Would a Methane Tax Make Natural Gas a Green-Enough “Bridge” Fuel?

05/20/2011 by James Handley

(co-authored with Charles Komanoff)

From a climate standpoint, natural gas appears to have two huge advantages over coal. First, gas combustion releases 40% less carbon dioxide per Btu produced than does coal. Second, gas-fired power plants using “combined cycle technology” require 40% fewer Btu’s to produce each kilowatt-hour than coal-fired plants. Chain those advantages, and you find that new gas-fired power plants can produce 2.7 – 2.8 times as much electricity as a typical coal-fired generator while emitting the same CO2. No wonder gas is touted as a “bridge fuel” to renewables from coal, which accounts for 45% of U.S. electricity generation and a third of U.S. carbon dioxide emissions.

Of late, however, scrutiny of “fugitive” emissions from gas extraction and transmission is calling into question the assumption that gas is more benign for Earth’s climate than coal. The new wrinkle isn’t CO2 but methane itself, a potent greenhouse gas in its own right which can escape into the atmosphere at almost every step of the natural gas “fuel cycle.”

Natural gas (or simply “gas”) is 99% methane (CH4). Viewed over a 100-year time horizon (as the 2008 IPCC Fourth Assessment report did), methane’s greenhouse potency — its heat-trapping capacity, per pound of gas in the atmosphere — is roughly 25 times that of CO2. And if a 20-year timeframe is used, the greenhouse potency of a pound of methane becomes 72 times that of a pound of carbon dioxide. (The difference between the ratios arises because methane in the atmosphere breaks down about ten times as fast as CO2 — roughly a decade on average vs. a century for CO2.)

What’s bringing the issue of fugitive methane emissions to a boil is “hydrofracking” (or “fracking”). A highly invasive drilling process that releases gas by subjecting underground shale rock to hydraulic fracturing, fracking is being touted as a global-energy game changer. (“How Shale Gas Is Going To Rock The World” was the title of a May 2010 Wall Street Journal “special report.”)  But fracking is also an emerging source of massive air, soil and water pollution in states such as Pennsylvania that are the epicenter of the fracking boom.

In a recently-published peer-reviewed article, Prof. Robert Howarth and colleagues at Cornell University calculated methane releases from fracking and combined them with EPA data on gas pipeline leak rates to estimate methane losses across the gas fuel cycle. Their findings are sobering.  For every 100 cubic feet (the standard volume measurement) of natural gas “gathered” at the well and transferred to the transmission system:

  • 0.6 – 3.2 cubic feet are released to the atmosphere in the frack drilling process, and
  • 1.4 – 3.6 cubic feet of gas leaks into the atmosphere from the distribution system.

(EPA is expected to revise these estimates upward in view of more complete reporting showing greater leak rates, according to Howarth.)

Howarth et al. caution that their figures are based on very limited data, and are calling for further study. Nevertheless, their preliminary conclusion is that due to fugitive emissions in both the fracking process and gas pipelines, frack gas is causing as much global warming and climate change, per unit of energy output, as is coal. While that result is calculated for a 20-year timeframe, which understates the overall impact of carbon dioxide and, therefore, of coal, even over a 100-year timeframe fugitive emissions appear to take a huge bite out of any climate advantages that might otherwise be ascribed to natural gas.

It’s important to note that the Howarth analysis doesn’t take into account the second of the two “40% advantages” that we noted at the beginning of this post — the one reflecting the greater electric-generation efficiency of combined cycle gas turbines over conventional coal-fired steam turbines. This omission is significant in light of the fact that this efficiency edge has made combined cycle technology the overwhelming choice for recently-completed and proposed new gas-fired power plants. But regardless of the exact quantitative comparison between coal and frack gas, Howarth et al. are focusing much-needed attention on what now appears to have been the even starker omission (by most analysts) of substantial fugitive methane emissions in the natural gas fuel cycle.

Furthermore, as a frack gas drilling boom sweeps over the Marcellus Shale region of southwestern New York and huge swaths of Pennsylvania and West Virginia, residents are learning the hard way that fracking leaves vast amounts of dangerous chemicals in groundwater while also dumping polluted water, some of it radioactive, into rivers and streams. Congress is barely beginning to consider measures to close loopholes that exempt fracking from the Safe Drinking Water Act and the Clean Air Act, and these defensive initiatives are far behind the “NAT GAS” bill pushed by billionaire hydrocarbon mogul T. Boone Pickens to jumpstart a huge market for natural gas vehicles by subsidizing conversion of fleet vehicles and heavy trucks to gas.

