Originally published for customers February 28, 2024.
What’s the issue?
In this election year, the left wing of the Democratic party seems to be pushing an environmental purists’ climate change agenda aimed at motivating what may be perceived as a critical voting bloc this November.
Why does it matter?
However, that agenda may be doing more harm to the environment as it both restricts the ability to build almost anything in this country and limits a robust development of natural gas, which has proven to be a key contributor to the reduction of greenhouse gases in the U.S. and could play a similar role overseas.
What’s our view?
The energy evolution, especially at the pace desired by environmental purists, requires substantial investments in infrastructure. Such investments are being thwarted by the uncertainty caused by other aspects of the purists’ agenda. Further, by focusing on keeping U.S. resources “in the ground,” the environmental purists are making it easier for more harmful production to dominate the market, which will only increase the intensity of greenhouse gas emissions.
Infrastructure Is Critical
There have been a number of studies released across the political spectrum about what needs to happen for the world to meet the Paris climate goal of keeping the temperature rise below 1.5 degrees centigrade. One critical path item identified in every report is the need to build infrastructure, both domestically and globally, at an unprecedented pace and multiple times faster than the current pace.
Breakthrough Energy, founded by Bill Gates, emphasized the importance of electrifying everything in its most recent report. The report highlighted the urgent need to continue building clean electric generation at a breakneck pace, and that we are stumbling badly by failing to build a grid to deploy that electricity where it is needed. The report bluntly stated that there is “no transition without transmission.”
DNV, a Norwegian company that provides independent expert advice to safeguard life, property, and the environment, issued its own report on the path to net zero. That report stated that staying below the 1.5 degree target was unlikely, but to minimize the extent by which the world misses that mark, solar and wind capacity must together increase five-fold in the next decade, while storage capacity must grow four-fold over that same time period. The report stated “[e]lectricity must reach 47% of the energy mix in 2050, but that is dependent on rapid grid extensions which are already subject to critical permitting and supply chain bottlenecks.”
We previously highlighted the concerns raised by the Net-Zero America project at Princeton University in our article The Path to Net Zero Runs Through the Electric Grid, Which is a Problem. While they are clearly working toward achieving the goal of net zero by 2050, the head of that group in an interview last summer noted that the U.S. has to “deploy trillions of dollars of capital to build clean energy infrastructure at scale.” He emphasized that upgrading the grid was key to success, recognizing the dual challenge it faces: having “to cut emissions faster and deeper than any other sector, and do that while simultaneously expanding electricity supply quite substantially — by 25% by 2030, 50% by 2035, and 150%, give or take, by 2050.”
Placating the Environmental Purists Is BANANAs
With so much need for infrastructure, some more pragmatic environmentalists have recognized the reality that the permitting process needs to change drastically to effectively address climate change. They have started a movement calling for YIMBYism, or “yes in my back yard,” to replace NIMBYism, “not in my back yard.” However, some staunch environmental purists are insisting that there should be no changes to the permitting process. Many also advocate for integrating an extreme form of environmental justice into the process, which can add to the analytical burden and further slow it down. Add in recent instances of wealthy or powerful coalitions of stakeholders successfully blocking renewable infrastructure by taking pages from the environmental purists’ litigation handbook, and you wind up with a situation that has recently been referred to as BANANAism, which stands for “build absolutely nothing anywhere near anybody.”
Recently, the Biden administration seems to have decided it is necessary to placate the extreme left of its base by taking steps like pausing LNG approvals, which we discussed in “Pause” Patrol - Practical Implications of DOE’s LNG Authorization Pause. Last fall, the White House also announced an environmental justice “playbook” to assist all executive branch agencies in developing an Environmental Justice Strategic Plan. Each agency’s plan must set forth the agency’s environmental justice vision statement; overall approach to advancing environmental justice; and concrete steps, priority actions, and metrics to measure progress and include a description of steps taken to ensure opportunities for meaningful engagement, public participation; and Tribal consultation, as appropriate, in the development of the plan.
The development of such plans and pauses for studies simply creates additional uncertainty in the permitting process. Such uncertainty not only can result in delays to planned projects, but can also deter developers from initiating projects until the uncertainty is resolved. While the administration maintains that its actions will not cause any real world harm, the lack of clarity regarding this administration’s direction, compounded by the country being in an election year, will almost certainly lead many project developers to take a “wait and see” approach before committing to large projects that might be impacted by potential changes.
