The Free Market Is Reducing Carbon Dioxide Emissions

NCPA July 19, 2013

Many federal lawmakers support President Obama in his desire to reduce carbon emissions by imposing the heavy hand of regulation. What they consistently fail to appreciate, however, is that the free market is already curbing energy-related carbon emissions, says Merrill Matthews, a resident scholar with the Institute for Policy Innovation.

The best example of this market-induced transition: The widespread shift from coal to natural gas. Between January 2007 and April 2012, many electricity power plants (the largest single source of carbon dioxide (CO2) emissions) made precisely this shift.

• One reason was the exploding supply, and therefore falling price, of natural gas, which bottomed out at $1.86 per thousand cubic feet in April of last year.
• According to the U.S. government's Energy Information Administration (EIA), energy-related CO2 emissions fell to a little above the 1995 level and were trending lower, toward early 1990s levels.
• The Environmental Protection Agency says that natural gas produces about half of the CO2 emissions as coal. Thus that shift to gas has been helping the president achieve his goal.

Gas is not only cleaner than coal, but the United States has become the largest producer of natural gas.  So it is in both our environmental and economic interests to see an expansion of natural gas production and use. Worldwide, coal is still the largest source of fuel for electricity power plants.

• China is the largest consumer of coal, 3.7 billion short tons, releasing 6,946 million metric tons (MMT) of CO2 in 2010.
• The United States comes in second at 1.05 billion short tons, releasing 1,985 MMT of CO2. Most countries use significantly less coal.
• Making it easier for not only the United States but other coal-using countries, especially China, to shift to natural gas would have a positive impact on energy-related CO2 emissions.

Fortunately, innovation and the free market have produced a solution.  The new extracting process known as hydraulic fracturing has dramatically increased U.S. natural gas production, and lowered its price. The goal should be to expand the market for U.S. natural gas so that producers will expand their drilling.

The private sector operations will invest billions of dollars to build liquefied natural gas terminals that super-cool the gas, turning it into a liquid, to ship it to other parts of the world. But another dozen or so terminals are seeking Energy Department export permits. Quick federal approval would mean less CO2 emissions in the near future.

Source: Merrill Matthews, "Mr. President, the Free Market Is Reducing CO2 Emissions," Forbes, July 12, 2013.