gas policy landscape is diverse; addressing fuel sourcing, distribution, power production, and end use consumption.
- An estimated 36 gigawatts (GW) of coal generation is expected to be retired between 2014 and 2016, largely in response to lower natural gas prices and, to a lesser extent, new environmental regulations.
Proposed greenhouse gas emissions standards by the U.S. Environmental Protection Agency favor natural gas technologies for new fossil fuel power plants
Constituting 25 percent of total U.S. energy consumption, natural gas is important in almost every economic sector, used to produce heat and electricity, and as a feedstock in manufacturing (see Figure 1). Natural gas is composed primarily of methane (CH4) – a very potent greenhouse gas. During various steps of natural gas extraction, transportation, and processing, methane is released to the atmosphere. These “fugitive” emissions can represent an opportunity to reduce greenhouse gas emissions, maximizing the potential climate benefits of using natural gas.
Recently, natural gas reserves have dramatically expanded because of technological advances allowing access to unconventional sources in shale formations, coal beds, and sandstone formations. For background information on natural gas not covered in this factsheet, including supply, demand, and pricing see C2ES Natural Gas Overview.
Figure 1: U.S. Natural Gas Consumption by Economic Sector (2011)
Source: Energy Information Administration, U.S. Department of Energy 2012.
In the last few years, the outlook for U.S. natural gas supply has changed dramatically, with predictions no longer showing the United States becoming increasingly reliant on natural gas imports (particularly imports of liquefied natural gas, or LNG); rather, technological advances in seismic imaging, horizontal directional drilling and hydraulic fracturing over the past 30 years have led to dramatically increasing economically recoverable North American shale gas. Because of this increase, the United States is expected to become a net exporter of natural gas in 2022. Shale gas has been the primary source of U.S. natural gas growth since 2000, increasing from 2 percent to approximately 22 percent of the natural gas supply in 2011. Shale gas is expected to grow fourfold by 2035, making up nearly 50 percent of total U.S. natural gas production.
In 2012, U.S. natural gas consumption averaged 69.8 billion cubic feet per day (Bcf/d), a 4.8 percent increase (3.2 Bcf/d) from 2011 (see Figure 2). Growth in natural gas consumption is expected in all sectors except the residential sector, with the most dramatic increase in transportation (an estimated 5.9 percent increase, though it is starting from a low baseline).
Figure 2: Projected Total Natural Gas Consumption (2012-2035)
Source: EIA Annual Energy Outlook. 2012. Total Energy Supply, Disposition, and Price Summary.
Natural Gas Applications
Natural gas has a wide range of applications in all economic sectors.
Electric Power: Natural gas can provide baseload, intermediate, and peak demand electricity. The electric power sector is using an increasing percentage of natural gas, over 31 percent in 2011, up from 17percent in 1990. Natural gas-fired electric power plants are expected to continue to increase in importance – accounting for 37 percent of 23.5 GW of electric power generation planned for 2012 and 60 percent of capacity additions between 2010 and 2035 (for more, see C2ES resource Natural Gas in the U.S. Electric Power Sector).
- Besides the appeal of a low-cost domestic fuel source, natural gas power plants can be constructed in as little as 20 months for approximately one third the levelized capital cost for a typical coal plant. Natural gas electricity generation relies on three basic technologies:
- Steam turbine plants: These plants operate like traditional coal-fueled power plants where fossil fuel (in this case natural gas) combustion heats water to create steam. The steam turns a turbine, which runs a generator to create electricity. These typically have thermal efficiencies of 30 – 35 percent.
- Combustion turbine plants: These plants are generally used to meet peak electricity demand. They operate similarly to jet engines: natural gas is combusted and used to turn the turbine blades and spin an electrical generator. The typical size is 100 – 400 MW with a thermal efficiency around 35 – 40 percent.
- Combined cycle plants (NGCC): Combined cycle plants are highly efficient because they combine combustion turbines and steam turbines; the hot exhaust from a gas-fired combustion turbine is used to create steam to power a steam turbine. High efficiency combined cycle plants emit less than half the CO2 per megawatt-hour as coal power plants, and operate with a 50 – 60 percent thermal efficiency range. A typical natural gas combined cycle power plant has a heat rate (i.e., the amount of fuel used per unit of electricity generation) that is about one third lower than for a combustion turbine or gas-fired steam turbine plant. The newest NGCC systems claim efficiencies of greater than 61 percent.
Figure 3: Combined Cycle Power Plant
Source: Global-Greenhouse-Warming.com, 2010.
- Alongside renewables: Natural gas can have an important relationship with renewable energy production because of its ability to respond quickly to short-term energy supply fluctuations. As a highly responsive energy source capable of providing baseload and short-term energy supply, it can supplement intermittent energy sources such as solar and wind, allowing for more opportunities for clean energy deployment.
- Greenhouse Gas Abatement options:
- Fuel switching: Fuel switching refers to displacing traditional coal-fueled electricity generation with less carbon-intensive natural gas generation. Activities include: modifications to existing coal plants to instead utilize natural gas; operating fewer coal power plants; operating those plants at lower output levels; ramping up generation from natural gas power plants; and/or building new natural gas plants to replace coal generation. From 2002 to 2010, the number of natural gas electric utility power plants increased by 10 percent, from 699 to 775, while the number of coal electric utility power plants fell by 7 percent, from 363 to 333.
- Distributed Generation (DG): Traditionally, electricity is produced in large centralized power stations, which is transported to end-users over long distances. Contrarily, DG produces smaller amounts of electricity closer to the consumption site. DG benefits include fewer losses from long distance transmission lines, increased reliability, reduced peak power load, and increased responsiveness. Some technologies use less primary energy and emit fewer greenhouse gases than the centralized power system, especially when they are used in combined heat and power operations (see C2ES resource Distributed Energy and Emerging Technologies).
- Carbon capture and storage (CCS): Similar to its application with coal-fueled power plants, CCS can be coupled with natural gas power plants to capture and permanently sequester large percentages of the CO2 emissions from electricity generation (see Climate TechBook: Carbon Capture and Storage).
- Supply Side Efficiency: Modern natural gas combined cycle power plants have higher efficiencies than gas-fired steam cycle plants; replacing the latter with the former can reduce the greenhouse gas emissions from gas-fired electricity generation. Increasing the thermal efficiency of electricity production can reduce emissions, as higher thermal efficiencies mean less fuel is required to produce each kilowatt-hour of electricity (see C2ES resource Natural Gas in the U.S. Electric Power Sector).
Industrial Sector. Natural gas can be used in a diverse array of industrial sector applications, including heating and cooling, electricity generation, food processing, and as a feedstock in chemical products, plastics and fertilizers (see C2ES resource Natural Gas in the Industrial Sector). In 2011, natural gas accounted for 58 percent of industrial electricity generation produced onsite, up from 51percent in 2005. That year, the industrial sector consumed 6.91 quadrillion Btus of natural gas with 72 percent (4.98 quadrillion Btus) in heat and power operations. Industrial sector usage resulted in the release of 433 million metric tons of CO2 that same year.
- Greenhouse Gas Abatement Options:
- Boiler Efficiency: Because of the widespread use of natural gas in heat and power provision, upgrading boiler equipment to the highest efficiency possible can provide considerable emission benefits. For example, gas fueled boilers tend to have a long operational life; many in current operation are no longer considered efficient options. Replacing inefficient pre-1985 boilers, with average efficiency rates between 65 and 70 percent, with new boilers reaching efficiencies of up to 95 percent, could reduce emissions between 4,500 to 9,000 tons of CO2 per boiler.
