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BJØRN LOMBORG

Innovation’s vastly cheaper than green subsidies Add to ...

The U.S. Energy Information Administration recently published a report that estimates global shale gas resources. These findings may have a significant impact on energy policy in the future: Shale gas increases global resources of natural gas by a whopping 47 per cent. And this may be the tip of the iceberg. For example, at the end of June, the British Geological Survey released shale gas estimates for just one field in mid-England that increased the global estimate by more than 18 per cent.

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Canada’s shale gas resources – the world’s fifth highest in terms of technically recoverable gas, estimated at 573 trillion cubic feet – are nothing to balk at. The economic benefits from fracking are manifold: Whereas natural gas prices in the European Union have doubled since the year 2000, U.S. prices have declined about 75 per cent in the past few years. This has saved U.S. consumers $125-billion a year. So the shale gas revolution promises to be great news for the Canadian economy, but – perhaps surprisingly, it is also good news for our climate.

So far, the United States is the only country that has produced shale gas on a large scale, using hydraulic fracturing, known as “fracking.” A host of environmental concerns have been attached to fracking, some real enough to warrant strong regulation but many vastly exaggerated. A widely viewed clip of a faucet catching fire – originating in the film Gasland – turned out to be spurious, as the gas was entirely natural in origin. Concerns about the water supply in Dimock, Pa., flashed around the world, but essentially evaporated when the Environmental Protection Agency tested it.

Running contrary to much environmental rhetoric, fracking has proven to be this decade’s green solution, bridging the future until renewable energies are ready to compete with fossil fuels. Natural gas emits 45 per cent less carbon dioxide than coal, and costs much less than current solar and wind. In 2012, U.S. emissions of carbon dioxide dropped to their lowest level in 20 years, 14 per cent below their peak in 2007. Previously, the United States generated about half its electricity from coal, and about 17 per cent from gas. Over the past five years, those numbers have changed, first slowly and now dramatically – by 2012, coal had fallen to 37 per cent, while gas had almost doubled to 30 per cent.

By replacing dirtier coal, shale gas has prevented about 500Mt of CO2 emissions in the United States. That is about twice the total effect of the Kyoto Protocol and all other climate legislation in the rest of the world over the past 20 years. And remember, while the EU’s climate policies will cost about $250-billion and cut only half as much, the Americans are making more than $100-billion annually.

Although the switch from coal to natural gas was rapid, the underlying technologies have been in the making for several decades. The U.S. Department of Energy and others invested about $10-billion over 30 years to secure innovation for drilling, fracturing and advanced mapping techniques. Now, as fracked gas becomes cheaper than all other fossil fuels, we’re seeing the benefit in a matter of years. That story holds an important lesson for the next generations of green energy.

In the long run, we need to switch to green energy because of global warming. But as long as green energy technology costs more than fossil fuels, this change will never happen. Governments can’t afford to heavily subsidize it directly at the hundreds of billion dollars per year – instead, it will remain a feel-good niche.

But supporting innovation as with fracking turns out to be a much cheaper solution. If ramped-up innovation can help us discover solar panels 2.0 and 3.0, which would be better, smarter and cheaper than fossil fuels, everyone – including the Chinese and Indians – will switch. The switch would happen just as fast as the recent transition from coal to shale gas, because the economic fundamentals would encourage it, instead of the present, uphill fight for heavy and unaffordable subsidies.

Indeed, economic models show that innovation is by far the best long-term climate policy. If we all invested far more to drive down the cost of future green energy through innovation, we would outcompete fossil fuels faster and find a truly viable energy solution to global warming.

For now, however, Canada too needs to experience the fracking bonanza, which promises to be the biggest source of CO2 reductions this decade, while benefiting the Canadian economy and its consumers. There is a bargain that’s difficult to pass up.

Bjørn Lomborg is author of The Skeptical Environmentalist and Cool It, and director of the Copenhagen Consensus Center.

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