Tuesday, December 11, 2012

Natural gas and climate change

Natural gas is cleaner than many alternatives, notably coal. It could help to reduce US carbon dioxide emissions from around 18 tonnes per person today to around 14 by 2040.

Unfortunately, that is nowhere near enough. I went to an interesting presentation last week on the 'Economic Implications of Moving Toward Global Convergence in Carbon Emissions'. I learned that taking into consideration population growth, the sustainable level per person per year is around 2 tonnes. That is around the India's level today.

A carbon tax imposed only in the developed world can help. But even a tax of around $250 per tonne would not be sufficient to achieve convergence at sustainable levels. A tax around this level would increase the price of petrol by around $4 per gallon. That sounds like a lot but it really isn't. Americans are still drastically under-paying for petrol compared with Europe and even compared with plenty of developing countries, which can least afford it. Unfortunately, carbon is currently trading at around $10 per tonne in the EU. Still some way to go.