Accelerating Decarbonization in the United States Technology, Policy, and Societal Dimensions (2024) / Chapter Skim
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12 The Future of Fossil Fuels
12 The Future of Fossil Fuels
Pages 621-678
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Beyond 2030 and even during the current decade, the outlook for fossil fuels is highly uncertain and depends on how world events affecting global energy markets unfold; how fossil fuel prices and production costs vary relative to one another and relative to other energy resources; the development, economics, and deployment of energy technologies and electrification in vehicles, power plants, build ings, and industrial applications; the commercial and political viability of carbon capture; the build-out of energy delivery infrastructure; and other factors. Further action is necessary to reduce emissions from the production and delivery of fossil fuels and to address transition impacts in regions tied to fossil fuel production; such transi tions have been occurring for decades in coal-mining communities and may accelerate af ter the 2020s in communities where oil and gas are produced.
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INTRODUCTION Given the fundamental role that fossil fuel combustion plays in producing GHG emissions, the outlook for production, delivery, and use of fossil fuels is central to the success of de carbonization pathways. In 2022, CO2 emissions from consumption of oil, natural gas, and coal in the United States were 2,273 million metric tons (MMT)
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. The outlook for fossil fuel production and use in the United States varies among oil, gas, and coal and by different assumptions about how world events will unfold; how 623 A00026 -- Accelerating Decarbonization in the United States_CH12.indd 623 3/30/24 3:27 PM
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The upheaval in global energy systems and the price volatility in oil and gas markets brought about by Russia's war on Ukraine have made these issues even more complex and challenging.3 Economic-, energy-, and national-security considerations in global markets for fossil fuels (Birol 2022; Bordoff 2022a,b; EFI Foundation 2023; Victor 2021, 2022) add significant uncertainty about future outlooks for coal, oil, and natural gas -- all of which are in plentiful supply in the United States.
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IEA's World Energy Investment 2023 report indicates continued growth in clean energy technology investments, projecting $1.7 trillion USD globally in 2023, compared to about $1 trillion USD for fossil fuels (IEA 2023)
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These latter functions would also be served by renewable fuels -- that is, chemical energy carriers that are synthesized (rather than extracted as in today's fossil fuels) in a manner that generates no net GHG emissions on a life-cycle basis.
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; • Energy efficiency standards and programs to reduce energy use in buildings; • Performance standards for GHG emissions from motor vehicles; • Planning and assessment of requirements for a national CO2 transport net work and characterization of geologic storage reservoirs; and • Low-carbon standards for federal procurements of goods and services (NASEM 2021a)
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SOURCE: Data from the U.S. Energy Information Administration, June 2022 (EIA 2022c)
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SOURCE: Data from the U.S. Energy Information Administration, April 2023 (EIA n.d.)
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Energy Information Administration Report, October 2022 (EIA 2022a)
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3 (74%) 4,859 936 West Virginia 2 (12%)
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. Natural Gas Production/Consumption, Prices, and Employment In contrast to coal trends in the 21st century, demand for natural gas has remained robust, especially since around 2010, with increases largely driven by power-sector consumption and to a lesser degree by exports of liquefied natural gas (LNG)
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. Domestic gas production has doubled since its recent low point in 2005 (EIA 2022j)
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Energy Information Administration, January 2022 (EIA 2022g)
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, with approximately 80 percent of shale gas production occurring in a handful of regions: the Marcellus and Utica (Pennsylvania, West Virginia, Ohio, and New York) and the Permian, Haynesville, Eagle Ford, and Barnett areas of Texas, New Mexico, and Louisiana (Figure 12-11)
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Utica (OH, PA & WV) Monthly dry shale gas production 70 Haynesville (LA & TX)
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Most recent estimates of economic impact include the combined effects of oil and gas production and other activities (because many data sources combine the two)
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Energy Data source: U.S. Energy Information Administration, Petroleum Supply Annual, August 2022 Information Note:Administration, Petroleum Crude oil includes lease Supply Annual, September 2022 (EIA 2022l)
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. Trends in Fossil Fuels as of 2023 There are clear trends across the three fossil fuels: coal production continues to de cline, while natural gas and oil production have not only avoided declines but in fact have increased in the past decade.
