A role for shale gas in energy transition ? – GAZET

The use of shale gas releases less CO2 emissions than most fuels, among which coal. On this basis, an increasing number of top CO2 emitting countries that are endowed with large shale gas deposits plan to achieve energy transition by promoting the shale gas resource. Shale gas extraction can also entail large macroeconomic gains. But first, fracking to extract shale gas is considered dangerous and environmentally damaging (contamination of surface and groundwater, seismic vibrations, landscape concerns). And second, it is argued that what should be done in the face of global warming is to reduce drastically the use of fossil fuels, not to find new ones, which will have the effect of postponing the transition to clean renewable energy. The deep contrast between the positions held by different countries on the shale gas extraction is stunning and comes in part from a lack of scientific knowledge.

In particular, there is a lack of economic research on the role of shale gas in a low carbon economy, taking into account the macroeconomic effects, the local environmental impacts and the climate impacts of its extraction. The project addresses three general questions. (1) In the short run is shale gas a useful tool to reduce CO2 emissions in a globalized world? Can substitution of coal by shale gas in some regions contribute to increase/decrease world emissions? (2) In the long run what are the implications of shale gas extraction on energy transition to a low carbon economy? Is shale gas a transition fuel until renewables become less expensive, or, in the context of reduced public investment, will it deter renewables development? (3) What are the economic gains and the environmental damages that can be expected from shale gas extraction? And how do they compare? These questions are interconnected and few answers already exist. Thus, our project intends to contribute significantly by providing answers to these questions.

The economics of shale gas development is at the interplay between the topics of macroeconomic growth, climate change, the growing scarcity of natural resources, the role of industrial policy in directing economic activity toward different sectors (for instance clean technologies or shale gas industry) and the design of new types of international climate agreements. The originality of the research project is that it aims at incorporating all these different aspects of the problem and to provide policy recommendations on possible national or international regulatory framework. We intend to infer from the observation some stylized facts and develop theoretical models to explain in depth these facts, and to run simulated models and draw policy recommendations. The project will thus combine theoretical research with empirical analysis on quantitative data. Our approach is mainly economics but we will build on geologists and environmental scientists work.

The team includes highly skilled environmental economists, with deep expertise on resource economics, public economics, macroeconomics, panel data and hedonic pricing methods. The ANR support will offer the coordinator the opportunity and means to develop a new research topic, to coordinate a new research team, and to gain autonomy.