Is there a way to legislate a clampdown on fugitive emissions of methane? Regulation requiring capture of gas, especially during the flow-back phase of gas drilling, should certainly be considered. But economic incentives are also worth a close look. Several carbon tax proposals would tax other greenhouse gases, including methane because, after CO2, it’s the top greenhouse gas driving Earth’s climate into instability. If, as Howarth and his colleagues have documented, fugitive methane emissions are a serious threat to Earth’s climate, could a tax on those methane emissions at their CO2-equivalent price correct the apparent market failure that leaves drillers willing to vent valuable and very climate-damaging methane?

We think so. Because methane is (at least) 25 times as potent a greenhouse gas as CO2, let’s consider a fugitive methane tax of 25 times the carbon tax rate, to reflect that potency. We calculate that a tax of $25 per ton of CO2 — to pick a modest, but not insignificant level — would imply a tax on fugitive gas of $13 per thousand cubic feet.* Since natural gas currently sells in wholesale markets for around $4 per thousand cubic feet (down from as much as $12 before the onset of the financial crisis), this tax would more than quadruple the incentive to capture methane provided by its current market price. That would appear to be a lot of leverage to capture fugitive methane, even from a fee pegged to a relatively modest carbon tax.

Howarth et al. report a huge range of fugitive methane emissions over the life of different frack wells — from a low of 140,000 cu ft to a high of 6,800,000.  At $13 / 1000 cu ft, the tax on those fugitive emissions would range from only around $60,000 per well to as much as several million dollars. (This enormous range is partly an artifact of the limited data available to Howarth.) While the low end is just peanuts to frack drillers, the high end is a significant fraction of the $2 to $10 million cost to drill a well.  It seems reasonable to expect that this tax, along with the market price of gas and the expectation of a rising CO2 (and equivalent fugitive gas) charge, would encourage deployment of equipment to capture, compress and store gas, at least at larger wells.

As both Howarth et al. and a recent report by the Post Carbon Institute point out, gas pipelines generally aren’t built and connected until wells are completed. Thus, well drillers who aren’t typically in the business of selling gas (and may not even own the rights to it) may not have ready access to gas pipelines and markets. This “split incentive,” along with the rush to establish and maintain drilling rights before leases expire, may help explain the reckless, wasteful discharge of climate-damaging methane into the atmosphere from frack wells. But gas can be compressed and transported by truck, so we’d expect that the price incentives of a rising greenhouse gas tax on fugitive methane would push well drillers to find ways to capture more of their emissions. Similarly, a substantial price signal should induce pipeline companies to repair and monitor leaking distribution systems. In this way, more of the lifecycle combustion advantages of natural gas as a true transition fuel could be realized.

As for fracking’s often-horrific “other” emissions: tough and comprehensive regulations are sorely needed. Congress should start with the “FRAC Act” H.R. 1084/S. 587 introduced by Rep. DeGette (D-CO) and Sen. Casey (D-PA), which would eliminate fracking’s exemption from the Safe Drinking Water Act; and the “BREATHE Act,” H.R. 1204 by Rep. Polis (D-CO.), which would bring fracking under the Clean Air Act.

* Authors’ calculation:

A $25/ton CO2 tax x 25x GHG potential  = $625/ton CH4.

$625/2000 lb x 44 lb/1000 cu ft  x  1000 cu ft/ 1.02 MM Btu = $13.5 /MM Btu

Flickr Photo:  Frack Well in Dimock, PA.  Brandi Lynn.

Filed under Carbon Tax


  1. Mankinds struggle to have inexpensive energy without exterminating mankind is the challange.Slickwater hydraulic fracturing is a clever idea. Its advantages cut down on surface destruction over verticle wellsites with the same results of product.However, there have been many adverse situations where life has been destroyed.For the human species to continue, we have to drink clean water, breathe non toxic air without gassas and pollutants, and raise crops that won’t destroy our immune system. Other forms of life that we depend on also have to be protected. Invested dollars and tax incentitavesneed to shift if mankind is going to survive.

    Comment by Bob Schmetzer — May 20, 2011 @ 9:00 pm

  2. We will not be able to burn our way out of global warming. Until we are able to generate our energy in a way that is in harmony with nature, we will be destined to repeat the mistakes that created the problem.
    This transformation will take both political will and money to fix and here you offer again a way to “incentivise” a transition to a sane energy policy.
    If we continue to arrogantly believe that we can win this war to conquer nature, we will find ourselves deeper in a hole that we can’t blast our way out of.
    Either will result to a more unstable and toxic future (like Philip Dick’s “Do androids Dream of Electronic Sheep?” that Ridley Scott made into the movie “Blade Runner”) or even lead to our own extinction.
    We need a paradigm shift in the way we think of energy solutions fast before extreme climate events spiral out of control.
    It is clear that we won’t see the signs in the form of weather events until it’s too late thanks to a coordinated campaign paid for by- you guessed it- the same companies that are promoting Fracking, Extreme oil drilling and nuclear toxic solutions.

