The Center for American Progress (CAP) published recently a report titled, “U.S. Natural-Gas Use Must Peak by 2030.” In it, CAP argues that while natural gas provides short-term economic and environmental benefits, its long-term use is detrimental to the U.S. economy and global climate.
CAP’s primary concern with natural gas is that it is so affordable, abundant, and reliable that its continued use beyond 2030 will jeopardize President Obama’s “climate stabilization targets.” To address this alleged problem, CAP makes a number of misleading claims and logically inconsistent policy recommendations. Some of these are discussed below.
Having it Both Ways on Natural Gas Prices
As CAP admits, natural gas provides a “comparatively clean and currently available and affordable” energy source for the U.S. economy. Indeed, the Institute for Energy Research (IER) has noted the enormous economic benefits of expanding oil and natural gas production. Domestic energy production creates jobs, provides affordable electricity to American families, and reduces America’s dependence on imports.
CAP claims to support cheap natural gas, urging policymakers to “protect middle-class families and manufacturing companies from any price increases that may result from liquefied natural gas, or LNG, exports.” But CAP’s own report belies this alleged concern for keeping natural gas prices low. Specifically, the authors offer three recommendations that would actually increase natural gas prices.
First, CAP calls for levying taxes at every stage of the natural gas production and consumption cycle, from the wellhead to end users and every point in between. Such taxes would, as CAP admits, “obviously” raise production costs, which would result in higher energy prices for Americans. This directly contradicts CAP’s ostensible commitment to protecting the middle class from price shocks.
Second, CAP advocates for a tax on carbon dioxide emissions. As with the natural gas tax, a CO2 tax would undoubtedly raise energy prices on American families. According to the Energy Information Administration (EIA), a carbon dioxide tax that starts at $25 per ton of CO2 and rises 5 percent annually would cut the income of a family of four by $1,900 per year in 2016, increase household energy bills by more than $500 per year, and raise gasoline prices by 50 cents per gallon. Again, it is logically inconsistent to advocate both for lower energy prices and a tax on carbon dioxide emissions.
Third, CAP supports limiting construction of natural gas infrastructure. CAP believes natural gas production needs to peak at about 40 percent of the nation’s energy supply no more than 17 years from now. This goal requires curtailing the infrastructure necessary to deliver natural gas from producers to consumers, the effect of which will be to limit supply and thus raise prices.
Each of these proposals—taxing natural gas, taxing carbon dioxide emissions, and limiting natural gas infrastructure—contradicts CAP’s stated concern that LNG exports will raise energy prices. The logic of supporting taxes that make natural gas more expensive while expressing concern over the price effects of exporting LNG only makes sense if the goal is to limit natural gas production. Natural gas is abundant, affordable, and reliable, but CAP wants to make it more expensive and thus harder to use. This would make CAP’s preferred energy sources, wind and solar, more attractive by comparison.
Making affordable energy more expensive is just one of the reasons CAP supports carbon dioxide and natural gas taxes. CAP wants to redistribute the revenue these taxes would generate to subsidize expensive, unreliable energy technologies. That is the only way to make a “swift transition” from fossil fuels to renewables like wind and solar.
Some conservatives support the concept of a revenue-neutral carbon dioxide tax as an economically efficient alternative to regulation. They argue that Congress could use the revenue generated from a CO2 tax to reduce income or corporate taxes. The CAP report demonstrates why such a tax scheme is untenable. As IER has explained before, liberals who support taxing carbon dioxide emissions do not want to use the revenue to reduce other taxes; they want to chase green energy chimeras at taxpayers’—and ultimately the nation’s—expense.
The fact is that a revenue-neutral CO2 tax is incompatible with environmentalists’ goal of creating a “zero-carbon future.” The U.S. cannot simply eliminate fossil fuels without finding replacement energy sources. Fossil fuels comprise more than 82 percent of U.S. energy use, while renewables account for just 9 percent, most of which comes from hydropower that has been installed for years and wood that emits more CO2 than coal. Thus, CAP contends, the federal government must spur renewable technologies with massive subsidies, the funds of which would come, in part, from taxing CO2 emissions.
Unilateral U.S. Climate Action Doesn’t Actually Matter
In its report, CAP proposes taking aggressive action to curtail greenhouse gas emissions. CAP endorses the view that the U.S. must prevent global temperatures from increasing more than 2 degrees Celsius above pre-industrial levels to prevent the worst effects of climate change.