- Combined heat and power (CHP, or cogeneration): In natural gas-fueled industrial CHP applications, natural gas is used to generate both useful heat and electricity. CHP has much higher efficiency than separate generation of heat and electricity from the same fuel supply. Therefore, replacing separate power and heat generation with CHP reduces fuel use and lowers emissions. As noted earlier, some of the most efficient uses of natural gas are in distributed generation applications in CHP operations. However, utility safety concerns, lack of additional expertise, lack of utility financial incentive to encourage its use, and the need to provide sufficient backup are barriers to CHP development.
- Other efficiency measures: Measures such as preventive maintenance and advanced steam systems process controls can lead to more efficient energy use and thus lower emissions.
Natural Gas Industry Operations. Natural gas systems involve the production, processing, transmitting, and distributing as well as the storage of the resource.
- Formation CO2: Often found in raw natural gas, formation CO2 is separated and generally vented to the atmosphere during natural gas processing.
- Fugitive emissions: Fugitive emissions, also called “leakage”, are primarily from equipment or pipeline leaks as well as routine venting activities. Estimates of leakage rates within the natural gas system are changing as more information becomes available. Greenhouse gas monitoring, measurement, and regulation in other sectors and the recent expansion of natural gas production and use have increased attention to the issue and spurred efforts to measure leakage.
- Other CO2 emissions: “Lease gas” is combusted to power gas and oil field operations (e.g., dehydration, compression). Flaring is the burning off of unwanted gas, which yields CO2 as a byproduct. “Plant fuel” is natural gas used to power gas processing plants; likewise, “pipeline fuel” is natural gas used to power natural gas transmission and storage operations.
- Greenhouse Gas Abatement options
- Carbon Capture and Storage (CCS): Natural gas processing facilities remove CO2 and other impurities from raw natural gas, generating highly-pure streams of CO2.  Such facilities offer some of the least expensive opportunities for deploying carbon capture technology at a commercial scale, since processing produces high purity streams of CO2 that can be captured with less difficulty than potential CO2 emissions from fossil fuel combustion. For several decades, CO2 from natural gas processing has been captured, transported via pipeline, injected underground for use in enhanced oil recovery (CO2-EOR) (see C2ES resource: National Enhanced Oil Recovery Initiative.
- Methane mitigation: Mitigating fugitive emissions provides an opportunity to maximize the potential climate benefits of using natural gas. Additional field testing should be performed to gather up-to-date, accurate methane leakage data. A better understanding and more accurate measurement of the emissions from natural gas production and use could identify additional cost-effective emission reduction opportunities along the natural gas value chain, and aid policymakers in creating effective regulations to address methane releases. Fugitive emissions can be reduced by upgrading equipment (e.g., valves), changing procedures to reduce venting, and improving leak detection and measurement efforts.
Transportation: Natural Gas Vehicles (NGV): Natural gas can be compressed (CNG) or converted into liquid (LNG) fuel for use in place of conventional fuels in modified engines, or in fuel cell vehicles. Globally, there are more than 15 million NGVs; almost three quarters in just five countries (Pakistan, Argentina, Brazil, Iran, and India). In 2010, compressed natural gas (CNG) and liquid natural gas (LNG) vehicles comprised about 0.05 percent (about 120,000 vehicles) of the U.S. vehicle stock (for more, see C2ES Natural Gas in the Transportation Sector) – over 45 percent of which were medium- or heavy-duty vehicles. Gas to liquid technology (GTL) is another fuel technology that converts natural gas into diesel or gasoline, able to be utilized in the existing fleet and fuel distribution infrastructure. Finally, electricity can be produced using natural gas that can in turn power electric vehicles.
- Vehicle Types:
- Dedicated: completely natural gas reliant
- Bi-fuel: vehicles with separate fuel systems allowing them to run on conventional fuels or natural gas
- Dual-Fuel: typically heavy-duty vehicles that use diesel for ignition but run on natural gas
- Fuel types: to provide vehicle fuel, natural gas is most commonly used as either compressed natural gas (CNG) or as liquefied natural gas (LNG). Both CNG and LNG are less dense than gasoline and therefore require larger tanks in vehicles.
- LNG is produced by super-chilling the natural gas to -260ºF. Usage requires vehicle tanks to be insulated to keep the fuel chilled, leading this technology to be primarily used in heavy-duty trucks.
- CNG is produced by compressing natural gas in cylinders at a pressure of 3,000 to 6,000 lbs per square inch and is used in light-, medium-, and heavy-duty vehicles. These vehicles get about the same fuel economy as a conventional gasoline vehicle.
- Fuel Cell vehicles can be fueled with hydrogen gas extracted from a secondary fuel that contains hydrogen, such as natural gas. The secondary fuel is first converted to hydrogen gas, for example, by an onboard reformer. These vehicles produce only small amounts of air pollution.
- Greenhouse Gas Abatement Options
- Fuel substitution: Increasing the use of natural gas vehicles and decreasing other is an example of transportation-based fuel switching. Because of its lower carbon intensity, natural gas combustion can produce fewer lifecycle greenhouse emissions than gasoline or diesel. In 2009, California Air Resources Board (CARB) found that substituting natural gas for diesel in heavy-duty vehicles could provide a 29 percent reduction in emissions. A higher leakage rate during the natural gas production and distribution process, however, would reduce these benefits. Fuel substitution in heavy-duty vehicle fleets may present opportunities to reduce emissions in government and commercial fleets because of available technology and refueling options.
- Overcoming infrastructure barriers: Using natural gas in vehicles in place of gasoline or diesel reduces greenhouse emissions. Although widely dispersed fueling infrastructure remains a barrier to increasing use of natural gas, municipalities and certain scale commercial fleets could utilize centralized refueling stations. Intercity or regional heavy duty vehicles are ideal candidates, particular those with consistent travel requirements and predictable range such as buses and garbage trucks. A small number of refueling stations can serve a large percentage of this sector. For more, see C2ES resource Natural Gas in the Transportation Sector.
Residential and Commercial: Natural gas has extensive residential and commercial applications. As a fuel source consumed onsite, natural gas provides an option to increase fuel efficiency in buildings while decreasing emissions when compared with centrally produced electricity.
- Residential: Natural gas is most commonly used in thermal applications, particularly space and water heating. Space heating use varies regionally, and natural gas provides a greater proportion in colder climates whereas homes in warmer climates tend to prefer electric heating. Natural gas is also used in various appliances such as clothes dryers, ovens and cooktop stoves. For more information on the residential applications see Climate TechBook: Buildings Overview and Residential End-use Efficiency.
- Commercial: These buildings include offices, health care facilities, warehouses and storage, food service and preparation, and educational institutions, where natural gas is used to heat water, for large appliances, and most predominantly, space heating (see C2ES resource Natural Gas in Commercial Buildings).
- Greenhouse Gas Abatement Options:
- Codes, Standards, and Labeling. Mandatory or voluntary building codes and standards adopted by state and local governments can improve efficiency by encouraging equipment updates, improving building envelopes, and providing information resources to building managers and occupants about reducing fuel use. New appliance labeling efforts may offer an opportunity to inform consumers about energy efficiency and emissions benefits of different fuel choices, including natural gas.
