Did you hear about the drop in CO2 emissions this year? I didn’t think so. It seems to have been kept pretty quiet. But here it is. According to an Energy Department report, in the first 4 months of 2012, U.S. CO2 emissions dropped to roughly 1992 levels. That’s as low as they’ve been in 20 years! And the reason for this drop? Well, there was no big program or initiative that brought it about. Rather, it comes down to the price of natural gas relative to that of coal.
In recent years, we’ve seen an increase in shale gas drilling, much of it due to improvements in hydraulic fracturing, which has caused the wholesale price of natural gas to drop from $7 or $8 per unit four years ago to $3 per unit now. Power plant operators, seeing those dramatic changes in price, have moved away from coal and toward natural gas – not because it’s cleaner, but because it’s cheaper.
The irony, of course, is that the same people who have been so adamant about the need to reduce CO2 emissions have tended to question the merits of hydraulic fracturing. And yet, it offers a perfect example of the market’s power to address a plethora of needs. In this case, the market perceived a need for clean and affordable energy and developed the technology to make that energy accessible. As the market presented good options to power plant operators, they moved away from coal and toward natural gas voluntarily. Without any direction from the government, the market seems to be finding a solution, and it’s one that’s far more effective than government mandated regulations, or investment in Solyndra and the Chevy Volt.
