The International Energy Agency has just released some data that green-minded fans of shale gas should appreciate. The organisation's latest figures show that America's carbon-dioxide emissions from generating energy have fallen by 450m tonnes, more than in any other country over the past five years. The turnaround has been welcomed by many, and Fatih Birol, the IEA's chief economist, ascribes much of the credit to a shift away from dirty coal towards cleaner gas, according to an article in the Financial Times.
The importance of coal in America's energy mix has indeed tumbled since 1997, from almost half of electricity generation to just 36.7% in February, according to America's Energy Information Administration (see chart). This has come about mostly because of an increase in the use of natural gas (from 21.6% to 29.4% over the same period) rather than renewable energy (from 8.3% to 12.1%).
However, the numbers may not be welcome among all environmentalists, some of whom tend to loathe shale gas because of the “fracking” process through which it is released from rock formations. Some greens claim that fracking contaminates the air and groundwater and can even cause earthquakes (although there is no evidence linking fracking to increased seismic activity, according to the US Geological Survey).
Whatever the dangers of fracking, American manufacturers are enjoying cheaper energy. Thanks to shale gas, natural-gas prices in America are as low as they have been this decade (although talk of America achieving the holy grail of energy independence any time soon seems a bit premature).
Europe, on the other hand, has had no such luck. On the continent the price of natural gas has risen back to near pre-recession highs. What is more, the price of emitting carbon under the European Union's Emissions Trading Scheme has dropped below €7 ($9) per tonne, less than half its peak in mid-2011.
As a result, the economics of energy in Europe have moved in coal's favour (see charts below). In France and Germany, for instance, the “clean spark spread”—the theoretical gross margins from selling electricity after buying the gas required to produce it and the right to emit the carbon dioxide—is negative, meaning that the gas needed to fuel a power planet costs more than the electricity produced. In Britain this spread remains (just) positive, but operators must still cover the costs of building, running and maintaining power plants.
The equivalent “clean dark spread” for coal-fired plants is much higher. Under these circumstances, it is easier to build a coal-fired plant—and watch the cash roll in. Since October 2011 Britain's electricity production from gas has shrunk from 11 to seven terawatt hours, while coal-fired production has risen from nine to 14 terawatt hours, according to the European Network of Transmission System Operators for Electricity.
Thanks to the shale-gas bonanza, America now finds itself almost accidentally among the rich nations that have seen their carbon-dioxide emissions from electricity generation fall in recent years. By contrast “the energy policies of the European Union have focused on climate impact over energy security or keeping costs down,” according to Marcel Brinkman, a partner at McKinsey, a consultancy. Mr Brinkman says it is “ironic to see that the current outcome for Europe seems to be increasing emissions due to higher coal-fired power generation as gas prices are so high.” If gas prices stay high in Europe and big European countries back away from nuclear power as well, they may be pushed out of the falling-emissions club—and it could be tough for Europe to hang on to its reputation for greenery.
