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U.S. Carbon Emissions are Declining Thanks to Natural Gas and the Free Market

Emissions of carbon dioxide in the U.S. are now lower than they were in the year 2000, and they are expected to continue to decline, according to the U.S. Energy Information Agency (EIA) in their “Annual Energy Outlook 2012.” Furthermore, the EIA says that carbon dioxide emissions in the electricity-generating sector fell so much in the first three months of 2012 that energy-related CO2 emissions are on track to be at the lowest level since 1991.

What brought about such a dramatic decline? It wasn’t new carbon reduction regulations from the Environmental Protection Agency (EPA) because the EPA just started rolling out their carbon reduction rules this year – and carbon emissions have been declining for three years. It wasn’t stringent worldwide carbon reduction agreements because no such agreements have been reached.  

While a sluggish economy accounts for some of the reduction, most of the decline in CO2 emissions is the result of basic economics: the increased use of natural gas due to low prices and the free market system. The need to force CO2 reductions may be a hotly debated topic, but there is nothing wrong with free market generated reductions in CO2. In fact, economists call this a positive externality of natural gas.

Reductions in carbon dioxide are the result of the shale gas revolution beginning in the Barnett Shale only 10 years ago, which has boosted natural gas supplies and pushed down prices. Power generators have been switching from coal to natural gas for the simple reason that it is cheaper. In April of this year, natural gas-fired electric generating plants produced 32% of the electricity in the U.S., which was equal to that generated by coal. By comparison, coal accounted for 52% of the electricity market in 2000 and 48% in 2008. Since natural gas emits about 40% of the carbon dioxide emitted by coal, CO2 emissions are plummeting.

The goal of reducing carbon emissions back to 1990 levels has been the stated goal of many environmentalists, although it was thought to be impossible without regulations that would dramatically increase the cost of electricity and harm the economy. However, the free market has worked its magic and CO2 emissions are on track to meet that goal and energy bills have plummeted, saving consumers more than $100 billion in 2011.

With all the benefits of natural gas from the vast shale deposits in the United States, that are now accessible due to hydraulic fracturing, environmental groups should be championing the development of shale gas. But sadly, this is not the case as demonstrated by the environmental group Sierra Club and their recent anti-natural gas campaign “Beyond Natural Gas.” However, as demonstrated by the market-generated reductions in carbon dioxide, the United States can have a low-cost and environmentally friendly energy future. Hydraulic fracturing is the answer– provided that the U.S. energy sector is supported and permitted to use this game-changing technology.