Increased natural gas production could inadvertently slow investment in clean energy and lead to higher carbon emissions, according to a new paper. In 2015, 195 countries met in Paris to sign a global agreement to cut carbon emissions. A key part of that plan is reducing the amount of coal burned to create power. Now, a decade later, coal consumption has plummeted. South Korea and Germany have eliminated coal power altogether. But in this rush to ditch the dirtiest fuel, climate-conscious countries could be making one big mistake.
In much of the world, the best alternative to coal is natural gas, a fossil fuel that releases less carbon. Getting more countries to use gas will reduce emissions in the short term. But that switch comes with an unintended consequence. In a new paper, Bård Harstad, a professor of political economy at Stanford Graduate School of Business, and Katinka Holtsmark, an assistant professor of economics at the University of Oslo, show that natural gas exports have the effect of discouraging investments in renewable energy. Ultimately, that will increase carbon emissions over the long term, a dilemma the authors call “the gas trap.”
“The gas trap means that countries that are very climate-concerned might increase gas production even more,” Harstad says. “The more they care about climate change, the more they try to outcompete coal. But the outcome of this well-intended action is a reduction in the investments of renewables and ultimately more emissions.”
Harstad hopes to alert policymakers and show them a way to avoid this pitfall. “Our hope is that this paper provides a warning,” he says. “Unless countries find a way to commit to reducing or regulating their production of natural gas then their eagerness to compete with coal might do more harm than good.”
The problem starts – as many climate problems do – with coal. Scientists agree that avoiding devastating increases in global temperatures requires replacing coal with cleaner renewable energy sources like wind, solar, and hydroelectric power. But those technologies require large investments and years of development before they can fully compete with coal.
One temporary solution is natural gas which releases about half the carbon emissions of coal. Switching to this “transition fuel” could give countries time to create more solar arrays and wind farms while satisfying their power needs with a less dirty solution.
Using Norway as a case study Harstad and Holtsmark modeled how competition between coal and natural gas affects investments in renewable energy.
The alternative Harstad and Holtsmark say is for natural gas producers to make credible commitments so investors can see it will be profitable long-term.
In their paper Harstad and Holtsmark suggest three policies: investing in renewables by gas-producing countries; levying taxes on search/exploration for natural gas; creating a coalition similar to OPEC for regulating prices.
Harstad emphasizes “The gas trap isn’t inevitable.”
This story was originally published by Stanford Graduate School of Business.