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. 9 From 2020 to 2021, for example, and across all jobs in energy "fuels" (including renewable-energy fuels, nuclear fuels, and fossil fuels)
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Fossil Fuel Jobs Fossil Fuel Energy Sector in the State with Jobs in Fossil as % of Energy- Jobs as % of Highest Number of Energy Jobs Fuel Industries Related Jobs Total Jobs (2021) United States 743,872 9.5% 0.5% Motor Vehicles (2,553,368 jobs)
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500 10,000 20,000 Economic Status 1 2 3 4 Natural Gas Production (mcf) 10,000,000 150,000,000 800,000,000 FIGURE 12-16 Economic status of regions with oil (top)
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As severance tax revenues are tied to the production volume and price, fossil fuel sever ance taxes represent a relatively volatile source of public funds.10 FIGURE 12-17 Severance tax revenue as a percent of state and local general revenues (2020)
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. A notable suite of taxes related to fossil fuels are federal and state motor vehicle and highway taxes collected on sales of gasoline and other petroleum products.
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As Figures 12-20 and 12-21 illustrate, the magnitude of annual GHG emis sions from production, extraction, and transportation of fossil fuels (~300–350 MMT CO2e) is much less than that from their combustion: 935 MMT CO2 (coal)
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Surface mining Abandoned underground mines Underground mining FIGURE 12-20 U.S. GHG emissions from coal mining: 1990–2020.
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The Future of Fossil Fuels 80% 60% 40% 20% OIL PRODUCTION COAL PRODUCTION NATURAL GAS PRODUCTION FIGURE 12-22 PM2.5 levels in regions with oil, natural gas, and coal production (2019)
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In contrast, domestic natural gas and oil production have almost doubled over the past 15 years. Most of the GHG and ambient air-pollutant emissions associated with fossil fuels result from their use rather than from their production/extraction and transportation, with methane leaks during natural gas production and processing the most significant exception.
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; and formation of and assessments by the Interagency Working Group on Coal and Power Plant Communities and Economic Revitalization. EPA's Methane Policies One area of recent executive branch effort focused on the fossil fuel industry in volves the regulation of methane emissions from oil and gas production, processing, and transport.
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. Under the current operative 1999 Policy Statement, the commission has approved nearly every pipeline facility proposal and did so upon a showing for "project need" that the pipeline company had an agreement with a party seeking additional pipe line capacity and without other indications of project benefits or costs (including such things as GHG emissions)
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. • Investing in Technological Innovations • Funding for Small Businesses • Investing in Financial Institutions Serving Energy Communities • Creating Good Jobs by Reclaiming Abandoned Mine Lands • Financing for Economic Development Aligned Workforce Training • Funding to Revitalize Brownfields • Investing in Economic Revitalization in Appalachia Finding 12-3: The Interagency Working Group on Coal and Power Plant Communities and Economic Revitalization has been helpful for transitions in coal communities, but there is no parallel, coordinated effort under way to ad dress and plan for transitions affecting regions heavily dependent on oil and/or natural gas production.
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in the form of grants, financial incentives, loans, rebates, and other means to support methane emissions monitoring, reporting, and 13 For abandoned mine reclamation fees, Title VII "adjusts the rates of the Abandoned Mine Reclamation Fee to 22.4 cents per ton of coal produced by surface coal mining, 9.6 cents per ton of coal produced by underground mining, and 6.4 cents per ton for lignite coal. This section also extends the fee until 2034" (BIL Summary 2021, p.
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. State Action Many states have adopted executive or legislative targets to reduce GHG emissions from their economies,15 including a handful of states with relatively significant economic activity tied to fossil fuels (e.g., coal mining and oil and gas production)
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HOW FAR DO CURRENT/NEW POLICY AND MARKET CONDITIONS GET US? Several modeling efforts have projected the potential impact of recent federal legis lation on production and consumption of fossil fuels, GHG emissions, and economic outcomes as of 2030 and 2035.
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. In its analysis of recent federal legislation, the Rhodium Group observed that the IIJA and IRA will decrease reliance on imported fossil fuels.