But CAP fails to point out that the U.S. can do almost nothing by itself to significantly impact global temperatures. Even if the U.S. immediately stopped all carbon dioxide emissions, global temperatures would decrease by just 0.17 degrees Celsius by the year 2100, using assumptions based on the Intergovernmental Panel on Climate Change’s (IPCC) own models. This makes so-called “climate stabilization targets” a meaningless gesture that serve only to raise energy prices on American families and hamper economic growth, a result that CAP cannot possibly intend for the United States.
In reality, China and India are driving recent increases in carbon dioxide emissions. U.S. emissions have declined by about 4 percent since 2002, while China’s and India’s have increased by 147 percent and 84 percent, respectively. In 2007, China surpassed the U.S. to become the world’s largest emitter of carbon dioxide. China’s emissions are expected to rise by more than 7 billion metric tons between 2010 and 2040, an 89 percent increase.
China and India have, understandably, signaled little interest in sacrificing economic growth at the altar of climate change. Their governments support coal-fired power plants as an inexpensive source of electrical generation. China, for example, is projected to nearly double its coal-fired generating capacity by 2040, according to EIA. Meanwhile, an estimated 300 million people in India still do not have electricity. India’s emissions will only continue to rise as coal-fired electricity lifts millions of people out of energy poverty.
For many developing countries, the choice is not between fossil fuels and renewables, but between any energy and no energy. These countries do not have the luxury of experimenting with trendy green energy sources—they can either burn coal or live in darkness. For them, the distant impacts of climate change are justifiably subordinate to the immediate need for heat and electricity.
In its report, CAP falsely equates U.S. carbon dioxide reduction goals with climate stabilization targets. Unilateral action by the U.S. to curtail emissions will not have a meaningful impact on global temperatures, as long as developing countries continue to increase emissions. CAP’s failure to recognize this reality is either ignorance or denial of climate science.
The “Halliburton Loophole” Fallacy
Technological advances that combine hydraulic fracturing and horizontal drilling have unlocked vast shale resources that were previously inaccessible, resulting in the greatest domestic energy boom in U.S. history. America’s proved natural gas reserves rose to a new record high of 348.8 trillion cubic feet in 2011, an increase of nearly 10 percent in just one year, according to EIA data. Even CAP admits, “The natural-gas boom is a reality.”
The natural gas boom that CAP ostensibly supports in the short-term is not occurring on federal lands, where production actually fell 7% last year, but on state and private lands. While natural gas production on federal lands hit a ten-year low in 2011, production on lands not under federal control has skyrocketed in recent years. Between 2007 and 2012, natural gas output grew by 40 percent on state and private lands, according to the Congressional Research Service. Recognizing this trend, CAP wants the federal government to extend its regulatory reach to state and private lands.
CAP cites something they call the “Halliburton Loophole” as justification for federal regulation. According to them, this “loophole” allegedly prevents regulators from protecting groundwater from hydraulic fracturing. The problem is that no such loophole exists. States have successfully regulated hydraulic fracturing for decades without a single confirmed case of groundwater contamination. Former EPA Administrator Lisa Jackson, DOE Secretary Ernest Moniz, and Interior Secretary Sally Jewell have all acknowledged the impressive safety record of states.
Conclusion
As IER explains in a letter to the Bureau of Land Management (BLM), regulating hydraulic fracturing at the federal level is unnecessary, duplicative, and will only slow natural gas production. As much as it claims to support affordable natural gas, CAP proposes erecting numerous central government roadblocks to tax, regulate, and limit production, even in the absence of any proven problems. These policy recommendations belie CAP’s purported desire to keep energy prices low.
In reality, CAP seems to care about promoting expensive, unreliable energy sources like wind and solar, while giving lip service to energy affordability. That would explain why CAP proposes taxing natural gas to pay for even more green energy subsidies. As we have seen with Solyndra, Shepherds Flat, Abound Solar, and countless others, the government spends money not on the most economically promising energy technologies, but on the most politically-connected projects. Not only does this waste taxpayer dollars, but it threatens our nation’s ability to deliver affordable energy to American families for decades to come. CAP’s recent report demonstrates that its agenda is fundamentally incompatible with abundant, affordable energy.
IER Policy Associate Alex Fitzsimmons authored this post.
