Increasing the use of abundant, clean and secure North American natural gas provides the best and most realistic path for meeting growing U.S. energy demand and achieving the greatest reductions in greenhouse gas emissions, said BP America Chairman and President Lamar McKay today in a speech at the Financial Times U.S. Energy Business Conference.
"For a fraction of the cost of other options, BP estimates that as much as 30 percent of the near-term Waxman-Markey CO2 reduction target could be delivered through expanded gas use for power and switching a variety of home appliances to gas, " McKay said.
The Waxman-Markey bill has passed the U.S. House of Representatives but is still pending in the Senate. It calls for a 17% reduction in carbon emissions from major U.S. sources by 2020, compared to 2005 levels.
BP supports adoption of market-based mechanisms to reduce emissions with the cost of reductions spread as equitably as possible across all energy sectors.
"That's one of our core beliefs," McKay said. "If it is not done equitably - massive misallocation of capital and insulated consumption will occur. That would seriously impede - or make much more costly - the very carbon reductions that we intend. Bottom-line: a ton of carbon is a ton of carbon - whether it comes out of tailpipes or smokestacks."
Replacing high-carbon fuels with low-carbon fuels is the most cost effective way to achieve early greenhouse gas reductions. In the power sector, the nation could achieve significant early emissions reductions by replacing the nation's oldest, least efficient and most carbon-intense, coal-fired power plants by expanding use of existing natural gas facilities.
Natural gas is the cleanest burning fossil fuel, resulting in 60% less carbon emissions than coal per kilowatt hour of electricity. Natural gas is also abundant. The nation has a 50- to 100-year supply thanks to proven technology and improved recovery techniques that have driven a 45% increase in U.S. gas reserves over the last decade.
"So with all of these advantages, why is the Energy Department projecting that the share of US electricity generated by natural gas will stagnate over the next 20 years? Increasing use of renewables is one reason, and I think we can all agree that is to the good. But another reason is that America is still building coal-fired power plants," McKay said.
As of June 2009, 36 new coal plants are permitted, under construction or near construction in the U.S., with 47 more announced. Coal is projected to provide 47 percent of U.S. electric power in 2030, a level almost unchanged from today.
"At a time when we are supposedly looking to make the American energy portfolio greener, we are doubling down on the most carbon-intensive form of energy known to exist," McKay said. Today, coal accounts for 81 percent of the carbon emissions associated with the generation of electricity.
"The prize is great," McKay said. "If we apply the necessary technology within a stable fiscal and regulatory framework natural gas can transform America's energy outlook in the decades going forward."