Daniel Raimi

Implications of shale gas development for climate change.

Advances in technologies for extracting oil and gas from shale formations have dramatically increased U.S. production of natural gas. As production expands domestically and abroad, natural gas prices will be lower than without shale gas. Lower prices have two main effects: increasing overall energy consumption, and encouraging substitution away from sources such as coal, nuclear, renewables, and electricity. We examine the evidence and analyze modeling projections to understand how these two dynamics affect greenhouse gas emissions. Most evidence indicates that natural gas as a substitute for coal in electricity production, gasoline in transport, and electricity in buildings decreases greenhouse gases, although as an electricity substitute this depends on the electricity mix displaced. Modeling suggests that absent substantial policy changes, increased natural gas production slightly increases overall energy use, more substantially encourages fuel-switching, and that the combined effect slightly alters economy wide GHG emissions; whether the net effect is a slight decrease or increase depends on modeling assumptions including upstream methane emissions. Our main conclusions are that natural gas can help reduce GHG emissions, but in the absence of targeted climate policy measures, it will not substantially change the course of global GHG concentrations. Abundant natural gas can, however, help reduce the costs of achieving GHG reduction goals.

Carbon Market Lessons and Global Policy Outlook

Ongoing work on linking markets and mixing policies builds on successes and failures in pricing and trading carbon. Prices in the European Unions (EU) Emissions Trading System (EU-ETS) spent 2013 at historic lows. Elected officials have promised to repeal the Australian carbon market. Yet five new regional carbon markets recently began in China, which nearly doubled the volume of emissions covered by trading programs. This follows Californias successful launch of its cap-and-trade program in 2013 and its 2014 link to Quebecs market. Are carbon markets seriously challenged or succeeding and on the rise?

US State and Local Oil and Gas Revenues

US state and local governments generate revenues from oil and gas production through a variety of mechanisms. In this paper, we quantify four leading sources: (1) state taxes levied on the value or volume of oil and gas produced; (2) local property taxes levied on the value of oil and gas property; (3) oil and gas lease revenues from state lands; and (4) oil and gas lease revenues from federal lands. We measure these revenues against the total value of oil and gas produced in the top 16 oil- and gas-producing states using fiscal year 2013 as a benchmark. On average, state and local governments collect roughly 10 percent of oil and gas revenue, ranging from a low of roughly 1 percent to a high of nearly 40 percent (not including income taxes). We also assess the use of these revenues, finding that there is substantial variation among states. The largest shares of revenue flow to state governments’ current expenditures and education, followed by local governments. Some states also allocate a portion of oil and gas revenues to trust funds endowing future government operations and/or education expenditures.