The CCC's view on the impact of fracking on global emissions

[Chris Broome]

Hello All,

I have copied below an e-mail exchange I have had with the CCC. (My e-mail to them is at the end). I was challenging there conclusion that extracting UK unconventional oil and gas would have a “broadly neutral impact on global emissions”. The report we discussed is at :-

https://www.theccc.org.uk/wp-content/uploads/2016/11/Scottish-Unconventional-Oil-and-Gas-Committee-on-Climate-Change-2016.pdf and the relevant five page section is on pages 62 -66.

I will not add my own thoughts on the reply yet.  I would be interesting to hear other people’s. But I would also like to hear from anyone that has any readily accessible information on a couple of points that are not mentioned in the reply by the CCC’s David Joffe. 

Firstly, is it likely that the UK unconventional gas and oil industries will be very dependent on each other? I assumed they would be, based on brief articles I have read about the US industries. But, if in this country, the gas and oil reserves are generally in different places that might not be true here.

Secondly, I was surprised to learn recently that most global oil reserves are unconventional. See this link and scroll down to the pie chart on the right for an illustration of this. So can a reasonable case be made that UK onshore oil would displace mostly higher emissions oil sources , such as from tar sands?

https://en.wikipedia.org/wiki/Oil_reserves

All thoughts welcome, either to the list or me personally. Next, I intend to draft a response to the Scottish Parliament consultation on whether to end the moratorium on unconventional oil and gas extraction there. ( See https://consult.scotland.gov.uk/energy-and-climate-change-directorate/fracking-unconventional-oil-and-gas/supporting_documents/00513575.pdf ) This closes on 31 May.

Best Regards,

Chris

----- Forwarded Message -----
From: Joffe, David (CCC)
To: "chris1...@yahoo.co.uk" <chris1...@yahoo.co.uk>
Cc: Communications (CCC) <communi...@theccc.gsi.gov.uk>
Sent: Wednesday, 3 May 2017, 12:20
Subject: RE: Query of CCC's conclusions on impact of UOG on global emissions

Dear Chris,

 

First of all I’d like to express my apologies for the delay in responding to you. Your original message came at a very busy time for the organisation, and for me personally (I was trying to finish off two reports). After that I was on leave for a few weeks. I am only now finally getting on top of the large number of other matters that accumulated during that period.

 

I am aware that we have had correspondence on similar matters in the past. As previously, I will do my best to set out our reasoning in reaching the conclusions set out in the report, in response to points in your email that are quoted below.

 

In a real-world situation, both impacts [displacing other sources of oil and increasing total consumption] would be bound to occur

 

It is clear that this is a complex area, and a range of views could defensibly be held. In making our assessment we attempted to communicate the uncertainties associated with doing so. However, this does not mean saying that it’s all too uncertain and therefore we have no view. The following is an attempt to outline our thinking in reaching our view:

 

Ultimately an assessment of the impacts on domestic production on global emissions should ideally be based on a combination of available evidence (e.g. modelling) and a broad understanding of the dynamics of the system in question, some of which may not be captured by the model. For gas, there were interesting questions that could  be answered by a model about the extent to which gas would displace higher-carbon (i.e. coal) electricity generation vs. lower-carbon (e.g. renewable) generation. But for oil, there would not have been any significant fuel switching, so the only relevant question is around the impact of domestic production on global demand for transportation.

 

It is important to recognise that the oil market is complex and cyclical. In order for global emissions to be higher as a result of significant additional shale oil production, global consumption would need to be higher as a result of oil prices being depressed to some extent. However, as well as increasing near-term oil consumption, lower near-term oil prices would impact on investment in oil exploration which would potentially lead to lower supply in the longer term (with a corresponding increase in the price). It is not clear whether consumption would be significantly higher overall – to a large degree this depends on the wider context around reducing emissions globally.

 

Ultimately the question of whether there is an impact on global emissions in the context of limiting warming to, say, 2ºC comes down to whether one believes that oil consumption commensurate with this limit would be achieved via limiting consumption (and therefore, indirectly via the price, production) or that it would be achieved via limiting production (and therefore, indirectly via the price, consumption). Our view is that it is the former mechanism that is of greater importance, for two reasons:

·         Under the Paris Agreement, each country is responsible for their own national emissions – obviously these include emissions from oil consumption. It follows that in taking actions to meet the Paris goals the main actions of relevance will be those that bear down on consumption.

·         On the supply side, there is no lack of potential oil resources globally – there is much more than is compatible with avoiding dangerous climate change. Imposing constraints on individual sources of oil is therefore unlikely to limit overall supply to a sufficient degree, should constraints on demand not be in place.

 

Clearly, were enough oil-producing countries willing to agree to limit their production in an effort to limit climate change then supply-side constraints could potentially lead to significant reductions in emissions via price effects. However, we find the geopolitics of this solution to be much less plausible than achieving the same end via a wider range of countries driving down consumption.

 

Thus, the most likely outcome for a Scottish shale gas industry is that it will fail to compete in the European market

 

That is a logical conclusion based on the available evidence. However, this is not certain at this time and the Committee viewed it as being important to look at the impact of these resources should it turn out that their exploitation turns out to be economically favourable.

