Comparing Price Reductions for Gas and for Solar

Craig Morris just posted an interesting article comparing the price reductions for gas in the United States and the CO2 reductions from deployment of renewable in Germany.

I agree with his conclusions that cheap fracking gas on the American market is bad news for the climate, even if it does get down CO2 emissions in the United States in the short term somewhat.

But I would like to focus on a different aspect.

With renewable, all the price reductions achieved by German rate payers shouldering the burden of deploying big numbers of solar panels and wind turbines immediately benefit all markets world wide.

That is the greatest CO2 reduction effect from the German energy transition. It makes it possible to displace coal with solar in China. And that’s where it counts most.

In contrast, cheap gas in the United States does not mean cheap gas everywhere else. The costs of transporting gas are so high that right now in Europe gas is much more expensive than coal. And coal gets cheaper in Europe, since coal displaced in the United States market by cheap gas gets shipped to Europe.

Anyway, price reductions for gas are useless and harmful for the climate. Fossil fuel of any flavor needs to stay in the ground. To make that happen, it needs to get more expensive, like oil fortunately is.

Reducing the price of solar radically is great news for the climate. Reducing the price of gas in contrast only makes things worse.

There is not much hope for getting a carbon tax enacted in the United States in the first place. But obviously adding some marginal cost with a carbon tax won’t help if the price for the fuel is way down in the first place. And having no carbon tax is no big problem if fossil fuel prices go way up, like they would under my simple solution for global warming.

Published by kflenz

Professor at Aoyama Gakuin University, Tokyo. Author of Lenz Blog (since 2003, lenzblog.com).

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