An American Triumph: US Shale Revolution Delivers Cleaner Environment, Along With Jobs And Prosperity

  • Date: 06/01/13
  • Mark J. Perry, AEIdeas

Uncle Sam is showing the world that carbon emissions can be cut sharply and cheaply. For the first time in recent history, the U.S. has been able to produce increasing amount of economic output over the last five years, while at the same time experience huge reductions in C02 emissions. Most of the credit for the historically unprecedented reduction in CO2 emissions goes to the shale gas revolution, which started in about 2007 with the technological breakthroughs in hydraulic fracturing.

John Hanger’s top energy fact of 2012, in a post titled “An American Triumph,” is captured in the chart below, showing annual U.S. real GDP and annual U.S. C02 emissions from 1986 to 2012, with estimates for last year based on the first nine months of data for both series.  During the twenty year period between 1986 and 2006, there was a strong positive relationship between America’s economic output (real GDP) and the amount of carbon dioxide emissions generated each year (that pattern actually goes back much further).  For many decades, the activities associated with increasing economic output generated increasing amounts of greenhouse gases, as the chart clearly shows.

co2

But the historical, positive relationship between real GDP and CO2 emissions broke down in about 2007.  Over the last five years since 2007 when CO2 emissions were the highest in history (more than 6 billion metric tons), real GDP has increased by 3.4%, while CO2 emissions have declined by about 12%. Depending on final calculations for the last quarter, carbon emissions in 2012 could fall to the lowest level in 20 years, going all the way back to 1992 (see chart).  For the first time in recent history, the U.S. has been able to produce increasing amount of economic output over the last five years, while at the same time experience huge reductions in C02 emissions.

How is that possible?  While increased energy efficiency and renewable energies have played a role in reducing greenhouse gas emissions, most of the credit for the historically unprecedented reduction in CO2 emissions goes to the shale gas revolution, which started in about 2007 with the technological breakthroughs in hydraulic fracturing.  Here’s how John explains the “American Triumph“:

It is a true American triumph that energy related carbon emissions will be down in 2012 another 4% from 2011 levels and will be back to approximately 1995 levels. The carbon clock has rolled back 17 years, and 2012 emissions will be even less than in the near-depression year of 2009.

US GDP has grown every quarter since July 1, 2009, and today our economy is bigger than it was in 2007, the peak carbon emission year. Yet, even with an economy in 2012 that is bigger than in 2007, our carbon emissions will be 12% lower than they were in 2007.

The recipe for US carbon success includes more natural gas, renewable energy, energy efficiency. But central and unique to the US success is massive shale gas production and the resulting low gas prices causing a substantial shift to electricity generated from lower carbon gas and away from coal and oil.

Many other countries like China are investing heavily in renewable energy and energy efficiency, and such investments are essential. Notwithstanding impressive investments in clean energy, China and other nations have rising coal use and carbon emissions. Around the world, renewables and energy efficiency help but have not been enough by themselves to even stabilize carbon emissions, let alone reduce them.
Only the USA has had a shale gas boom and only the USA has cut substantially its carbon emissions since 2006. When combined with rising amounts of renewable energy and energy efficiency, the shale gas boom substantially decreased US carbon emissions. Moreover, US electricity prices in 2012 have barely increased and natural gas prices have plummeted.
Cleaner and cheaper energy is a real American triumph and my Top Energy Fact of 2012!

MP: As I have commented previously, it’s really hard to exaggerate all of the significant benefits of the shale revolution for the U.S. economy over the last five years, and the significant reduction in carbon emissions since 2007 is just one part of a “real American triumph,” as John Hanger calls it.  In addition to the significant environmental benefits of shale gas, the revolution for both shale gas and shale oil provided a well-timed energy-based stimulus to the economy starting in about 2007, just as the Great Recession and financial crisis crippled the economy. It’s quite sobering to think about where the US economy and job market would be today, and how much higher CO2 emissions would be, without the “energy revolution” that was made possible with advanced drilling technology.

To summarize, the great “American triumph” is creating millions of shovel-ready jobs throughout the U.S. labor market, stimulating the economy with trillions of dollars of new investment capital, lowering energy costs for residential and industrial customers and generating billions of dollars of savings, bringing U.S. natural gas prices down to the lowest level in the world and helping to spark a renaissance in energy-intensive manufacturing, adding billions of dollars of revenues for federal and state governments, and creating thousands of new millionaires from the oil and gas royalties being paid out to farmers and landowners around the country.  And as an additional environmental benefit, we’re “rolling the carbon clock back” by several decades.  Unless there is major political or regulatory interference, the impact of the energy revolution and the “real American triumph” is just getting started, and provides one of the strongest reasons to be optimistic about the U.S. economy, the job market, and the environment.

AEIdeas, 6 January 2013