WHEN it comes to the issue of climate change, it's easy to bash the United States. Yes, the U.S. emits a lot of carbon dioxide about 5.9 billion tons in 2013 alone, second only to China's 9.5 billion tons.
But it's also easy to overlook this fact: The U.S. is leading the world in reducing its carbon dioxide emissions. And those reductions are largely due to the innovation that is happening not in green energy, but in the oil and gas sector's ability to produce hydrocarbons from shale deposits.
Indeed, thanks to soaring domestic production of natural gas up by 27 percent, or about 2.7 million barrels of oil equivalent per day since 2003 the U.S. has been able to reduce the amount of coal it consumes for electricity generation. Since 2003, according to the latest data from the BP Statistical Review of World Energy, U.S. coal consumption has declined by about 2.1 million barrels of oil equivalent per day. Put another way, the U.S. is now burning about the same amount of coal as it did back in 1987.
That reduced coal consumption has resulted in major reductions in carbon-dioxide emissions, even when compared to Germany, a country that many environmentalists consider an example to be copied. Over the past decade or so, German consumers have subsidized renewable energy programs to the tune of about $100 billion, according to a Financial Times report.
And, while it's true that Germany is now producing more solar energy than any other country, it's also true that the U.S. has achieved far greater emissions reductions, in absolute terms, than Germany has.
Since 2003 again, according to the latest BP Statistical Review of World Energy the U.S. has reduced its carbon-dioxide emissions by six times what Germany has achieved, and it has done so at far lower cost.
When it comes to energy, the U.S. is now the envy of the rest of the world. Over the past two years or so, U.S. natural gas prices, measured at the Henry Hub in Louisiana, have averaged about $4 per million BTU (British thermal unit). In the European Union, that same 1 million BTUs of gas will cost roughly three times as much. In Japan, it will cost about four times as much.
To be clear, the dramatic increase in domestic oil and gas production is creating some friction. Many people are concerned about the possibility of water contamination. But remember that in 2011 the head of the Environmental Protection Agency, Lisa Jackson, in testimony before the U.S. Senate, said, I'm not aware of any proven case where the fracking process itself has affected water.
Continuing improvements in horizontal drilling and hydraulic fracturing are allowing the U.S. to produce record quantities of natural gas. And that flood of gas is stimulating the economy, creating large numbers of jobs and attracting tens of billions of dollars in foreign investment.
Last fall, Wallace Tyner, an energy economist at Purdue University, estimated in a study that the shale revolution was adding some $473 billion per year to the U.S. economy, or about 3 percent of the gross domestic product. Energy consulting firm IHS recently estimated that more than 2.1 million jobs in the US are now supported by shale-related oil and gas activity. To cite just one example of foreign investment: Sasol, a South African company, is spending $21 billion on a new gas-to-liquids facility in Lake Charles, La.
Over the past few years, a myriad of pundits and politicians have claimed that the U.S. would see big economic gains due to breakthroughs in renewable-energy production. While it's true that the cost of solar photovoltaic modules has fallen from more than $20 per watt in the 1980s, to less than $1 per watt today, the energy story of today is the resurgence of America's oil and gas production.
That resurgence has occurred due to continuing innovation in everything from better drilling rigs and drill bits to improved seismic techniques and more powerful pumps. Those innovations may not be glamorous, but they are giving the U.S. a major competitive advantage in the world economy while also helping the country reduce its carbon-dioxide emissions.
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