Gas: too much of a good thing?

Over the past five years, the US shale gas boom has brought about dramatic changes in the North American energy landscape, prompting economic and environmental debate in Europe and other parts of the world. In the US, energy prices have fallen dramatically, helping drive economic recovery from the global recession. But the spread of hydraulic fracturing or “fracking” – the technology used to drill for shale gas – has raised the ire of environmentalists.

Between 2005 and 2012, the gas prices paid by US industry plummeted by 66 per cent, while gas prices in Europe rose by 35 per cent. Low US gas prices have triggered a remarkable revival in energy-intensive manufacturing. The ability to exploit unconventional hydrocarbons, including shale gas and oil, has already created 1.7 million jobs in the US, according to a study by research firm IHS. Reacting to the positive economic impact in the US, several other nations, notably China, are also moving to extract unconventional hydrocarbons. Should EU Member States follow in their footsteps?

Yes, but cautiously: a major push to harness Europe’s shale gas reserves will have complex and unpredictable consequences for the climate, the environment and the economy, according to experts speaking at an academic policy symposium organised by Science|Business in Brussels on 1 October 2013.

This report summarises the half-day of debate at the symposium and highlights recommendations to European policymakers grappling with the tough questions posed by the abundance of shale gas – from its impact on Europe’s competitiveness to the deployment of renewable energies. It also outlines the evolving best practice in shale gas drilling and regulation, as well as new technologies to help mitigate environmental risk.

It is difficult to gauge the impact of pursuing unconventional hydrocarbons on the development and deployment of renewable energies, greenhouse gas emissions and ultimately, the climate. With the right infrastructure, shale gas could help Europe plug gaps in the intermittent supply of renewable energy. It could also reduce the region’s dependence on heavily polluting coal-fired power plants. Conversely, an abundant supply of cheap gas could undercut the case for further investment in renewables.

As European governments explore the potential of their shale gas reserves, they should avoid repeating the mistakes of the US, where a gold-rush atmosphere and the race to exploit new technologies resulted in widely publicised cases of negligent drilling practices, inadequate regulation and environmental damage. The hasty approach dramatically transformed public attitudes toward shale gas over the past five years. Initially viewed as a positive development – even by environmentalists – shale gas is now widely vilified. “Somehow, the gas industry has squandered an opportunity,” said Professor Robert H. Socolow, director of the Climate and Energy Challenge at Princeton Environmental Institute. “There was a lot of goodwill from the environmental community in the beginning… but the industry was evasive when asked to disclose chemicals, and combative about regulations.”

More broadly, the complexity of the energy market means European policymakers need to apply systems thinking and model the knock-on effects of extracting unconventional hydrocarbons. The first step is to establish exactly how much shale gas can be cost-effectively recovered in Europe. The cost analysis should take into account all externalities, including the potential environmental impact.

At the same time, policymakers should consider how to encourage the greater use of natural gas in Europe, thereby reducing the region’s dependence on imported coal and oil. They also need to explore how to increase the interoperability of the EU’s electricity and gas networks, so that gas can be used to fill gaps in the supply from renewable sources, which can depend on the availability of sunshine and wind.

Although the apparent abundance of shale gas suggests the world is unlikely to run out of hydrocarbons in the foreseeable future, Europe should redouble its efforts to increase energy efficiency for both environmental and economic reasons. By imposing tighter building regulations, for example, the EU could reduce its energy consumption, its greenhouse gas emissions and costs for both businesses and consumers.

The EU should also make a practice of questioning its energy policy assumptions. The rapid rise of shale gas demonstrates how unpredictable the energy sector can be. In particular, it highlights the extraordinary impact of new technologies on the energy landscape – and the inability of either the public or private sectors to predict such developments.

Hard choices lie ahead in resolving the growing contradictions between EU climate and industrial policies. “These contradictions are getting bigger and we have to decide what is more important,” said Frank Umbach, associate director at the European Centre for Energy and Resource Security, King’s College London, at the symposium. For example, the EU has set a target of raising industry’s share of GDP from 15 per cent to 20 per cent by 2020 to enhance economic competitiveness. But that policy contradicts environmental and climate policy objectives. It’s not a very coherent approach, Umbach added.

Is the global gas boom “too much of a good thing”? Probably not. But the challenge for Europe lies in making sure unconventional gas is integrated into a coherent EU energy system – which is still a work in progress. Policymakers at the EU and government level must ensure that regulation of drilling and environmental monitoring together enforce best practice and so minimise the risk of pollution to water and soil. Energy research and development can play an important role in developing tools and processes that optimise safe practice.

To download the report, please click here.