- Increased Deployment: Producing heat onsite from natural gas appliances is more efficient than producing heat through electricity transmitted from a central power plant. Assuming natural gas is displacing fossil fuel produced electricity, increased deployment of natural gas technology will increase energy efficiency and reduce greenhouse gas emissions by 40 to 60 percent per appliance (see C2ES resource Natural Gas in the Residential Sector).
Environmental Benefits / Emission Reduction Potential
Among fossil fuels, natural gas is the least carbon intensive and burns efficiently with fewer air pollutants (including particulates, nitrogen oxides, sulfur dioxide, lead, and mercury). Combustion of natural gas emits approximately half as much carbon dioxide (CO2) as traditional coal and 33 percent less than oil. As described natural gas heavy-duty vehicles could achieve a nearly 29 percent reduction when compared to diesel vehicles, depending on natural gas leakage rates. While natural gas still produces significant emissions, when it displaces more carbon-intensive fuels like coal and oil, it can lower greenhouse gas emissions.
Natural gas emissions consist primarily of methane (CH4), which is a greenhouse gas about 21 times more powerful in terms of its heat-trapping ability than CO2 over a 100 year time frame. Methane is emitted through venting and fugitive releases during the processing, transporting, and storage of natural gas. Currently, venting and fugitive emissions from natural gas systems are around 3 percent of total U.S. greenhouse gas emissions. However, to fully realize the benefits of increased natural gas usage these fugitive emissions must be addressed. Fortunately, there are technologies that can help reduce emissions from oil and natural gas systems. Some analyses suggest these technology-based investment options for reducing greenhouse gas emissions have short payback times, depending on the price of natural gas.
The role natural gas plays in overall greenhouse gas emission reductions depends on the extent to which natural gas is used to fulfill energy needs, the efficiency of the technology used, and the effectiveness of efforts to limit emissions. First, increasing direct use of natural gas in residential, commercial, and industrial sectors can reduce greenhouse gas emissions because of increased efficiency inherent in natural gas transmission and distribution when compared to electricity. A full fuel cycle assessment of the emissions impacts from all stages of fossil fuel production, processing, and end-use more accurately assesses its true climate impacts (see C2ES resource Natural Gas in the Commercial Buildings). Also, fuel switching from coal to natural gas in large power plants creates an opportunity for emissions reductions. Additionally, though no commercial-scale projects have been developed, natural gas power generation with carbon capture and storage (CCS) could provide further opportunity to diminish emissions (see C2ES Climate Techbook: CCS and C2ES resource Natural Gas in the U.S. Power Sector). Interest in building the world’s first commercial-scale natural-gas fired CCS power plant has grown in recent years. Notably, CO2 captured from natural gas processing or power generation can be used in enhanced oil recovery (CO2-EOR) and stored underground (see C2ES Enhanced Oil Recovery Overview).
However, inexpensive natural gas has the potential to outcompete renewables and nuclear projects, potentially hurting emission mitigation efforts. Nuclear becomes less tenable because of its higher upfront capital costs when compared to natural gas (see Table 1). Using natural gas in combination with renewables could provide lower emissions and a more flexible energy production system compared to centralized provision based on a single fuel source such as coal or nuclear power.
Price volatility is an important component of natural gas history, but it is unclear if this will remain so in the future (see Figure 4). Historically, natural gas cost fluctuations were due to regulatory changes, weather patterns, and large market trends (see C2ES resource U.S. Natural Gas: Overview of Markets and Uses). However, the market is expected to remain more stable in future years because of increased supply due to development of shale gas resources, advanced reserve identification and extraction techniques, and storage capabilities.
Figure 4: U.S. Natural Gas Monthly Average Wellhead Prices (USD/mcf)
Source: U.S. Energy Information Agency, 2012.
In the U.S. electric power sector, public utility commissions are approving natural gas power production based on fuel source economics, increasing deployment of natural gas electricity production. The degree of fuel switching is also dependent on cost differences in utilizing existing natural gas power plants compared with coal plants. For new construction, natural gas power plants can be built on a levelized cost basis for much less than competing fuel sources, including coal, nuclear, and renewable resources (see Table 1). When compared to traditional coal power production, new natural gas power plants provide a lower cost option to provide electricity with reduced carbon emissions.
Table 1: Levelized Comparisons of New Power Plants Entering Service in 2017
Levelized Capital Cost
Total System Levelized Cost
Advanced Coal (IGCC)
Conventional Natural Gas (NGCC)
Advanced Combined Cycle
Source: Annual Energy Information Administration of the Department of Energy. 2012.
Current Status of Natural Gas
Due to the range of applications, the natural gas policy landscape is diverse and addresses extraction, distribution, energy production, and end use consumption. The recent boom in shale gas extraction in areas of the country unaccustomed to this manner of industrial development has caused concerns in some communities and some calls for policy action. As part of this development, and particularly related to hydraulic fracturing, the U.S. Department of Energy’s Secretary of Energy Advisory Board (SEAB) recently released recommendations for improving operational safety and reducing potential environmental impacts in drilling operations.
One area of policy attention is water quality impacts of shale gas development. The Environmental Protection Agency (EPA) is undertaking a study on the effects of hydraulic fracturing on drinking water, to be completed in 2014. The Energy Policy Act of 2005 amended the Safe Drinking Water Act (1974) to exempt underground injection of fluids for hydraulic fracturing related to oil, gas, and geothermal production from regulation by the Environmental Protection Agency. This lack of regulation has led to some concerns that water resources are not effectively protected from hydraulic fracturing activities.
Currently, 15 states have requirements for chemical disclosure in fracturing operations (see C2ES resource Hydraulic Fracturing Chemical Disclosure Map). Though requirements can vary widely, they generally outline what must be disclosed, identify the monitoring authority, set disclosure deadlines, and outline trade secret protections. Regulations are changing quickly as states respond to new market conditions, recoverable gas resources, and potential environmental impacts. At the federal level, legislation has been put before Congress to promote transparency, particularly concerning the chemicals used in fracking operations.
EPA, using its authority under the Clean Air Act (CAA), promulgated New Source Performance Standards (NSPS) and National Emissions Standards for Hazardous Air Pollutants (NESHAP) for the oil and gas production sector in 2012. The NSPS requires facilities, including hydraulically-fractured wells to reduce emissions to a certain level that is achievable using the best system of pollution control, taking other factors into consideration, like cost. Under the NESHAP program, the Agency sets technology-based standards for reducing certain hazardous air pollutants emissions using maximum achievable control technology. The regulations directly target the emission of volatile organic compounds, sulfur dioxide, and air toxics, but have the co-benefit of reducing emissions of methane by 95 percent.
Also in 2012, EPA proposed a court-mandated NSPS to regulate greenhouse gas emissions from newly-constructed power plants. The rules would require that all new power plants meet the emission rates of highly efficient NGCC power plants. Therefore, NGCC power plants would comfortably meet the new standards, favoring new natural gas electricity generation in the future. Coal power plants can only meet the standard using CCS technologies. With an estimated 14 GW of coal generation being retired by 2015 because of other regulations and market forces, natural gas has an opportunity to capture an expanded percentage of power markets. EPA is also required to set additional NSPS rules for greenhouse gas emissions from existing power plants, expected in the next few years. Additional pollution regulations impacting the power sector are found here.
