Emissions of carbon dioxide in the U.S. are now lower than they were in the year 2000 and are expected to continuing declining, according to the U. S. Energy Information Agency (EIA) in their “Annual Energy Outlook 2012.” Furthermore, the EIA says that carbon dioxide emissions in the electricity-generating sector fell so much in the first 3 months of 2012 that energy-related CO2 emissions this are on track to be at the lowest level since 1991.
What brought about such a dramatic decline? It wasn’t new carbon reduction regulations from the Environmental Protection Agency because the EPA just started rolling out their carbon reduction rules this year and carbon emissions have been declining for 3 years. It wasn’t stringent worldwide carbon reduction agreements because no such agreements have been reached.
While a sluggish economy accounts for some of the reduction, most of the decline in CO2 emissions is the result of basic economics: the increased use of natural gas due to low prices and the free market system which allows resources to be allocated to the most efficient uses. The need to force CO2 reductions may be a hotly debated topic but there is nothing wrong with free market generated reductions in CO2. In fact, economists call this a positive externality of natural gas.
Reductions in carbon dioxide are the result of the shale gas revolution, beginning just 10 years ago in the Barnett Shale in North Texas, which has significantly increased natural gas supplies and pushed down prices. Power generators have been switching from coal to natural gas for the simple reason that it is cheaper. In April of this year, natural gas fired electric generating plants produced 32% of the electricity in the U. S., which was equal to that generated by coal. By comparison, coal accounted for 52% of the electricity market in 2000 and 48% in 2008. Since natural gas emits about 40% of the carbon dioxide emitted by coal, CO2 emissions are plummeting.
The goal of reducing carbon emissions back to 1990 levels has been the stated goal of many environmentalists but was thought to be impossible without regulations that would dramatically increase the cost of electricity and harm the economy. However, the free market has worked its magic and CO2 emissions are on track to meet that goal and energy bills have plummeted, saving consumers more than $100 billion in 2011.
The market has demonstrated that it is possible for the United States to enjoy a low-cost and environmentally friendly energy future based on the vast domestic resources of natural gas and oil that technology has unleashed but market forces must be allowed to operate without onerous federal regulations and misguided state and local bans on hydraulic fracturing.