Two agricultural economists from Purdue University said the energy boom from shale development could help make a uniform carbon tax to reduce greenhouse gas emissions (GHG) more palatable, but annual economic growth and the windfall from shale would be impacted.
In a policy brief published by the National Agricultural and Rural Development Policy Center, Wallace Tyner and Farzad Taheripour estimate that shale development would provide an “economic welfare” increase of about $302 billion a year, on average. They added that a carbon tax levied on all sectors of the economy would be the most efficient way to spread the cost for emission reductions.
On Wednesday, Tyner told NGI’s Shale Daily that economic welfare is similar to gross domestic product (GDP), but the terms are not the same. “Welfare includes all of the changes in what economists call consumer and producer surplus, whereas GDP is a measure at given prices of changes in output,” he said.
The researchers said it was “interesting” that “policies that welcome shale oil and gas development and at the same time cause substantial reduction in GHG emissions still result in a substantial welfare and GDP gain for the economy.
“In a sense, we can more than pay for the reduction in GHG emissions with the economic gains from shale oil and gas…The question is do we use it all for higher economic growth or do we allocate part of it for reducing future global warming.”
Using computer modeling, the researchers analyzed four possible scenarios. Excluding the first model, they envisioned that a 26.5% reduction in emissions from 2007-2035:
? Expanded development of shale resources with no environmental policy;
? Shale expansion, plus a carbon tax imposed on all sectors of the economy;
? Shale expansion with a carbon tax equivalent applied only to the power generation and transportation sectors; and
? Shale expansion with emission reduction targets only for the power generation sector.