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.

The Oil Curse: How Petroleum Wealth Shapes the Development of Nations

I just attended a presentation by Micheal L Ross on his book: The Oil Curse: How Petroleum Wealth Shapes the Development of Nations. I learnt a some very interesting things in a short time that thought I would share whilst wolfing down my lunch*.

-- Oil countries have higher birth rates and lower female participation rates in the labour force. Possibly due to the fact that Dutch Disease kills sectors in which women tend to participate, such as the export manufacturing and agriculture sectors.

-- Oil-producers have considerably less open budgeting processes than non-oil producers.

-- Since the end of the cold war there has been a significant reduction in the number of civil wars in countries. But this reduction comes entirely from non-oil producing countries.

--The number of democracies has increased significantly since the end of the cold war but this is entirely in non-oil producing countries.

-- The oil curse only started to appear following the price hikes/wave of nationalisations that occurred in the 1970s. Prior to this, oil producing countries were no more likely to have a civil war, no more likely to be a dictatorship and their budgets were as transparent as other countries.

-- Countries with only off-shore oil are significantly less likely to have a civil war than countries with some on-shore oil - in fact they are about as likely as non-oil producers to have a civil war. This suggests that tribal, ethnic, regional tensions are exacerbated if those in oil-producing regions do not feel they get their fair share and the ability of fighters for these causes can use oil to prolong fighting. 

-- There are currently only about five major oil producers in sub-Saharan Africa but this is likely to double or even triple by 2050 as more exploration is done on the continent, as oil demand increases, supply runs out elsewhere and the resulting price increases make it viable to produce in the region. This makes it important to try to address some of these issues.

So, you see, oil isn't all good.

*A part of the 'Insights into the exciting lives of economists' series