Doha, Fracking and the Green Economy

Edward Barbier

As governmental representatives meet in Doha to negotiate yet again a successor to the expiring 1997 Kyoto Protocol on climate change, two recent global trends may alter irrevocably such negotiations, and even affect future global warming.  The first is the new shale gas and oil boom in the United States and other regions.  The second is the emergence of the green economy.

As outlined in an article in the UK Guardian newspaper by Julian Borger and Larry Elliott, rapid exploitation of vast shale gas and oil deposits in the United States through new fracking technologies is changing global energy markets and future supplies. In just a few years, fracking has allowed the US to produce 30% of its gas needs, and should account for over half of domestic consumption by the early 2030s. Canada’s development of tar sands could have a similar impact on oil markets.  Australia is likely to rival Qatar as the world’s major exporter of liquefied natural gas (LNG), and West Africa will also become a major supplier.

These rapid and dramatic changes to the world energy market will impact current negotiations to control fossil fuel emissions through any climate change agreement.  For one, it is unclear what these developments will mean for baseline projections and negotiated targets for carbon emissions.  Rather than moving into an era of fossil fuel scarcity, the world may be encountering a relatively long period of cheap and abundant supplies.  Moreover, with the diversification of the source of supplies, major global energy consumers such as the United States, Europe, China, India and Japan, may not have to worry about energy security and long-term real price rises. Global energy consumption is likely to increase even further. On the other hand, as natural gas substitutes for more carbon-intensive fossil fuels, especially coal for power generation or even oil for transport and heating, there could be less carbon emitted.  Trying to forge a climate change agreement that leads to realistic and attainable targets for carbon emissions over the next few decades must take such changing scenarios and “moving” baseline predictions into account.

Meanwhile, a global green economy is also slowly emerging. The Environment Business Journal indicates that the $866 billion global environmental market grew 4% in 2011, slightly ahead of global gross domestic product (GDP) growth of 3.9%.  Although the global market is still dominated by the United States, Western Europe and Japan, growth in 2011 was led by Africa (10%), the Middle East (9%) and the rest of Asia (9%).  Solid waste management and water treatment are the largest sectors, but clean energy sectors and power grew by 11% and is now the fourth largest sub-sector. In some countries, the green economy has been a significant and dynamic boost to the overall economy. For example, the Confederation of British Industries (CBI) reports that the UK’s green economy is worth £122 billion ($195 billion) a year, 8% of GDP, and grew at 4.7% in 2011.

In a recent Policy Forum in Science, “The Green Economy Challenge After Rio+20”, I outlined several steps that could further foster growth in the green economy worldwide via additional global commitments and funding mechanisms.  Yet, already the innovation and employment potential of this sector is attracting considerable investment, growth and momentum across the world.  As the green economy takes hold and expands, it will also impact carbon emission trends and targets globally.  Current negotiations over targets to mitigate future climate change need to take this factor into account as well.

It is too early to determine whether the green economy or fossil fuel energy developments will have the most significant long-run impact on global carbon emissions.  But to ignore either of these trends in the forging of an international climate change agreement will undermine its effectiveness and successful implementation.

Edward B. Barbier is the John S. Bugas Professor of Economics at the University of Wyoming.

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