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Economic and Environmental Impacts of
Increased U.S. Natural Gas Exports
Kemal Sarica
Wallace E. Tyner
Purdue University
July 28-31, 2013
ANCHORAGE
32nd USAEE/IAEE North American Conference
THE
GLOBAL POLICY RESEARCH INSTITUTE
• Shale gas is a game changer.
• It is part of the reason behind the manufacturing
resurgence in the U.S.
• It will stimulate much more conversion of old
coal fired electric power plants in the U. S. to
natural gas, thereby providing environmental
benefits.
• The IEA estimates that shale gas done right is
only 7% more expensive than business as usual, so
it can be done with minimal adverse environmental
impact.
2
• Free trade is beneficial in almost all cases
from a global perspective.
• However, that does not mean that partial
trade liberalization in all cases is good for every
country. In fact, there are many examples of
countries or regions losing from partial trade
liberalization.
• The question, then, is what are the impacts on
the U.S. economy and environment of permitting
increased natural gas exports.
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• We use a model called MARKAL-Macro to
evaluate the impacts of increased natural gas
exports.
•
MARKAL is a bottom-up energy model that solves
for the lowest cost mix of meeting energy
service demands over the specified time horizon.
• MARKAL-Macro adds a macroeconomic sector to
provide two way feedback on energy service
costs and demands.
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• MARKAL Macro based on the EPA 2010 single
region MARKAL database with DOE AEO 2010
assumptions.
• We have made many modifications to the base
data, but the most important for this study is to use
the MIT natural gas supply curves:
• We replaced the default data base curves with
the MIT high availability natural gas resource
supply curves based on the MIT Energy Initiative
report (The MIT Energy Initiative, 2011).
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•Natural gas resource supply curves represent
a
relationship, between price and quantity with no
time dimension.
•How fast can supply adjust over time?
•We used two parameter sets regarding exponential
growth and decay rates for each natural gas supply
step to define two reference cases:
• Standard reference scenario,
5% annual growth with 3%
annual production decay rate (the default values)
• Elastic reference scenario,
10% annual growth and no
decay rate limit (calibrated to replication EIA data).
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•We conducted our analysis for three cases, export
increases of:
•6 BCF/day,
•12 BCF/day, and
•18 BCF/day.
• We assessed impacts on
• GDP, natural gas prices and production, primary
energy resource mix, electricity and transportation
sectors, and energy intensive manufacturing
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•GDP is always higher with the elastic reference case.
•Electricity prices, are 10 % lower, with the elastic case, due to
higher use of natural gas and lower natural gas prices compared
to standard reference case.
•Total primary energy consumption increases with the elastic
reference case mainly due to lower energy cost.
•Coal use decreases more under the elastic case due to fuel
switching with natural gas, up to 18% lower in the short run.
•Natural gas use as transportation fuel increases significantly
under the elastic case, up to 100%, compared to standard case.
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The average
decline is about
$7 billion.
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Elastic Reference
Energy
source
Reference
6 Bcf/day
Standard Reference
12 Bcf/day
18 Bcf/day
Reference
6 Bcf/day
12 Bcf/day
18 Bcf/day
Coal
19.6%
19.6%
19.8%
20.1%
21.5%
21.6%
22.0%
22.2%
Natural gas
23.3%
23.1%
22.7%
22.5%
20.2%
20.1%
19.8%
19.4%
Oil
34.4%
34.5%
34.7%
34.5%
35.4%
35.3%
35.3%
35.3%
8.0%
8.0%
8.1%
8.1%
8.1%
8.2%
8.2%
8.3%
Renewables
14.2%
14.3%
14.4%
14.5%
14.4%
14.5%
14.5%
14.5%
Elec. import
0.5%
0.5%
0.3%
0.3%
0.3%
0.3%
0.3%
0.3%
Nuclear
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Percentage Energy
Sector
Use Decline Relative to
Respective Reference Cases in 2035
Primary metals
Elastic Case
Standard Case
6 BCF/day
-0.6%
-0.2%
12 BCF/day
-1.3%
-1.1%
18 BCF/day
-2.0%
-2.4%
6 BCF/day
-0.8%
-1.3%
12 BCF/day
-2.6%
-2.0%
18 BCF/day
-3.3%
-3.0%
6 BCF/day
-0.2%
-0.2%
12 BCF/day
-0.9%
-0.7%
18 BCF/day
-1.3%
-1.6%
6 BCF/day
-0.3%
0.6%
12 BCF/day
-0.4%
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-0.8%
0.0%
Non-metalic
Paper
Chemical
18 BCF/day
-1.1%
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•Permitting significant natural gas exports causes a small
reduction in US GDP.
•There is loss of labor and capital income in all energy
intensive sectors, and electricity prices increase
•Higher natural gas prices cause pervasive losses
throughout the commercial, industrial, and residential
sectors
•The two reference cases essentially bracket the likely
supply response, and the general trends of results are
robust through both cases.
•These results suggest caution is in order in approving
large levels of LNG exports.
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In the presence of a Clean Energy Standard
• The GDP and sectoral impacts are similar, but the
impacts on electricity and transport are
substantially different.
• The CES induces considerably higher natural gas
prices because of the added demand for natural
gas for power generation.
• Natural gas exports on top of CES cause prices to
go even higher.
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Thanks!
Questions and Comments
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