Finally, proposals for a Federal Clean Energy Standard (CES) have been before Congress in recent years (see C2ES resource Clean Energy Standard). A CES would act similarly to state-level renewable portfolio standards (RPS) – which mandate a certain percentage of renewable-sourced electricity – by allowing credits for renewables as well as “clean” energy. “Clean” energy encompasses various technologies, such as NGCC and CHP, which create significantly less CO2 than traditional coal-fired power plants. Currently, some states have policies that operate similarly to a CES in that they allow for some compliance through clean non-renewable energy resources (for more, see C2ES report Clean Energy Standards: State and Federal Options and Policy Implications.
Policy Options to Help Optimize Natural Gas Use
- Putting a Price on Carbon. A policy that puts a price on greenhouse gas emissions would lead firms and households to make investment and operating decisions that reduce greenhouse gas emissions—ranging from fuel switching by electricity generators to investments in home insulation or programmable thermostats by households.
- Policies to Address Impacts of Shale Gas Production. Abundant and low cost natural gas results from shale gas production. Local, state, federal, and corporate policies will be required to address concerns about water quality and availability, air pollution, community disruption, and climate change, among other topics, if this production is to continue at levels that maintain or expand supply. Policies such as public disclosure requirements regarding toxic chemicals used during hydraulic fracturing will improve understanding of risks, protect public safety, and boost confidence in shale gas drilling operations.
- Alleviate Legal and Regulatory Barriers. Certain natural gas deployment options related to natural gas are constrained by legal and regulatory barriers. A policy of decoupling, which separates revenues from natural gas sales, can incentivize state-regulated local distribution companies to help customers pursue end-use efficiency measures. Another issue, the deployment of CCS with natural gas processing facilities, or natural gas-fueled electricity generation, requires a fully-developed regulatory and legal framework at the federal and state level to ensure the long-term safety of geological carbon storage (see Climate TechBook: Carbon Capture and Storage). Additionally, CHP deployment can face regulatory hurdles related to grid integration and electricity tariffs (see Climate TechBook: Combined Heat and Power).
- Further control fugitive releases of methane through expanded policies. Policymakers have begun to create regulations that address fugitive releases, but better understanding and more accurate measurement of the emissions from natural gas production and use could potentially identify additional cost-effective emission reduction opportunities along the natural gas value chain.
- Create Greenhouse Gas Reduction Credits or Offsets. Addressing fugitive methane emissions from oil and gas industry operations will prove administratively difficult to do directly under an emissions pricing policy such as cap and trade. Implementing a policy allowing projects that reduce methane emissions to qualify for offset credits to be traded under a cap-and-trade program would provide a financial incentive for firms to undertake such projects.
- Enact Policies to Encourage Efficiency and Natural Gas. A range of proven policy interventions can improve natural gas implementation. Decoupling utility profits from sales ensures cost-recovery and a rate of return for energy efficiency investments, and state regulators can address the disincentive utilities face regarding promoting customer energy efficiency measures (see C2ES factsheet Decoupling in Detail). A lost-revenue adjustment policy can compensate utilities for lost revenue due to increased efficiency and can be particularly useful in encouraging CHP.
- Promote distributed generation and direct use. Distributed generation and direct use of natural gas can be more efficient than producing electricity at a centralized location. By incorporating these uses into all levels of building policy – industrial CHP, residential, and commercial – major gains in energy efficiency can be seen.
- Energy Efficiency Product Standards. The government can and has set minimum efficiency standards for a variety of products including those that consume natural gas, such as furnaces, boilers, and water heaters (see C2ES resource Natural Gas in the Residential Sector).
- Education Programs. Education and information programs can take forms such as voluntary labeling of energy-efficient household products (e.g., the ENERGY STAR program), publicly funded energy assessments, industrial energy efficiency case studies, and training (e.g., the Technology Deployment Activities program of the DOE’s Advanced Manufacturing Office). Policy intervention should address potential energy and cost savings, misaligned incentives, and bounded rationality (e.g., the use of rules-of-thumb that can lead to suboptimal decisions).
- Technological and infrastructure limitations. Policies should be implemented to expand infrastructure for natural gas applications, for example in buildings. In 2005, 71 percent of U.S. homes had access to natural gas, and yet only 61 percent of U.S. residences made use of natural gas in an appliance. Only 54 percent of new homes constructed in 2010 had natural gas service installed, and this access was primarily for heating. Additionally, allowing for increased storage of natural gas and policies promoting CHP and district energy applications will also expand the role of the natural gas in energy provision.
- Research, Development, and Demonstration (RD&D). Continued and increased government financial incentives and cooperation with the private sector related to RD&D could accelerate technology advances and market penetration, with possible technology areas of focus including advanced natural gas turbines with higher efficiencies and carbon capture technology on a commercial-scale with natural gas fired electricity generation. Additional important research topics are the potential environmental impacts of unconventional gas production, especially with respect to drinking water, regulatory safeguards, improved fuel efficiency technology, advancements in reducing leakage, and greenhouse gas lifecycle analysis.
Related C2ES Resources
- Appliance Efficiency Standards
- Commercial Building Energy Codes
- Decoupling Policies
- Residential Building Energy Codes
Further Reading / Additional Resources
Congressional Research Service (CRS)
- Displacing Coal with Generation from Existing Natural Gas-Fired Power Plants (2010)
- Global Natural Gas: A Growing Resource (2010)
- U.S. Natural Gas Exports: New Opportunities, Uncertain Outcomes (2011)
U.S. Department of Energy
- Alternative Fuels and Advanced Vehicles Data Center: Natural Gas Emissions.
- Appliances and Commercial Equipment Standards
- Modern Shale Gas Development in the United States: A Primer
- Oil and Natural Gas Supply and Delivery
U.S. Energy Information Administration (EIA)
U.S. Environmental Protection Agency (EPA)
- Clean Energy – Natural Gas
- Natural Gas STAR Program
- International Non-CO2 Mitigation
- Hydraulic Fracturing
- Global Methane Initiative
U.S. Department of the Interior, Bureau of Land Management
National Energy Technology Laboratory
- Life Cycle Analysis: Natural Gas Combined Cycle (NGCC) Power Plant (2010)
- Life Cycle Greenhouse Gas Inventory of Natural Gas Extraction, Delivery, and Electricity Production (2011)
Global CCS Institute
- The Global Status of CCS (2012)
- Integrating Variable Renewable Electric Power Generators and the Natural Gas Infrastructure (2011)
- Availability, Economics, and Production Potential of North American Unconventional Natural Gas Supplies (2008)
Related Business Environmental Leadership Council (BELC) Company Activities
 U.S. Energy Information Administration (EIA), Annual Energy Outlook (AEO): Total Energy Supply, Disposition, and Price Summary Table (2012), http://www.eia.gov/oiaf/aeo/tablebrowser/#release=AEO2012&subject=8-AEO2012&table=1-AEO2012®ion=0-0&cases=ref2012-d020112c.
 EIA AEO, Electricity Supple, Disposition, Prices and Emissions Table (2012), http://www.eia.gov/oiaf/aeo/tablebrowser/#release=AEO2012&subject=6-AEO2012&table=8-AEO2012®ion=0-0&cases=ref2012-d020112c.
 Out of 5,481 million metric tons. EIA, Annual Energy Review (AER): Total Energy Emissions (2012), http://www.eia.gov/totalenergy/data/annual/showtext.cfm?t=ptb1101.