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. As a point of reference, in 2021, domestic production of crude oil amounted to 11.2 mil lion barrels per day, and natural gas production was 34.5 trillion cubic feet (EIA 2022j,n)
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However, the analysis also found that there would be employment losses in several areas related to fossil fuels. The WRI study compared a "reference" scenario without any of the new federal poli cies, an "advanced tax credit" scenario with new policies similar to those in the IIJA and IRA, and a "net-zero" scenario with additional policies (including sector-specific performance standards such as a clean energy standard and economy-wide net-zero emissions cap)
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CONTINUING IMPEDIMENTS AND GAPS AFFECTING CLIMATE RELATED ACTION IN THE NATION'S FOSSIL FUEL INDUSTRIES Compared to business-as-usual outlooks, recent actions in markets and policy will change the nation's fossil fuel production levels, delivery, consumption, and systems. Many changes (notably coal production and use)
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the degree to which carbon capture is socially accept able and cost competitive; and (3) the role of electrification (e.g., as opposed to renewable fuel substitutes for fossil fuels)
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produces another challenge to understanding the 17 Researchers have analyzed the potential to repurpose the sites of recently retired coal-fired power plants. While such proposals might not extend the life of coal as a fossil fuel, they might address transition impacts of communities with economic attachment to such large infrastructure projects (Hansen et al.
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(See Chapter 5 on public engagement.) Because discussions of the future of gas-delivery infrastructure typically do not dif ferentiate between declining use of natural gas derived from fossil fuels and other 19 NASEM (2023)
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Finding 12-6: Transition impacts on jobs and local communities differ based on whether they are associated with fossil fuel extraction, processing/refining, trans portation, or utilization. For example, there may continue to be a significant role for the latter three of these if there is significant uptake of renewable fuels, such as hydrogen or sustainable aviation fuels.
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Department of Energy, the Pipeline and Hazardous Materials Safety Administration, the Federal Energy Regulatory Commission, and the U.S. Coast Guard -- should collaborate to assess the possibility of repurposing existing LNG facilities for CO 2 liquefaction, as well as the feasibility of co-designing any future facilities to be able to compress both natural gas and CO2" (pp.
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. With electrification of buildings, power systems, and industrial uses, sales of traditional forms of natural gas service will decrease, but customers who remain in need of natural gas service will require access to supply delivered over safely operating local and higher-pressure gas pipelines.
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In places where transition discussions are under way as well as in other places, there are tenacious impediments to action on fossil fuels -- many of which are discussed in other chapters. Fundamentally, as described in Chapter 11 and the committee's first report, the absence of a price on carbon produces economic advantages for some, if not many, applications of fossil fuels owing to unpriced and unmitigated CO2 emis sions from power generation using coal and natural gas; consumption of petroleum products in vehicles; use of gas, oil, and propane in buildings; and industrial use of fossil fuels.
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. One state -- Illinois -- has put in place a legislative requirement that in advance of a closure of investor-owned power plants and coal mining operations, the owner must give advance notice of the anticipated facility closure to local communities and workers.25 Such advanced notice allows for transition planning and other activities by the state, local community, and workforce.26 Initiatives from the IWG and some states (e.g., Colorado, see Colorado OJT 2020)
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A model for providing federal assistance to communities impacted by fossil fuel transition assistance can be found in the American Rescue Plan's "Coronavirus State and Local Fiscal Recovery Fund," which allows states, localities, and tribal gov ernments to apply for and use funding for a variety of purposes (including replacing lost public sector revenue and responding to the negative economic impacts [of the pandemic] on communities and households, small businesses, and others)
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Congress and state legislatures should ensure the existence of funding in support of decommissioning, cleanup, and just transitions for communities associated with fossil fuel extraction and power production: a. States that currently receive royalty, severance tax, or revenues as sociated with extraction of fossil fuels should evaluate -- and adjust as needed, the availability of revenue to assist in planning for just transi tions in the communities affected by such resource extraction activities.
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State utility regulators should continue to expand opportunities for rate recovery to address remediation/transition costs associated with use of fossil fuels, while protecting the utility bills of low- and moderate-income consumers. Table 12-5 summarizes all the recommendations in this chapter regarding the future of fossil fuels.
