June 23, 2013 7:15 pm

IEA warns on US emissions ahead of Obama announcement

  • Share
  • Print
  • Clip
  • Gift Article
  • Comments

US carbon dioxide emissions have been falling only because of the cheap price of natural gas and could easily pick up again if the price of gas rises, the International Energy Agency has warned.

The threat of a rise in US emissions comes as President Barack Obama plans on Tuesday to set out plans for regulation to reduce the output of greenhouse gases.

New rules limiting greenhouse gases from existing power plants and other industrial facilities, which could force coal-fired plants with higher emissions to shut down, are likely to be the most controversial element in Mr Obama’s plan.

US emissions of CO2, the gas that scientists say is mainly responsible for climate change, have been in decline since 2007, and last year hit their lowest level since 1994, according to the government’s Energy Information Administration.

However Fatih Birol, chief economist at the International Energy Agency, a Paris-based think-tank backed by 28 governments, said last week the decline was principally a result of US power generators switching away from coal and towards gas, which typically creates about half as much CO2 when burnt for an equivalent output of electricity.

The share of US electricity generated using coal dropped to 37 per cent in 2012, its lowest since the 1970s, having typically been about 50 per cent since 1980.

Gas is more competitive as a result of the shale boom, which pushed US prices to a ten-year low below $2 per million British thermal units last year. They have since recovered to about $3.80 per mBTU.

“The reason that America began to use a lot of shale gas was because it was cheaper,” Mr Birol said.

“My main worry is that if gas prices continue to climb, we may see coal coming back, and then this emissions reduction may well be reversed.”

Speaking at Columbia University’s Center on Global Energy Policy, he suggested $5 per mBTU could be a gas price at which there would be a significant shift back to coal.

The IEA is advocating short-term measures for curbing emissions it says would “keep alive” the prospect of limiting the man-made rise in global temperatures to a manageable 2°C. These include steps to raise energy efficiency, which provide about half the IEA’s proposed cuts, as well as curbs on coal-fired plants and leaks of methane during oil and gas production.

The IEA says its proposals would not hurt economic growth, and would provide other benefits such as cutting air pollution.

Those ideas will be echoed in Mr Obama’s statement on Tuesday, which is expected to propose measures to cut emissions from coal-fired power plants, tighten energy efficiency standards, and increase renewable energy use on public land.

Regulations on power plants are likely to be the most contentious aspect of the plan for business.

Proposals from the US Environmental Protection Agency last year to limit the emissions only of new power plants faced strong opposition, with the US Chamber of Commerce, the business lobby group, saying they would “weaken our energy security and raise energy prices.”

But the Natural Resources Defense Council, an environmental group, said it would be possible to curb emissions from existing plants at a cost that was not prohibitive. The group said its plan, which would cut the CO2 output of US power plants by 26 per cent from 2005 levels by 2020, would cost about $4bn per year by the end of the decade: little more than 1 per cent of industry revenues.

Copyright The Financial Times Limited 2015. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.

  • Share
  • Print
  • Clip
  • Gift Article
  • Comments


Sign up to Energy Source, the FT's weekly briefing on energy sector.

Sign up now


Sign up for email briefings to stay up to date on topics you are interested in

Enter job search