Rising gas prices could lead to coal resurgence in US, IEA says

10 June 2013 14:21  [Source: ICIS news]

LONDON (ICIS)--The rise of shale gas in the US could slow in favour of coal if prices continue to rise, France-based think tank the International Energy Association (IEA) said on Monday.

Speaking at a press conference in London, IEA chief economist Fatih Birol noted that US C02 emissions fell in 2012 to mid-1990s levels as a result of the growing prominence of cheap shale gas, which has reduced coal to 35% of the US energy mix.

However, the fall in C02 emissions was driven primarily by cost concerns as opposed to a strong drive by the US to decarbonise its economy, Birol said, adding that rising gas prices could lead to a resurgence of coal usage if regulations are not put in place to discourage the use of the material.

Fatih said: “This major decline [in emissions] happened not because gas is cleaner, not because gas is domestic, [but] mainly because gas was cheaper. Last year, gas prices in the US averaged around $2.80 [MMBtu], and this year they started to increase... to around $4.20.

“Our analysis... shows that if the gas price in the US [reaches] around $5, we will then see a comeback of coal if there are no regulations put in place,” he added.

The increase in C02 emissions for China during 2012 was the lowest in a decade at 3.6%, as a result of increased usage of renewable power and improved energy intensity. The US and China make up around 45% of global C02 emissions, according to the IEA.

Fatih noted that Europe’s C02 emissions had fallen by 1.4% in 2012 as a result of a slowing economy, but that the extent of the economic slump masked the fact that coal use was actually increasing in some parts of the region.

The IEA is calling for global policymakers to adopt a series of measures that it claims will reduce the growth of C02 emissions by 3.1 gigatonnes by 2020 without presenting a substantial economic cost.

The measures include the partial removal of fossil fuel subsidies, taking steps to reduce the amount of methane released in oil and gas extraction, limiting the use of inefficient coal power plants and implementing more energy efficiency policies.

($1 = €0.76)

By: Tom Brown
+44 208 652 3214

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