Reprint 2012-1

The Influence of Shale Gas on U.S. Energy and Environmental Policy

by Jacoby, H.D., F. O'Sullivan and S. Paltsev
Economics of Energy & Environmental Policy, 1(1): 37-51, 2012

(Supersedes Report 207)
(MIT News Story)


The emergence of U.S. shale gas resources to economic viability affects the nation’s energy outlook and the expected role of natural gas in climate policy. Even in the face of the current shale gas boom, however, questions are raised about both the economics of this industry and the wisdom of basing future environmental policy on projections of large shale gas supplies. Analysis of the business model appropriate to the gas shales suggests that, though the shale future is uncertain, these concerns are overstated. The policy impact of the shale gas is analyzed using two scenarios of greenhouse gas control—one mandating renewable generation and coal retirement, the other using price to achieve a 50% emissions reduction. The shale gas is shown both to benefit the national economy and to ease the task of emissions control. However, in treating the shale as a "bridge" to a low carbon future there are risks to the development of technologies, like capture and storage, needed to complete the task.

© 2012 IAEE

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