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Objective(s) Categories Short-Form Implementing Addressed by Addressed by Addressed by Recommendation Recommendation Recommendation Recommendation Recommendation 12-1: Authorize Congress and • Fossil fuels • Equity Ensuring and Provide state transition • Non-federal • Employment Procedural Equity Appropriations for offices actors in Planning State Transition and Siting New Offices to Infrastructure and Address Coal, Programs Oil, and Natural Ensuring Equity, Gas Community Justice, Health, Transitions and Fairness of Impacts Building the Needed Workforce and Capacity Managing the Future of the Fossil Fuel Sector 12-2: Consider Congress and • Fossil fuels • Greenhouse A Broadened Whether Proposed Federal Energy • Transportation gas (GHG)
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Objective(s) Categories Short-Form Implementing Addressed by Addressed by Addressed by Recommendation Recommendation Recommendation Recommendation Recommendation 12-3: Require State regulators • Electricity • GHG Ensuring Equity, Utilities and of natural gas • Buildings reductions Justice, Health, Service Providers distribution • Transportation • Equity and Fairness of to Plan for the utilities and fossil • Industry • Health Impacts Transition fuel supplier/ • Fossil fuels • Public Managing the service providers • Non-federal engagement Future of the Fossil actors Fuel Sector 12-4: Consider States and • Fossil fuels • GHG Managing the Adoption of communities • Non-federal reductions Future of the Fossil Moratoria on actors Fuel Sector New Gas Lines in Previously Unserved Areas 12-5: Modify the Congress and • Transportation • GHG Managing the Design of Taxes on states • Fossil fuels reductions Future of the Fossil Gasoline, Diesel, • Non-federal Fuel Sector and Petroleum actors Products 12-6: Require Congress and • Fossil fuels • GHG Ensuring Equity, Recipients of recipients of • Non-federal reductions Justice, Health, Federal Funding to federal agency actors • Equity and Fairness of Provide Advance funding • Employment Impacts Notice of Facility • Public Managing the Closures engagement Future of the Fossil Fuel Sector 12-7: Fund the Congress, state • Finance • GHG Ensuring Equity, Decommissioning, legislatures, state • Fossil fuels reductions Justice, Health, Cleanup, and agencies, and • Non-federal • Equity and Fairness of Just Transition state regulators actors • Health Impacts for Communities • Public Managing the Historically engagement Future of the Fossil Dependent on Fuel Sector Fossil Fuels 671 A00026 -- Accelerating Decarbonization in the United States_CH12.indd 671 3/30/24 3:28 PM
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2022. "COP27: Energy Crisis Leaves Fossil Fuel Phase-Out Clubs Struggling to Recruit." Reuters, November 16.
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2015. "Major Fossil Fuel-Producing States Rely Heavily on Severance Taxes." https://www.eia.gov/todayinenergy/ detail.php?
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2023a. "Fact Sheet: Greenhouse Gas Standards and Guidelines for Fossil Fuel-Fired Power Plants Proposed Rule." https://www.epa.gov/system/files/documents/2023-05/FS-OVERVIEW-GHG-for%20Power%20Plants%20FINAL%20 CLEAN.pdf.
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2023. "Excess Methane Emis sions from Shallow Water Platforms Elevate the Carbon Intensity of US Gulf of Mexico Oil and Gas Production." Proceedings of the National Academy of Sciences 120(15)
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2023. "Government Revenue from Fossil Fuels in the US: History and Projections." Written Comments Prepared for the Senate Budget Committee.
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2022. "Motor Fuel Tax Revenues (States)
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2021b. "Fact Sheet: President Biden Tackles Methane Emissions, Spurs Innovations, and Supports Sustain able Agriculture to Build a Clean Energy Economy and Create Jobs." https://www.whitehouse.gov/briefing-room/ statements-releases/2021/11/02/fact-sheet-president-biden-tackles-methane-emissions-spurs-innovations-and supports-sustainable-agriculture-to-build-a-clean-energy-economy-and-create-jobs.
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