Power Decarbonization & LNG Exports

2024 11 09

Power Decarbonization in a Global Energy Market: The Climate Effect of U.S. LNG Exports by Harvard economist Costanza Abruin puts into a formal model the point that restricting supply of fossil fuels from and in the United States does not mean an equivalent reduction in global emissions.  Abruin goes farther in showing that through 2070 approximately doubling US LNG exports actually reduces global emissions as

a)   Internationally, LNG replaces coal for electricity generation thus reducing CO2 emissions.   The reduction results not only becasue over half of the energy content of LNG (methane) comes from oxidizing hydrogen compared to zero for coal, but also becasue gas enables solar and wind to replace coal by addressing the intermittency problem.

b)   In the US higher gas prices are modeled to reduce gas use by faster adoption of zero CO2 emitting technologies[1] outweighing the slower gas for coal substitution.

As I have made a similar argument,

https://thomaslhutcheson.substack.com/p/why-not-lng-exports

I “like” the conclusions even if the effect within the US feels almost too good to be true.  Crucially, they derive from a “dynamic, multi-country model of power asset investment, where the carbon intensity of electricity generation is affected by the entry and exit of plants using alternative fuels and the local price of fossil inputs is determined in a global trade equilibrium.”  That is, the model takes account of how the US LNG is used abroad over a long enough period to affect investment decisions.

But even the international leg of the results alone ought to be enough to have avoided the past January “pause” of LNG export facilities.[2] As modeled it explicitly contradicts the “McKibbenist” assumption that every carbon atom produced and exported from the US results in an addition molecule of CO2 in the atmosphere.   

Additionally, it undermines the Paris Accord/COP process of encouraging countries to set goals for CO2 reduction a) without regard for the cost of those goals and b) assuming that a country’s production of fossil fuels affects its emissions goals.

https://thomaslhutcheson.substack.com/p/cop-28-and-counting

https://thomaslhutcheson.substack.com/p/cop-29-and-trump

“Finally, my work is connected to a growing theoretical literature …which has highlighted the importance of addressing time-inconsistency and international coordination problems in the design of supply side fossil fuel policies. I quantitatively evaluate these forces in the context of the U.S. LNG expansion and propose a framework that, more broadly, can be used to think about supply-side policy design in a global equilibrium.” 

Not to put words in the researcher’s mouth[3], this implies that addressing CO2 emission reduction by restricting production and transportation of fossil fuels is just about impossible.  At the very least it requires vastly more international policy coordination — what COP is failing to achieve — than the alternative of working on the demand for fossil fuels.  Each country taxing its own CO2 emissions, its least costly contribution to the common goal of net zero, requires no coordination at all.  Different rates of tax would only reflect different dispositions to free-ride, dispositions that exist in any policy regime.  

Image Prompt:  Group of environmentalists happily sending off an LNG tanker

[Standard bleg:  Although my style is know-it-all-ism, I do sometime entertain the thought that, here and there, I might be mistaken on some minor detail.  I would welcome comments on these views.]

---

[1] The word used in the paper is “renewables” but as I read the paper nuclear and geothermal are not excluded.

[2] LNG exports/banning exports increase/decreases the returns to fracking, potentially an important political effect in Pennsylvania!

[3] Any misunderstanding of the author’s model or conclusions are entirely my own.