U.S. should use shale gas proceeds to cut carbon emissions – economists find

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Source: DollarPhotoClub

Purdue agricultural economists, Wally Tyner and Farzad Taheripour, estimate that using part of the proceeds from the booming shale gas industry could help offset the costs of substantially reducing the U.S.’s carbon footprint – Phys.org reported on Monday.

Currently, shale technologies annually provide an extra $302 billion to the U.S. economy relative to 2007 – a yearly “dividend” that could continue for at least the next two decades, Tyner said.

Using computable general equilibrium model – which accounts for all economic sectors and factor markets – the economists have found that reducing the U.S. carbon emissions by about 27 percent would reduce this “dividend” by approximately a half.

“The benefits of shale technology to the American economy are tremendous – and just seven years ago, shale wasn’t even on the radar,” said Tyner, the James and Lois Ackerman Professor of Agricultural Economics. “The shale boom provides us with an opportunity: We can continue to accumulate more goods and services, or we can use part of this windfall to pay for a lower carbon economy.”

In their work the economists tested the cost of three emission-reducing scenarios:

  1. regulating the U.S. electricity and transport sectors,
  2. regulating only the electricity sector, and
  3. putting an economy-wide tax on carbon.

Each scenario reduced the carbon footprint by 27 percent, compared with 2007 levels, by the year 2035, but it was the tax on carbon that was the clear winner – achieving the required reduction in carbon emissions and saving an extra $30 billion of the shale dividend compared with the other two options.

“We can significantly reduce carbon emissions and still keep half of the gains from shale oil and gas production,” Tyner said. “Can we have our cake and eat it, too? The answer is yes.”

The other two scenarios – regulating the electricity and transport sectors – are similar to the regulation proposed in the EPA’s Clean Power Plan, which would reduce national carbon emissions from power plants by 30 percent compared with 2005 levels by 2030.

The proposed solutions, however, might prove unpopular as they will be costly, and the cost will ultimately be carried by the energy consumers. As Tyner himself admitted: “‘tax’ tends to be a four-letter word in Washington, D.C.” But, he believes, this is the reality people must get used to.

“Anything we do to reduce our carbon emissions is going to come with a price tag,” he explained. “But it is a glass half-empty or glass half-full situation. We can’t yet quantify the benefits of avoiding the adverse effects of climate change, but those effects clearly cannot be ignored.”

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