 Alvarez, R., Pacala, S, Winebrake, J., Chameides, W., Hamburg, S. Greater focus needed of methane leakage from natural gas infrastructure (2012), http://www.pnas.org/content/early/2012/04/02/1202407109.full.pdf+html
 California Air Resources Board (CARB), Low Carbon Fuel Standard Fuel Pathways Analysis, http://www.arb.ca.gov/fuels/lcfs/workgroups/workgroups.htm#pathways; U.S. Department of Energy (DOE) Energy Efficiency and Renewable Energy (EERE), Fuel Economy.gov – Natural Gas, http://www.fueleconomy.gov/feg/bifueltech.shtml
 C2ES, Natural Gas in the U.S. Electric Power Sector (Electric Power Sector) (2012), http://www.c2es.org/publications/us-natural-gas-electric-power-sector.
 EIA AEO, 2013, http://www.eia.gov/forecasts/aeo/er/index.cfm; EIA AEO, 2012, http://www.eia.gov/forecasts/archive/aeo12/index.cfm
 C2ES, Electric Power Sector, 2012; EPA, FACT SHEET: Proposed Carbon Pollution Standard for New Power Plants (2012), http://epa.gov/carbonpollutionstandard/pdfs/20120327factsheet.pdf.
 EIA AEO, Natural Gas Supply, Disposition, and Prices, Reference Case Table (2012) http://www.eia.gov/oiaf/aeo/tablebrowser/#release=AEO2012&subject=8-AEO2....
 C2ES, U.S. Natural Gas Overview of Markets and Uses (Markets and Uses) (2012), http://www.c2es.org/docUploads/natural-gas-markets-use.pdf
 EIA, Short-term Energy Outlook: September 2012 (2012), http://www.eia.gov/forecasts/steo/archives/sep12.pdf.
 EIA AEO, 2012.
 Or, 7.6 MMCF in 2011. AER, Total Energy, (2012), http://www.eia.gov/totalenergy/data/annual/index.cfm#naturalgas.
 Planned in 2012 additions were 20 percent wind, 18 percent coal, 12 percent solar, 5 percent nuclear, and 8 percent other sources, including hydro, geothermal and biomass. C2ES, Electric Power Sector, 2012.
 EIA AEO, Levelized Cost of New Generation Resources (2012), http://www.eia.gov/forecasts/aeo/pdf/electricity_generation.pdf.
 For a more detailed explanation, see DOE’s “How Gas Turbine Power Plants Work.” http://www.fossil.energy.gov/programs/powersystems/turbines/turbines_howitworks.html.
 EIA, Average Tested Heat Rates by Prime Mover and Energy Source, 2007 – 2011, http://www.eia.gov/electricity/annual/html/epa_08_02.html.
 For a more detailed explanation, see EGL’s Gas-Fired Combined Cycle Power Plants: How Do They Work? http://www.egl.ch/int/ch/en/about/Publications/Unternehmensbroschueren.-ContentLeft-0017-ContentLeftdownloadlist-l1227699492261-File.File.FileRef.pdf/Gas_Fired_Combined_Cycle_Power_PlantEN.pdf.
 A new natural gas combined cycle power plant is estimated to emit roughly 42-44 percent as much CO2 per unit of net electricity generation compared to a new pulverized coal power plant. National Energy Technology Laboratory (NETL), Cost and Performance Baseline for Fossil Energy Plants, Volume 1: Bituminous Coal and Natural Gas to Electricity Final Report, see Exhibit ES-2 (2007), http://www.netl.doe.gov/energy-analyses/baseline_studies.html.
 Comparison based on heat rates assumed in EIA’s Assumptions to the Annual Energy Outlook (2009), Table 8.2, and EPA’s National Electric Energy Data System (NEEDS) 2006 database. http://www.eia.doe.gov/oiaf/aeo/assumption/index.html.
 GE Energy, “FlexEfficiency* 50 Combined Cycle Power Plant.” (2012), http://www.ge-energy.com/products_and_services/products/gas_turbines_heavy_duty/flexefficiency_50_combined_cycle_power_plant.jsp.
 ICF International, Integrating Renewable Electric Power Generators and the Natural Gas Infrastructure, (2011), http://www.icfi.com/insights/white-papers/2011/integrating-variable-renewable-electric-power-generators-natural-gas-infrastructure.
 This contributed to 64 percent increase in natural gas net generation, from 601 thousand GWhs in 2000 to 988 thousand GWhs in 2010. EIA, Electric Power Annual 2010 Data Tables (2011), http://www.eia.gov/electricity/annual/html/epa_04_01.html.
 C2ES, Electric Power Sector, 2012.
 IEA 2008, p.256.
 C2ES, Natural Gas in the Industrial Sector (Industrial Sector) (2012), http://www.c2es.org/docUploads/natural-gas-industrial-sector.pdf.
 EIA, “Industrial onsite generation increasingly relies on natural gas.” Today in Energy - October 26 (2012), http://www.eia.gov/todayinenergy/detail.cfm?id=8550.
 EIA AEO, Industrial Sector Key Indicators and Consumption (2012), http://www.eia.gov/oiaf/aeo/tablebrowser/#release=AEO2012&subject=2-AEO2012&table=6-AEO2012®ion=0-0&cases=ref2012-d020112c.
 EIA AEO, Energy-Related Carbon Dioxide Emissions by Sector and Source, US. (2012), http://www.eia.gov/oiaf/aeo/tablebrowser/#release=AEO2012&subject=1-AEO2012&table=17-AEO2012®ion=1-0&cases=ref2012-d020112c.
 MIT Energy Initiative, The Future of Natural Gas: An Interdisciplinary MIT Study (2011), http://mitei.mit.edu/system/files/NaturalGas_Chapter5_Demand.pdf.
 C2ES, Industrial Sector, 2012.
 McKinsey & Company, Reducing U.S. Greenhouse gas Emissions: How Much at What Cost? (2007), http://www.mckinsey.com/clientservice/ccsi/pdf/US_greenhouse gas_final_report.pdf.
 IEA, Energy Technology Perspectives 2008: Scenarios and Strategies to 2050 (2008), http://www.iea.org/techno/etp/etp_2008_exec_sum_english.pdf.
 For detail on oil and gas operations emissions see Table 1 in Bluestein, 2008.
 DOE National Energy Technology Laboratory (NETL), Carbon Sequestration Through Enhanced Oil Recovery (2008), http://www.netl.doe.gov/publications/factsheets/program/Prog053.pdf.
 Global CCS Institute 2012, The Global Status of CCS: 2012, http://cdn.globalccsinstitute.com/sites/default/files/publications/47936/global-status-ccs-2012.pdf.
 IEA 2008.
 EIA, Renewable and Alternative Fuels: Alternative Fuel Vehicle Data, Yearly Estimates for 2010. (2012), http://www.eia.gov/renewable/afv/users.cfm?fs=a&ufueltype=cng%2clng&weightclass=ld&uyear=2010.
 C2ES, Natural Gas Use in the Transportation Sector (2012), http://www.c2es.org/publications/natural-gas-use-transportation-sector.
 DOE, Alternative Fuels Data Center (AFDC) (2012), http://www.afdc.energy.gov/fuels/natural_gas_basics.html.
 DOE, AFDC: Hydrogen Fuel Cell Vehicles (2012), http://www.afdc.energy.gov/vehicles/fuel_cell.html.
