Shale Oil Benefits Could Pay for Smaller Carbon Footprint

by | Aug 20, 2014

Oil fieldThe US could see about a 27 percent reduction in its carbon footprint if just half of the unanticipated economic benefits of shale gas and oil production were used in the efforts, according to agricultural economists at Purdue University.

The researchers estimate that shale technologies annually provide an extra $302 billion to various sectors within the US economy, relative to 2007.

The researchers used a computable general equilibrium model — which accounts for all economic sectors and factor markets — to test the economic outcomes of pitting the gains from an expanding shale gas and oil industry against the cost of three emission-reducing scenarios: regulating the US electricity and transport sectors, regulating only the electricity sector, and putting an economy-wide tax on carbon.

Each scenario would decrease national carbon emissions by about 27 percent, compared with 2007 levels, by the year 2035.

The model showed that regulating the electricity and transport sectors’ emissions would reduce the shale dividend from $302 billion to $148 billion. Regulating only the electricity sector would leave $151 billion of the original dividend, and an economy-wide carbon tax would drop the annual shale gain to $178 billion.

The carbon tax is the most efficient of the three scenarios because it saves an extra $30 billion of the shale dividend. However, the researchers note that taxing is not a popular idea for legislators.

Regulating the electricity and transport sectors is 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.

One objection to the EPA’s proposed regulation is that it could be costly to consumers. However, the researchers add that anything the US does to reduce its carbon emissions is going to come at a cost.

The shale technologies sector has grown quickly in recent years, so much so that General Electric announced last year that it would build a $110 million research center in Oklahoma just to study the technologies.

Photo Credit: Oil field by Christopher Halloran via Shutterstock

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