 

Further, that the analysis you have carried out is equally applicable to UK-wide resources

 

This is correct. Indeed, the model used to assess the impact of Scottish shale gas production does not split out Scotland from the rest of the UK (or, in fact, the rest of Western Europe). The reason why we commissioned this modelling for the report on Scottish unconventional oil and gas is that this was specifically requested by the Scottish Government.

 

For the UK report on onshore petroleum, this question was not central to the question we had to answer, which was specifically about the impact of UK production on meeting UK carbon budgets. The statutory deadline for the UK onshore petroleum report also meant that we were unable to commission global modelling in time to contribute to this work.

 

However, clearly the impact on global emissions is a relevant issue – this is why we flagged it in the UK report and were keen to explore it in the context of the Scottish UOG report.

 

I hope that I have been able to set out our thinking clearly.

 

Kind regards

David

 

From: Chris Broome [mailto:chris1...@yahoo.co.uk]
Sent: 02 March 2017 11:14
To: c...@youremail.org.uk
Subject: Query of CCC's conclusions on impact of UOG on global emissions

 

Hello,

 

This message is to query some of the conclusions in the Committee’s report    “Scottish unconventional oil and gas: Compatibility with Scottish greenhouse gas emissions targets” of August 2016. [See https://www.theccc.org.uk/wp-content/uploads/2016/11/Scottish-Unconventional-Oil-and-Gas-Committee-on-Climate-Change-2016.pdf ].This concludes, essentially, that this new industry would have a “broadly neutral impact on global emissions”. I believe that does not accurately reflect the evidence presented, which would indicate that global emissions are far more likely to be increased than remain broadly neutral.

 

As a campaigner on climate issues (mainly with Sheffield Climate Alliance), I would be interested in your response to my points below.

 

Impact of shale oil on global emissions

 

On page 63, three bullet pointed main conclusions are listed. The first states that Scottish shale oil would displace other oil production, as opposed to other energy sources. The second states:-

 

“ However, there is a question over the extent to which domestic shale oil production would displace other sources of oil as against increasing total consumption.”

 

In a real –world situation, both impacts would be bound to occur. Their relative extent could be estimated by modelling similar to that commissioned for shale gas and described elsewhere in the report.  (In fact, modelling the impact of both shale gas and oil together would represent a more realistic scenario). However, in any case, the first impact would not affect global emissions whilst the second would increase them. Hence the net result must be an increase. That simple conclusion would seem a much clearer one than any of those stated.

 

 I am aware that the oil sources most likely to be displaced are other unconventional sources. Thus, global oil production emissions could, at least in theory, be reduced overall. This though is only likely to be a minor effect and you do not consider it, other than to state in the Executive Summary that “it is difficult to say whether [Scottish shale oil] would provide an emissions saving over imports”

 

Then, the third bullet point states:-

 

“In world in which warming is limited to below 2C, it is likely that consumption would be largely unaffected and that full displacement of other oil production would occur.”

 

This seems a rather bizarre and misleading point to make. If the world’s governments ultimately succeed in limiting global warming to below 2C, then virtually by definition they must have limited overall consumption of fossil fuels to the corresponding degree. As any “new” oil production would have predominantly displaced other oil, then overall oil consumption must also have been successfully limited. But that could only be reasonably characterised as being due to emissions from the “new” source –in this case, Scottish shale- oil having raised emissions and this increase being cancelled out by reductions in production that would otherwise have happened elsewhere.

 

The Executive Summary, appears to seek to summarise mainly the third bullet point as follows:-

 

“Within the context of a world committed to decarbonisation, it is likely that domestic production of hydrocarbon liquids would displace high-cost production elsewhere in the world rather than increasing overall oil product consumption or driving fuel switching.”

 

This statement is even more misleading, especially for readers that consider that the world already is committed to decarbonisation. In fact, the statement only applies to a world that is taking practical measures on the scale needed to limit global warming to the internationally agreed targets of 2C or 1.5C. The present situation is that most countries agree to those targets in principle but not in terms of policy or practical action. 

 

Impact of shale gas on global emissions

 

The report’s most significant piece of evidence is the TIAM-Grantham model it commissioned the Grantham Institute to run (described in Box 5.2, page 64).

It is noted (page 63) that :-

“• In the TIAM-Grantham and other modelling, estimated supply curves for unconventional gas tend to have higher costs than those for conventional gas, meaning that the modelling has to force in shale gas so as to assess its impacts. This provides an indication that the economics of unconventional gas in general are not favourable, unless local geology happens to be especially productive and units costs commensurately lower (Chapter 2)”

 

Thus, the most likely outcome for a Scottish shale gas industry is that it will fail to compete in the European market.  There is also the related danger that exploration proves sufficiently promising that the Scottish Government provides increasing tax incentives and other financial support, in anticipation of future success. Providing such support would act to undermine calls by the IMF, World Bank and many other bodies to phase out such fossil fuel subsidies internationally. It could be argued that any subsidy offered for gas-related activity would not necessarily increase global emissions, due to the displacement of higher-carbon fuels. However, in practice, the onshore oil and gas industries are so inextricably linked, it would be impossible to avoid a knock-on effect of also subsidising oil-related activity which again, in my view, would raise global emissions.

 

My conclusion, is that the evidence the Committee has available indicates that development of Scottish unconventional oil and gas would be far more likely to increase than reduce global emissions.  Further, that the analysis you have carried out is equally applicable to UK-wide resources. I request your response to my points.

 

Best Regards

Chris Broome