 GREET modeling incorporates full life cycle emissions from well (natural gas recovery) to wheel (vehicle fuel combustion) and includes fugitive and fuel distribution emissions. CARB, Lifecycle Analysis Workgroup (LCA) Fuel Pathways, http://www.arb.ca.gov/fuels/lcfs/workgroups/workgroups.htm#pathways.
 Alvarez, et al., 2012.
 C2ES, Transportation Sector, 2012.
 C2ES, Markets and Uses, 2012.
 Environmental Protection Agency, Draft Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2011. 2013. Chapter 3 and Annex 2. Available at: http://www.epa.gov/climatechange/ghgemissions/usinventoryreport.html.
 CARB, Detailed GREET Pathway Modeling for North American Compressed Natural Gas (2009), http://www.arb.ca.gov/fuels/lcfs/022709lcfs_cng.pdf; CARB, Detailed GREET Pathway Modeling for North American and Remote Liquid Natural Gas (2009), http://www.arb.ca.gov/fuels/lcfs/092309lcfs_lng.pdf.
 Carbon dioxide equivalent is a metric used to compare the amounts and effects of different greenhouse gases. It is determined by multiplying the emissions of a gas (by mass) by the gas’s global warming potential (GWP), an index representing the combined effect of the length of time a given greenhouse gas remains in the atmosphere and its relative effectiveness in absorbing outgoing infrared radiation. CO2 is the standard used to determine the GWPs of other gases. CO2 has been assigned a 100-year GWP of 1 (i.e., the warming effect over a 100-year time frame relative to other gases). Methane (CH4) has a 100-year GWP of 21.
 Other sources of methane emissions include enteric fermentation, landfills, coal mines, and manure management. For more information on methane emission sources, see EPA, Methane: Sources and Emissions, http://epa.gov/climatechange/ghgemissions/gases/ch4.html.
 Massachusetts Institute of Technology (MIT), Future of Nuclear Power (2009), http://web.mit.edu/nuclearpower/pdf/nuclearpower-update2009.pdf.
 MIT, 2009. EIA estimates Natural Gas-fired levelized system costs to be $66.1 per MWh and nuclear levelized system costs to be $111.4 per MWh, (2012), http://www.eia.gov/forecasts/aeo/pdf/electricity_generation.pdf.
 EIA AEO, 2012.
 The assumed discount rate is 10 percent. EIA AEO, Levelized Cost of New Generation Resources (2012), http://www.eia.gov/forecasts/aeo/pdf/electricity_generation.pdf.
 These would be implemented be the Department of Energy (DOE), EPA, and the Department of the Interior (DOI , C2ES, U.S. Natural Gas Overview of Markets and Uses (2012), http://www.c2es.org/docUploads/natural-gas-markets-use.pdf.
 See Title III, Subtitle C, Sec. 322 of the Energy Policy Act of 2005.
 The Fracturing Responsibility and Awareness of Chemicals (FRAC) Act, presented before the 111th and 112th Congresses, would have granted EPA the authority to regulate hydraulic fracturing under the Clean Water Act, Murrill, B., Vann, A. “Hydraulic Fracturing: Chemical Disclosure Requirements.” Congressional Research Service (2012), http://www.fas.org/sgp/crs/misc/R42461.pdf.
 The NSPS regulates emissions of volatile organic compound from oil and gas production and processing facilities, including gas wells (including hydraulically fractured wells), compressors, pneumatic controllers, storage vessels, and leaking components at onshore natural gas processing plants.
 Environmental Protection Agency. “Methane Related C2ES, Electric Power Sector, 2012.
Gas Sector: New Source Performance Standards and National Emission Standards for Hazardous Air Pollutants Reviews,” Proposed Rule”. August 23, 2011. Available at: http://s398369137.onlinehome.us/files/Regulation.gov/PublicSubmission/2011%2F12%2F19%2FEPA%2FFile%2FEPA-HQ-OAR-2010-0505-4460-55.pdf.
 C2ES, Electric Power Sector, 2012.
 C2ES, Electric Power Sector, 2012.
 C2ES, Industrial Sector, 2012.
 As an example of misaligned incentives, if a firm allocates energy costs across departments as an overhead cost, no department will realize the full benefit of its investments in energy efficiency thus reducing the incentive of any individual department to pursue energy efficiency.
 Census Bureau, 2010 Census Data, U.S. Census Bureau, U.S. Department of Commerce (2010).
Transportation experts gathered in Washington last week for the Transportation Research Board’s 89th annual meeting. With over 10,000 participants and 600 sessions, it is hard to draw any crosscutting conclusions from the conference. With an eye on climate change, however, the TRB meeting indicated the transportation community is engaged and ready for reform. One of the conference’s hot topics addressed the potential to reduce greenhouse gas (GHG) emissions by limiting vehicle miles traveled (VMT). VMT is one of the four major influences on transportation GHG emissions. The others are vehicles, fuels, and the overall efficiency of our transportation system. We need policies to address all four.
At a session entitled “Vehicle Miles Traveled Reduction Targets: Will This Strategy Get the Desired Results?,” the participants debated the effectiveness of VMT targets on reducing GHG emissions. Reducing driving may have been unimaginable in the previous era of urban sprawl and Eisenhower’s interstate highway system, but a confluence of interests in promoting livability and combating climate change has ushered in a new way of thinking about transportation. The idea of limiting VMT is not without its critics, however. Research is ongoing as to how much VMT can really be reduced, on the precise relationship between VMT and GHG emissions, on the costs and benefits of transportation alternatives, and on the distribution of those costs and benefits geographically and by income class.
Perhaps it was the panelists’ connection to the glory days of transportation in the United States or their own economic analyses, but they were mostly skeptical with respect to the efficacy of using VMT targets to reduce GHG emissions. As one speaker put it, “VMT is about technology versus behavior,” meaning lawmakers would use VMT targets to affect behavior due to a lack of confidence in technology.
Another speaker defined VMT targets and the subsequent effects on land-use policy as a “blunt instrument.” They argued VMT reductions would force a reorientation of the population in the United States without necessarily reducing GHG emissions. Furthermore, one panelist claimed VMT targets would be highly regressive.
The lone advocate for VMT targets acknowledged some of these detractions, but strongly pushed for the policy as a “good starting point” towards greater land-use reform. His research showed an economic benefit (i.e., jobs) from spending less on transportation, since people tend to spend that extra money on more labor-intensive products. He also highlighted polls and recent trends indicating that people want to live closer together. Lastly, the co-benefits of reducing VMT including improved safety and reduced congestion make the policy worthwhile even without considering the environmental benefits.
The panelists agreed on some things – for example, that researchers do not fully understand transportation behavior, and that there are substantial co-benefits of reducing VMT. They also agreed that a VMT tax would be preferable to the current Federal gasoline tax as a means of maintaining the surface transportation system, though they disagreed over its effects on GHG emissions. Enacting that policy, however, is politically challenging.
A proposal by Rep. James Oberstar (D-Minn.) to reform fundamentally the current transportation system stalled in 2009, and the legislative prospects in 2010 are unclear. In the absence of comprehensive reauthorizing legislation, action by the Administration – for example, through the Federal budget and U.S. Department of Transportation (DOT) rulemaking – will be critical, as will state and local innovation. We could begin to see this needed leadership from the Administration in the form of the President’s budget, which is set for release on February 1st. DOT does have some discretion to improve federal transportation programs under its existing legislative authorities, and the President’s budget could include such reforms. The President could also propose more significant changes, but that would require Congressional approval.