Climate Change Is a Global Problem
Even environmental purists have to admit that climate change is a global issue which will require a worldwide response. Breakthrough Energy’s report describes how climate change experts often use the “bathtub analogy” to describe the problem with greenhouse gas emissions. Essentially the atmosphere is the bathtub and greenhouse gases are the water. You can only add so much water to the tub before it overflows. This analogy is helpful because it also makes clear that no single event is significant, but it is the accumulation over time that creates the problem.
This is why we have previously written that efforts to define a certain level of emissions as being “significant” under the standards of the National Environmental Policy Act — as FERC’s failed GHG policy did, or as the Biden Administration may try to do as part of its review of LNG exports — are almost certain to fail when challenged in the courts. A quick look at the global emissions over time by country of origin makes this problem apparent.
As seen above based on the data collected by the European Commission, Joint Research Centre global emissions more than doubled from 1970 to 2022. However, the contribution of the top ten emitters in 2022 has changed drastically over that period. Emissions from the twenty-seven members of the European Union (EU27) have fallen over that period and actually peaked in 1979, whereas the U.S. emissions rose slightly but have fallen substantially since they peaked in 2000. Conversely, China’s emissions increased seven-fold over this same period to the point where it now emits more than twice that of the U.S. China’s emissions have not yet reached their peak, with 2022, the last year available, marking its highest recorded emissions to date. Similarly, the “Rest of the World” which includes all of the countries not in the top ten, have doubled their emissions and have not yet peaked.
This is why DNV makes it clear in its report that high-income regions, which it defines as Europe, North America and developed economies in the Asia Pacific Region, have the means to, and are expected to, act more quickly to reach net zero, likely by 2045 to give the other regions more time. Concerted action within each country and across countries will require a tremendous deal of cooperation, which has been in short supply both within the U.S. and globally. Later this week, we will be looking at how a failure to agree on how to assess impacts of various actions may further hinder progress.
Environmental Justice Is a Worldwide Problem
We have written before about the new hurdle for infrastructure to overcome, which is the concept of environmental justice. There is a base truth to this concern in that throughout our nation’s history, primarily because of the strength of NIMBYism for those with power, the infrastructure needed for a modern society has been built in areas where those without power, typically the poor and people of color, live. The environmental justice movement seeks to change this by limiting additional facilities in areas that are already overburdened with such infrastructure. However, the problem environmental justice faces in the context of energy production and energy delivery is that a movement that does not look globally may result in shifting that production and infrastructure burden from the poor areas of the developed economies to the even poorer areas of the less developed regions. In other words, domestic policy without a global perspective may result in exporting the environmental cost of energy development to less developed countries.
Just how much energy the developed economies use may be gleaned from a recent somewhat controversial report by the U.S. Energy Information Administration (EIA) about the energy consumption of crypto-mining companies here in the U.S. The EIA estimated that 101 of the 134 crypto mining operations it could identify used approximately 70 terawatt hours of electricity in 2022. That is more energy than all but the top 100 countries consume on an annual basis. That is why Breakthrough Energy notes in its report that a “society’s wealth directly correlates to how much energy it has access to . . . We’ll never build a coalition to fight climate change if the implicit message is that people have to stay poor.”
Therefore, the more the U.S. suppresses the development of exportable energy, such as oil, natural gas and LNG, under the guise of environmental justice, what that really does is outsource the problem to even poorer areas of the world. In DNV’s report, it notes that fossil fuels, which account for around 80% of primary energy supply today, will see their share decline to 20% by 2050, but will still be a significant source of energy even then. DNV expects the use of oil and coal to decline rapidly, but projects that natural gas use will fall at a far more moderate rate. However, DNV notes that it expects the regions of the world, with less stringent environmental policies (i.e. Middle East and North Africa and North East Eurasia) would gain increasing shares in the oil and gas production. In other words, the western countries will simply outsource the environmental burden to others.
