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Natural Gas: Bridge or Dead End?

Natural gas could be an ally of the pragmatic environmentalist. But we must be careful that infrastructural investments do not hinder a renewable energy future. Without off-ramps, a bridge is simply a dead end.
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Natural gas is often touted as a bridge fuel: an interim step between the heavily polluting fossil fuels we depend on today and the clean renewable energy systems we hope for tomorrow. But the infrastructure we deploy to increase natural gas may actually inhibit the transition to solar and wind power. Rather than a bridge, natural gas may be a dead end.

The idea of natural gas as a bridge draws on three main points. First, natural gas produces significantly less carbon dioxide than coal or oil. Second, it releases fewer impurities like sulfur and mercury compared with other fossil fuels. Third, many experts anticipate that obtaining even 20 percent of our energy from renewables in the next couple decades will be difficult. Natural gas, advocates argue, offers a more realistic large-scale carbon reduction strategy in the short-term because we have already addressed many of the technical challenges of producing, transporting, and consuming it.

These considerations merit attention from the pragmatic environmentalist. Greatly reducing carbon emissions without lowering overall energy consumption is a laudable goal if it can be done in an environmentally responsible manner. Yet in addition to thinking about how we build a natural gas bridge, it is imperative that we devote equal attention to how we get off. A good bridge requires off-ramps. If we consider the role of infrastructure in energy transitions, this might be harder than we think.

Critics of natural gas have typically focused on issues of pollution rather than infrastructure. First, there has been widespread opposition to 'fracking' shale gas reserves, a process that may contaminate drinking water, trigger minor earthquakes, and produce many other environmental consequences. Second, there are debates over whether natural gas really has a beneficial impact on climate. It may produce less greenhouse gas, but leaks of methane might more than offset these gains. These are important issues, but it is also worth examining the impact that expanding natural gas infrastructure will have on renewable energy systems.

Building a natural gas bridge will require a significant expansion of infrastructure: drilling wells for production, pipelines for distribution, and a range of devices for consumption including power plants, home furnaces, and industrial ovens. Investing in these systems will increase the supply of natural gas and lower its costs through economies of scale. As a result, consumers will find it cheaper and easier to use natural gas. This is a straightforward account of what infrastructure does -- it facilitates certain types of behaviors.

What is less appreciated is the fact that infrastructure cuts two ways. These systems will not simply provide an advantage for natural gas; they will make it progressively harder and more expensive to transition to renewables. We can examine this point by thinking about relative prices and sunk costs.

Relative prices often matter more than absolute prices for energy transitions. For consumers, it is not simply the price of an energy source that matters; it is how much more or less that energy source costs than other options. Right now, natural gas is already cheaper than solar and wind for electricity production in most analyses. With significant investments in natural gas infrastructure, this price gap is only likely to grow. Therefore, even though the absolute price of renewable energy will not change, wind and solar will become less attractive to consumers because they will cost relatively more.

What's more, these inequalities are likely to become more extreme over time due to sunk costs. Most of the systems designed to burn natural gas, like furnaces and electrical generating equipment, are expensive and designed to last for decades. Once large sums have been paid to purchase such systems, short-term price changes matter far less to consumers. Even if natural gas triples in price, prior investments in these systems will still act as a disincentive for switching to renewables. The sunk costs in infrastructure, therefore, further suggest that once we get on the bridge, it will be hard to get off.

We need not be resigned to this fate. The key is to think not simply about building a bridge, but also about building off-ramps.

Careful policy measures can enable a more compelling coexistence of natural gas and renewables. For example, one option would be to place a tax on natural gas (as well as coal and oil) that begins in ten years and increases by a set amount every five years. The proceeds for this tax could be dedicated to renewable energy development, either in the form of research grants or production incentives. This would ensure that renewable energy sources will continue to receive investment and that they become comparatively more attractive over time, rather than less. Another approach would be to insist that any investment in natural gas infrastructure be matched by a corresponding investment in solar or wind. Any policy decision on natural gas must also include regulations to address fracking concerns and methane leakages.

Natural gas could be an ally of the pragmatic environmentalist. But we must be careful that infrastructural investments do not hinder a renewable energy future. Without off-ramps, a bridge is simply a dead end.