November 17, 2010 / 11:04 PM / in 9 years

U.S. can slash carbon emissions with natgas: report

WASHINGTON (Reuters) - The shale gas boom could help the United States reduce greenhouse gas emissions even if Congress does not pass broad climate legislation, according to a Deutsche Bank report.

U.S. natural gas prices have fallen sharply over the last two years as supplies expanded due to the unexpectedly swift development of technologies to tap the fuel in shale formations a mile or more underground.

Lower natural gas costs have also already helped raise the proportion of U.S. electricity generated from the fuel to 23 percent from 20 percent two years ago.

As coal costs rise, the percentage for natural gas in power generation could rise to 35 percent by 2030, according to the Deutsche Bank report released on Wednesday.

The report assumes that environmental problems associated with hydraulic fracturing or “fracking” of shale gas are minimized as the technologies mature.

With Republicans taking control of the House of Representatives early next year, expectations that Congress will pass broad measures on renewable energy and climate are low.

But progress on emissions can still be made because natural gas releases about half as much of the greenhouse gas carbon dioxide as coal does.

“The role natural gas can play is so significant, it can form a type of a potentially bipartisan area of agreement,” on cutting emissions, Mark Fulton, Deutsche Bank’s global head of climate change investment research, told reporters in a teleconference.

The report said broader use of natural gas, and renewable energy like wind and solar power, could slash coal use. The efforts would cut emissions from power generation by 44 percent by 2030, it said.

Looming Environmental Protection Agency rules on mercury, particulates, and other emissions from coal-fired power plants could help reduce electricity generated from coal from about 47 percent now to about 22 percent by 2030, the report said.

That’s because scrubbers and other technologies that would have to be added to coal-fired power plants could push up the cost of power from that energy source.

A Bernstein Research note earlier this year also concluded that the EPA rules on air toxics would lead old coal plants into early retirements.

“The economics of this are compelling,” said Fulton. “This really is just pure economics, the industry will want to do this because it is cheaper.” The report assumed natural gas prices would average about $6 per mmBtu, about $2 higher than current prices.

Existing U.S. natural gas plants also have extra capacity. Two-thirds of the extra natural gas generation will come from existing plants near existing power lines, the report said.

Not everyone is happy about the gas boom. Environmentalists have complained that fracking, in which companies blast a mix of water, sand and chemicals underground to break open fissures in the shale rock, pollutes water supplies.

The report downplayed the risks and said with best practices, like recycling water used in the process, the environmental issues can be managed.

Reporting by Timothy Gardner; Editing by David Gregorio

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