Focus Should Be on Intensity Not Absolute Numbers
The bathtub analogy that Breakthrough Energy uses, and we discussed on Wednesday, comes in handy in the situation described above. While the emissions from use of fossil fuels does not change based on the source of the fossil fuel, the amount of emissions to produce and deliver the fossil fuel can be different. Thus, by increasing the market share of producers from regions with less stringent environmental policies, the world fills up its emissions bathtub more quickly than it might need to if it favored producers who minimize their emissions in the production and delivery process. This is where the current administration should be careful in analyzing GHG emissions from any aspect of the U.S. economy and its impact on the worldwide problem of climate change. To the extent actions the U.S. takes benefit the producers in countries with less stringent environmental requirements, such actions will harm U.S. producers and the environment at the same time, a lose-lose situation.
That is why any actions taken should be focused on the carbon intensity of an action and not its absolute numbers. On Wednesday, we discussed the absolute numbers of the top ten emitters of the GHGs based on the data collected by the European Commission’s Joint Research Centre. That same report provides intensity measures for those same countries using GHG emissions per dollar of gross domestic product (GDP). That intensity measure shows that Europe and the U.S. are doing even better than the absolute numbers would indicate.
Per GDP Emissions
Because of the correlation between a country’s wealth and its use of energy, it is helpful to determine which countries are creating wealth while minimizing GHG emissions.
As seen above, Iran, Russia and China emit far more GHGs per dollar of GDP than the other members of the top ten emitters. The U.S. and EU27 emit GHGs at less than half the rate of these other countries. The good news is that unlike total emissions, all of the countries in the top ten and the world as a whole have reached the peak of the intensity on this measure and will hopefully be able to continue to reduce the intensity rate going forward. This is clearly what needs to happen if the world wants to continue prospering while also saving room in the collective bathtub of emissions.
How Can Restricting the Production of U.S. LNG Hurt the World’s Efforts at Fighting Climate Change?
In EPA Urges FERC to Follow Pseudoscience in its Review of Pipeline Applications, we discussed how the tremendous growth in U.S. production of natural gas has coincided with an overall decrease in U.S. GHG emissions. In a report issued in 2021, the Biden Administration’s own EIA acknowledged that between 2005 and 2019, the U.S. electric power sector produced 32% less CO2e, largely driven by a shift from coal to natural gas in the electricity generation mix.
This reduction in the U.S. can be seen in the worldwide data compiled by the EU for the top ten emitting countries.
As seen above, the U.S. along with the EU27 and Russia have all reduced their GHG emissions from power generation over the last thirty years and especially from their peaks. But Brazil, China, India, Indonesia, and Iran saw GHG emissions increase from four to ten times the levels in 1990 and most have not yet peaked.
While it is not surprising that these less developed economies would see substantial increases in their emissions as they sought to improve the living conditions for their citizens, most of them relied substantially on coal to create that energy.
The use of coal for power generation has a strong correlation to this tremendous increase in GHG emissions.
As seen above, four of the five countries that saw tremendous increases in GHG emissions, Brazil, China, India, and Indonesia, relied heavily on coal as a source for increasing their power generation. If these countries are going to rein in their GHG emissions from electric production over the coming decades, they will likely follow the U.S. pattern of adding renewables to meet the increasing demand as they electrify everything. But they will also likely still replace the coal-fired power with natural gas. Because as Breakthrough Energy notes in its report, with “fossil fuels, it's easy. You transport coal or natural gas to a power plant, convert it into electricity, and then send the electricity along power lines to the homes and cities that need it. Solar and wind power don’t work that way. The sunniest and windiest places aren’t the only ones that need electricity, and they’re not usually near big cities either.” Thus, as in the U.S., these large developing economies will have already built power grids that rely on generating plants near the demand centers and will likely replace them at the end of their useful lives with gas-powered facilities at or near the same locations.
This all means that the U.S. can facilitate this transition by providing its relatively low-emission LNG to these countries, or artificially restrict U.S. production to the benefit of producers in countries with less restrictive environmental requirements, which will just fill up the world’s emissions bathtub much more quickly. If the Biden administration looks globally at the issue of climate change, which it should since it is a global issue, it should recognize that both from an environmental justice perspective and an emissions intensity perspective, governmental constraints on U.S. production is the worst solution available.