Nick Nigro is an Innovative Solutions Fellow
The Pew Center just published a summary of many of the major clean energy policy developments of the past five years (2005 through 2009). This look back gauges progress on clean energy policy since the “10-50” Solution Workshop, sponsored by the Center and the National Commission on Energy Policy (NCEP) in 2004, which convened leading experts to discuss key technologies likely to enable a low-carbon future by mid-century (50 years henceforth) and to identify the critical policies necessary in the next 10 years to enable this long-term vision.
Addressing the challenge of global climate change will require a significant reduction in annual greenhouse gas (GHG) emissions in the United States and throughout the world by 2050. This will necessitate a fundamental shift from an economy predominantly based on traditional fossil fuel use to one based on efficiently managed low-carbon energy sources, including technologies that capture and store carbon dioxide (CO2).
Achievement of this transition depends on both near-term and long-term actions that take advantage of current technologies and opportunities and that also make substantial investments in the technologies of the future. But most of all, the United States needs a clearly enunciated and sustained policy to guide those actions. Too often the debate over GHG emission reductions pits near-term actions against long-term investments in technology, when in fact both are necessary and more effective together.
In 2004, the Pew Center held a workshop (the “10-50” Workshop) to understand the technologies likely to enable a low-carbon future by mid-century (50 years) and identify policy options for the coming decade (10 years) to help “push” and “pull” these technologies into the market. This brief reviews some of the key policies and actions deemed important five years ago and reports on progress against those goals to date; it finds significant progress in pushing low-carbon technologies and underscores the critical remaining need for a policy, such as cap and trade, that puts a price on carbon and “pulls” those technologies into the marketplace.
Click here for more on the 10-50 Solution.
Domestically and internationally, climate action in 2009 laid critical groundwork for potential breakthroughs in Congress and global negotiations in 2010. Yet with an issue as complex and political as climate change, turning groundwork into policy is a challenge. 2010 will undoubtedly be a pivotal year for climate change – but first it is instructive to take a look back at what happened in 2009 and how that shaped where we are today.
We captured these highlights in our annual Year-in-Review Newsletter – a useful compilation of 2009’s big climate change stories and related insights. The year’s major domestic action included passage of the landmark House climate and clean energy bill along with numerous Obama administration efforts to improve our climate and economy. These accomplishments included the stimulus bill’s $80 billion in clean energy-related funding and EPA actions, including the endangerment finding, the greenhouse gas reporting rule, and stricter auto-efficiency standards.
Copenhagen consumed international climate attention in 2009, culminating in the pre-dawn hours of December 19 when final touches were put on an accord directly brokered by President Obama and a handful of key developing country leaders. While many questions remain after Copenhagen, our summary of the conference provides a sound starting point for grasping what transpired at the year’s largest climate event.
The lead-up to 2009’s main events required a great deal of work, and some of the year’s highlights include the detailed Blueprint for Climate Action released one year ago this month by the influential business-NGO coalition U.S. Climate Action Partnership (USCAP). More industry leaders also showed support for mandatory climate action by joining our Business Environmental Leadership Council (BELC). And efforts to reach business communities, employees, and families expanded through the Make An Impact program. In partnerships with aluminum manufacturer Alcoa and utility Entergy, we continue to provide individuals with strategies to save energy and money while protecting the environment.
We continued to educate policy makers and opinion leaders, producing reports, analyses, and fact sheets on topics ranging from clean-energy technologies, climate science, competitiveness, and adaptation. Featuring expert insights and thoughtful opinions, we informed broad audiences about the immediate need for climate action. And our timely, relevant work moves forward in 2010 as we seek progress in addressing the most important global issue of our time.
Tom Steinfeldt is Communications Manager
Nearing the first anniversary of the United States’ first greenhouse gas (GHG) cap-and-trade program, members of the northeast Regional Greenhouse Gas Initiative (RGGI) joined with Pennsylvania to build on their effort to reduce GHG emissions. Governors from these eleven Northeast and Mid-Atlantic states signed a Memorandum of Understanding to establish the framework for a Low Carbon Fuel Standard (LCFS) by 2011.
The RGGI LCFS will operate in conjunction with national fuel economy standards that will increase the efficiency of passenger vehicles. A our new resource updates our comparison of fuel economy standards around the world and shows the fuel economy gains that will be made from these new standards. Click on the graph below for more detail.
In other climate and transportation news, we recently released a report on two modes of transportation that haven’t received a lot of attention from U.S. climate policymakers: the aviation and marine sectors. The report, Aviation and Marine Transportation: GHG Mitigation Potential and Challenges, finds that reductions in GHG emissions of more than 50 percent below business-as-usual (BAU) levels are possible by 2050. Though aviation and marine transportation currently represent only 3 percent of emissions, BAU CO2 emissions from the global aviation and marine transport sectors are projected to quadruple and nearly triple, respectively, by mid-century; controlling growth in these emissions will be an important part of reducing overall emissions from transportation.
Our President Eileen Claussen says, “Aviation and marine shipping are two of the fastest growing modes of transportation. Their greenhouse gas emissions are growing rapidly as well. To protect the climate, we need to reduce emissions across the entire economy. Aviation and marine shipping are part of the climate problem, and this report shows that they can be part of the solution.”
Tara Ursell is a Communications Associate
Shortly before the new year, Vice President Biden issued a memo summarizing the federal government’s progress in promoting “clean energy,” primarily via the 2009 stimulus bill (the American Recovery and Reinvestment Act, or ARRA). The Dec. 15 memo highlights significant incentives provided for efficiency, renewable electricity, biofuels, plug-in hybrid-electric vehicles, carbon capture and storage, and other low-carbon technologies. It summarizes where things stood one year ago (e.g., in terms of generating capacity, number of homes with smart meters) and where things are expected to be in the next few years.
The memo notes that ARRA provides $80 billion for clean energy investments. In terms of impacts, Vice President Biden claims, for example, that ARRA and other policies put the United States on track to double by 2012 non-hydro renewable electricity generation capacity compared to the level at the beginning of 2009. The memo says the rate of home energy efficiency retrofits will increase by an order of magnitude from 2009 to 2012 (to one million per year). While there are currently no commercial-scale carbon capture and storage projects in operation, the memo projects that there will be five by 2015. There are also evaluations of vehicle fuel economy, biofuels, nuclear power, electric vehicles, smart grid, and clean energy manufacturing.
While the clean energy advances touted by the Vice President are undoubtedly positive developments, the key policy for significantly reducing U.S. greenhouse gas emissions—i.e., putting a price on carbon—is still being debated in Congress. The House passed a climate and energy bill that included a greenhouse gas cap-and-trade program in June, and the Senate continues deliberations on a similar bill.
In considering efforts to transition to a low-carbon future, it’s helpful to remember that climate change is a “tale of two market failures.” First, and most importantly, businesses and households do not face any price associated with emitting greenhouse gases despite the social costs (e.g., costs of damage to coastal communities from sea level rise, increase in costs due to reduction in water resources) associated with their contribution to dangerous climate change. Thus businesses and households lack a key financial incentive to invest in efficiency or lower-carbon energy sources. Second, while intellectual property protections help firms profit from their investments in new technology, the nature of innovation is such that the gains to society (i.e., to other businesses and consumers) from a single company’s investments in innovation generally exceed the returns to that company. Thus businesses tend to under-invest in innovation.
