Role of gas will be limited in climate-change battle, experts note

Natural gas potentially can help address global climate change, but its contributions will be limited, certain experts agreed. More intelligent multinational carbon emissions reduction policies that countries are willing to actually follow will be essential, the experts said Oct. 8 at a Bipartisan Policy Center conference on the global gas renaissance and climate change.

“We haven’t made progress in greenhouse gas emissions reduction,” said Joseph E. Aldy, an assistant public policy professor at Harvard University’s John F. Kennedy School of Government. “Emissions have increased in the last decade. Gas could help change this, but only as a transition that begins with its replacing coal-fired power generation.”

David Garman, a former US Energy Undersecretary who now is a principal at the Decker Garman Sullivan and Associates consulting firm, said he was encouraged by the recent joint effort by oil and gas producers, the Environmental Defense Fund, and University of Texas at Austin researchers to actually measure wellhead GHG emissions.

Such information could help develop best standards and practices and realistic regulations to capture more GHGs during production, he explained. “There were some shady operators initially who resisted this idea, but that’s changing,” Garman said. “More producers realize now that best practices not only save money in the long run, but also enhance their licenses to operate in the public’s eyes.”

Former US Environmental Protection Agency Administrator William K. Reilly said one of the most positive changes he has observed is that business and industry have become more involved in the global climate change conversation. A group of 100 major companies have committed to stop Amazon Basin deforestation by 2020 and await encouragement from governments, which has yet to materialize, he noted.

Ahead of government

“Twenty years ago, no company had a vice-president for sustainability. Today, nearly every one of them does,” said Reilly, who now is the founding partner of Aqua International, a Texas Pacific Group fund. “These companies are ahead of government in many respects. They’re not afraid of climate controls because many already have them in Europe and still show a profit.”

Governments, meanwhile, are considering how to reform multilateral climate-change control agreements reached following the first United Nations Intergovernmental Panel on Climate Change (IPCC) report in the late 1990s so they contain not only realistic goals, but also ways for countries to be certain compliance won’t make their industries and businesses less competitive, according to several panelists.

World interest in addressing climate change has grown, but it’s still not close to what’s needed, according to Jason Bordoff, a former associate director for energy and climate change at the White House Council on Environmental Quality who now directs Columbia University’s Center on Global Energy Policy. Europe potentially could replace many of its coal-fired power plants with gas-fired units, but has had problems because of the recent global economic downturn and problems with renewable energy mandates, he said.

“When you get 200 countries around a table, it’s hard to reach a workable agreement,” said William Ramsay, who was deputy executive director at the International Energy Agency in Paris for 10 years. “The science is getting better, as the latest IPCC report shows, but the policies have been hard to pin down. The future trajectory is different for developing and developed countries. Maybe a minilateral approach by the two biggest countries—China and the United States—could establish a process for other countries to consider.”

Ramsay, who now teaches energy diplomacy at the Paris School of International Affairs, said pressure is growing for countries to both improve their energy distribution systems and address climate and environmental problems. Europe clearly is benefiting from growing US shale gas production because it has made LNG cargoes from Qatar and elsewhere available, lowering prices and forcing Russia and other suppliers to renegotiate, he explained.

Competitiveness first

“There’s a huge requirement for gas to back up renewables, and no grid to get power from renewables to where it’s needed,” he continued. “They’re reevaluating policies now, and consumers are questioning what they’re having to pay. But what’s scaring Europe now is what the US is doing with its low gas prices and reindustrialization. Countries there still look first at their competitiveness, then at climate change.”

Other countries are learning from Germany’s problems with an aggressive offshore wind power development program, other panelists noted. The Netherlands has had a reverse-bid system for 2 years in which project promoters indicate how much money they’ll need to build a project, and the lowest amount receives a contract. The problem is ensuring that sponsors of projects with winning bids are held accountable if financing becomes difficult and the projects aren’t built.

“We can push forward in climate policy surveillance so countries have more faith that other countries are following policies,” said Aldy. “That’s been weak so far. We have a number of tools at our disposal. It’s necessary not just to assure countries which are trying to meet the agreement’s goals, but also to learn what strategies and technologies are the most effective.”

Panelists generally agreed more US LNG exports would help the domestic economy without raising prices significantly, but expressed skepticism that they’d be very extensive. Bordoff said they are creating more competition in Europe, “but it takes time.” Coal’s share of US power generation, meanwhile, could climb back to 40% now that domestic gas prices are closer to $3 than $2/MMbtu, he warned.

“Natural gas could help us meet our 2020 environmental goals,” said Reilly. “But to the extend we lock in another fossil fuel—even one that’s more benign than oil or coal—we run the risk of not meeting our 2030 goals.” He also expressed concern that ongoing federal government budget sequestration could hurt US efforts to address climate change.

Contact Nick Snow at nicks@pennwell.com.

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