Have We Seen The Peak In Carbon Emissions?

The headlines may have you believing that things continue to get worse with respect to CO2 emissions.  But dispute what popular opinion thinks, carbon emissions are not continuing to go up.  History may mark 2007 as the turning point in the fight to control CO2 emissions.   According to projections by the Energy Information Administration, carbon dioxide emissions may never return to 2007 levels; at least not in the next few decades.

The reason for the drop is fairly straightforward.  Generally speaking, economic activity is an accurate predictor of emission levels.  Economic grow means more people on the roads, more manufactures burning fossil fuels, more electricity and more CO2.  The events in the financial markets in 2008 shocked the economy into a near standstill.  CO2 emissions followed the economy down.

Historic patterns would suggest then that as the economy has recovered, so too would CO2 emissions rise again.  But emission levels are not rebounding at a rate in keeping with economic growth.  This is due in large part to the macro trend toward cleaner electricity sources.

Coal has long been the foundation for electricity generation in the U.S.  Nothing else was as cheap and accessible as coal.  But this trend has reversed recently; seeing coal steadily lose its share of the U.S. electricity mix.  This is due in part to stricter environmental regulations and in part due to seemingly overnight boom in natural gas.

The switch off of coal onto cleaner energy sources is happening at a rate sufficient to keep the overall emissions levels lower despite increased energy usage due to economic expansion.

This effect is well illustrated in the state of Texas were the majority of electricity now comes from sources other than coal.  Natural gas is now the predominated source of electricity in Texas.

Texas is the nation’s largest producer of natural gas by a wide margin.  They also use natural gas extensively to generate electricity for the Texas grid which is separate from the other North American grids.  Thanks in large part to prolific new drilling techniques natural gas is the cheapest it has ever been.  The effect all this has on Texas is cheap electricity.

Aside from market competition from natural gas, coal is also being squeezed by tougher EPA regulations at the federal level and renewable energy mandates from the state level.  The combination of regulatory pressure and competition from natural gas is likely enough to make 2007 an historic turning point in the fight against carbon emissions.


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