With respect to fostering innovation, a summary from Harvard’s Belfer Center of U.S. Department of Energy research, development, and demonstration (RD&D) funding over time illustrates that the $7.5 billion in energy-related RD&D funding in ARRA is more than half as much as DOE received, cumulatively, in the five years from FY2005 through FY2009.
We know that a combination of a market-based climate policy that puts a price on carbon (e.g., via a greenhouse gas cap-and-trade program) to “pull” a portfolio of low-carbon technologies into the market coupled with incentives for low-carbon technology research, development, demonstration, and deployment (RDD&D)—i.e., policies to “push” low-carbon technologies into the market—make reducing greenhouse gas emissions less costly overall than a reliance on only “push” or “pull” policies alone.
The efforts outlined in the Vice President’s progress report are providing a much needed “push” for clean energy—such as government funding and loan guarantees to leverage private-sector investment in commercial-scale demonstrations of carbon capture and storage. But, ultimately, the United States will not make the required significant, absolute reductions in emissions without the market “pull” created by an economy-wide carbon price.
Steve Caldwell is a Technology and Policy Fellow
Source: An, F., and A. Sauer. 2004. Comparison of Passenger Vehicle Fuel Economy and GHG Emission Standards Around the World. Pew Center on Global Climate Change, Washington, DC; Updated data obtained from “Global passenger vehicle standards,” The International Council for Clean Transportation, Retrieved from here, June 2012.
In the United States and worldwide, vehicle standards have been the main mechanism for improving vehicle efficiency and reducing emissions of conventional air pollution and greenhouse gases from the transportation sector. Increasing vehicle fuel-economy standards have had the effect of lowering greenhouse gas (GHG) emissions from what they otherwise would have been, because GHG emissions are closely related to fuel use.
Vehicle fuel economy standards can be expressed in miles per gallon (mpg) or kilometers per liter (km/l). Vehicle fuel economy can be improved by increasing energy efficiency of the drivetrain (engine and transmission) and by decreasing the amount of energy needed to move the vehicle (through reducing weight, aerodynamic drag, and rolling resistance). Countries with fuel economy standards include Australia, Canada, China, Japan, South Korea, and the United States.
Some vehicle GHG emission standards limit the tailpipe emissions from a vehicle, as well as from air conditioning, and are typically expressed as grams of CO2-equivalent per kilometer (gCO2e/km) while other standards only include CO2 in the measurement. The European Union uses a standard in gCO2/km while the United States uses a gCO2e/mi standard alongside the Corporate Average Fuel Economy (CAFE) program.
This graph is an update of our 2004 report that takes into account the new U.S. vehicle fuel economy standards (see here for more information). For this graph, the CO2 per kilometer standard in the EU and the other standards that are not measured in fleet average miles per gallon are converted to CAFE-equivalent miles per gallon values in order to establish an equivalent comparison. This conversion and adjustments are not straightforward since the form of the standards varies from country to country. For example, different countries cover different segments of the vehicle fleets, and use different procedures for determining compliance. For a description of the methodology for comparing the standards on a common basis, see here.
In February 2009 Congress passed the American Recovery and Reinvestment Act (ARRA or the stimulus package) providing the largest single investment in clean energy in American history. About $84 billion of the $787 billion in stimulus funds targets energy, transportation, and climate investment in the form of grants, tax cuts, and loan guarantees. Given the magnitude of this investment and its anticipated role of laying the groundwork for American leadership in a global clean energy economy, it is beneficial to follow how these funds are spent.
We recently published the first installment of a brief on the spending of ARRA funds by the U.S. Department of Energy (DOE), the agency with jurisdiction over the majority of energy expenditures. The brief specifically examines how the funds have been appropriated, awarded, and spent as a way to track how quickly the money is moving out the door along with the impact of this spending on job creation. We plan to keep tabs on the use of ARRA funds over time and update this brief accordingly.
On the whole, ARRA money is moving at a slower pace than expected – as of November 13, 2009 only 3.9 percent of the DOE’s total appropriated ARRA funds had been spent. But ARRA is leveraging private investment and, as Vice President Biden noted in a recent memo to President Obama, “jumpstarting a major transformation of our energy system.” For example, with these funds and additional leveraged private investment, renewable energy generation is expected to double from 27.8 GW in January 2009 to 55.6 GW by 2012.1
ARRA funds will also lead to significant growth in the manufacturing capacity for clean energy technology, advanced vehicle and fuel technologies, components of a smarter electric grid, home weatherization, and carbon capture and storage technologies. New industry and funding for programs already in existence will create and save jobs in the clean energy sector. At the end of October 2009, the Bureau of Labor Statistics reported nearly 10,000 jobs created from the DOE’s use of Recovery Act funds. This number is expected to grow considerably as more of the ARRA money is committed to and spent by recipients (Biden’s memo predicts 253,000 jobs will be supported from new renewable generation and advanced energy manufacturing alone).
Stay tuned for updates as we continue to follow the spending progress and impacts of DOE ARRA funds.
Olivia Nix is the Innovative Solutions intern
The smart grid is a hot topic these days. President Obama touted the smart grid during his campaign and continues to be a booster. The 2009 stimulus bill (the American Recovery and Reinvestment Act, ARRA) provided nearly $4.5 billion to the Department of Energy (DOE) for smart grid investments. In October, DOE made $3.4 billion in awards under the Smart Grid Investment Grant Program, and, in November, DOE announced awards totaling $620 million as part of the Smart Grid Regional and Energy Storage Demonstration Project.
Last month, we added a smart grid factsheet to its Climate Techbook. While it’s not easy to give a short definition of the smart grid, one can think of it as the application of digital technology to the electric power sector to improve reliability, reduce cost, and increase efficiency. Smart grid technologies—including communication networks, advanced sensors, and monitoring devices—provide new ways for utilities to generate and deliver power and for consumers to understand and control their electricity consumption.
The smart grid has several anticipated benefits unrelated to climate change, such as improving electricity reliability (e.g., fewer power outages) and reducing utilities’ operating costs (e.g., by eliminating meter reading). Much of the buzz around the smart grid, however, has to do with the ways that smart grid technology can facilitate greenhouse gas emission reductions.
Efficiency, renewables, and plug-in hybrid electric vehicles (PHEV) are three of the primary climate solutions the smart grid can enable. Initial evidence suggests that giving consumers direct feedback on their electricity use via smart meters and associated display devices can by itself lead to energy savings of 5-15 percent. One of the challenges that will become increasingly important as the United States relies more on renewable electricity from wind and solar power is that these resources are variable (i.e., they only generate electricity when the wind blows or the sun shines) rather than schedulable like traditional fossil fuel power plants. Smart grid technology makes it easier to add energy storage to the grid and to exploit demand response (e.g., cycling air conditioners on and off) to more easily balance electricity supply and demand as output from variable renewables fluctuates. Finally, smart grid technology would facilitate charging PHEVs during periods of low electricity demand (when generating costs are lowest and existing capacity is underutilized) so that PHEV charging can be done most cost-effectively.
Achieving greenhouse gas emission reductions at the lowest cost will require deploying a portfolio of energy efficiency measures and low-carbon energy technologies, several of which can build upon smart grid technology.
Steve Caldwell is a Technology and Policy Fellow