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INTERVIEW

Shale better than green energy to combat climate change

Brussels, February 7, 2014

By Barbara Lewis

Shale gas offers a cheaper way to replace coal and cut greenhouse gas emissions than renewable power, BP's chief economist said, but dismissed claims that failure to develop it would drive industry out of Europe.

The comments from one of energy's most senior economists feed into heated debate ahead of a summit meeting of EU leaders in March about whether Europe faces a disadvantage to the United States because of high energy costs.

BP's Energy Outlook to 2035 has predicted unconventional gas, including shale, will account for 21 per cent of all gas produced by 2035, up from 8 per cent in 2012.

Almost none of that will be in Europe as "above ground factors", chiefly local politics, stand in the way, Christof Ruehl said in an interview.

The shale gas revolution in the United States has led to intensive lobbying in Brussels from industry and states, such as Britain and Poland, which argue their competitiveness is damaged because European gas prices are between three and four times higher than in the United States.

"All these companies in Europe are saying they will pack up and go and there is an industrial renaissance in the United States. It's a bit of a red herring," Ruehl said, citing other factors, such as wage costs.

"The major macro-economic implication is the balance of trade," Ruehl said, referring to energy import costs. "That will dwarf the industrial debate."

While the United States looks forward to energy independence, the Commission, the EU executive, has also voiced concerns about a fuel import bill it predicts will reach 600 billion euros ($811 billion) annually by 2050.

Europe is unlikely to feel the immediate benefits of shale gas, but for the planet as a whole, Ruehl sees it as a cost-effective way to cut emissions.

Environmentalists opposed to shale gas, which involves using chemicals to extract gas, say there are many risks, such as emissions of methane, a potent greenhouse gas.

But Ruehl said replacing coal with natural gas, which emits only around half as much carbon when burnt could have a much faster impact than renewable energy, such as solar and wind.

"A one percent global move from coal to gas is the savings equivalent of increasing global renewables by 11 percent and displacing coal," he said.

Global carbon emissions will continue to rise at a rate of about one percent per year up to 2035, slightly less than energy consumption growth of around 1.5 percent per year.

But there is still little hope of limiting CO2 levels in the atmosphere to 450 parts per million, which scientists say is needed to avoid the most damaging effects of climate change.

So far, Ruehl said EU climate and energy policy with its array of targets had been "a classic instance of ill-coordinated policy and the law of unintended consequences".

The Commission had learnt, he said, and broadly welcomed the outline for 2030 policy of a single carbon-cutting target of 40 percent.

Renewables have benefited from subsidies, but Ruehl said it was unclear when they would be economic and drew a comparison with nuclear energy, which grew at a comparable rate to renewables in the 1970s and 1980s, he said.

"In the early 1980s, it (nuclear) hit a glass ceiling because of cost," he said. "For us, the key question is whether renewables will suffer the same fate."-Reuters




Tags: BP | shale gas |

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