    Comment by Robert Malin — May 22, 2011 @ 4:17 pm

  3. The post mentions in a few places that there are shortages of data that make it difficult to draw firm conclusions. The shortages of methane leakage data are not coincidental. Measuring the multitude of methane leaks from gas production, processing, and transportation is not at all easy.

    By measuring leaks on several pieces of equipment, it may be possible to estimate average leakage rates; but it would not be fair to tax every piece of equipment or process based on averages because some operators might operate with low leakage rates.

    The difficulty of measuring each leak will make calculation of taxes very difficult. This may be a place where best available control technology and closer supervision would be more practical than a tax.

    Comment by Daniel Jones — May 22, 2011 @ 11:54 pm

  4. In some ways I agree with a tax to fund the overriding problems we are faced with. However maybe there should be a trial for companies to self-fund their own omission trading scheme which would see them measured on their accountability. It would also give a different approach to the way pollution problems are tackled within companies as there pollution output would now be included in their budgets. The major issues are incentives to tackle Co2, who wants to pay for it?
    Let’s face it we all go about our daily lives using equipment and products that omit Co2. There for we are all responsible right? Wrong we only use what is available to us, if a tax is imposed on citizens then we will be of the belief that we have paid for our pollution so we are not responsible which not a logical approach to the problem is at all.

    Comment by Elias Briffa — May 23, 2011 @ 6:41 am

  5. Personal choice may be better than tax – The first move is to have the CARBON PER KILOWATT for the supply period shown on each electric power account- so a person has an idea of their situation- Then open up the sale of electricity so each account can access any supplier of power to the grid.This does two things – IT exposes the carbon position for each power generator and so sets them on a course of reduction of CARBON PER KILOWATT for their supply ie increasing the low carbon inputs to their supply to achieve a better figure – (voluntary)- AND allows the consumer to purchase power from the supplier of their choice resulting in better competition

    Comment by clive cornish — May 23, 2011 @ 8:22 am

  6. Responding to Clive Cornish, #5: Giving people information and choices about the greenhouse gas (GHG)emissions caused by their electricity consumption can help, but is probably not sufficient to make a big dent in the climate change problem we face.

    For several years, numerous utilities have offered their customers the option of paying a bit more each month in order to get some or all of their electricity from renewable sources. The following web site reports results of these voluntary programs.


    Generally participation rates are well below 10% of utility customers and the demand for renewable electricity amounts to substantially less than 10% of total electricity sold by participating utilities.

    Getting even a few percent of customers to pay more for renewable power may be impressive, but it isn’t enough. Furthermore, most utilities don’t offer the voluntary renewable programs.

    In 2007, the National Renewable Energy Laboratory reported on the performance of both voluntary renewable electricity markets and state-imposed requirements for renewable energy (see http://www.nrel.gov/docs/fy08osti/42096.pdf).

    Renewable energy provided through voluntary markets amounted to about a half of one percent of US electricity consumption in 2007 and was projected to rise to about 1% in 2010. It’s not enough.

    The history of voluntary recycling of municipal solid waste provides an instructive analogy. The initiative that went into paper drives and operating recycling centers in the 1960s through 1980s was impressive. But high recycling rates didn’t occur until the 1990s when state and local governments mandated curbside collection of recyclables and other recycling programs.

    Comment by Daniel Jones — May 23, 2011 @ 3:42 pm

  7. Methane emissions in transmission are an interesting wrinkle in analyzing the merits of natural gas relative to petroleum or coal in power generation or for any purpose. Surely the apprpriate way to give guidance to the market is to tax all the GHG components of a fuel in its general use. The tax should be applied at the origin – minemouth, wellhead or port of entry. The tax will supplement economic incentives to avoid transportation losses. All carbon-based fuels in the chain of commerce should be taxed – including pressed sawdust logs, for example, or purchased firewood.

    Modelling the impact of such taxes is complex. The CTC model is an interesting effort but I do not see in it any provision for the series of tipping points that will occur. One tipping point will occur when the cost of carbon-based fuels rises above the cost of adding electrical energy storage devices or schemes to solar power projects. Storing some solar PV power overnight will bring it closer to baseload effectiveness. Similarly, storing wind generated electricity for up to several days will make it more reliable. There may remain significant improvements to be made in the cost of solar PV and concentrated solar PV. This too would be a tipping point. Depending on the cost of electricity, we are approaching a tipping point for local automobile transportation. There will be a time period where two car families have one that is all electric – when the lower fuel cost offsets the higher capital cost. When extended mileage per charge and rapid on-the-road charging are available, even the second car will be all electric or hybrid. Alternatively, a hydrogen from water process will develop that is more economical that building ever more batteries for auto power or energy storage. This hydrogen development could be another cost tipping point.

    Once the carbon tax gets the ball rolling, competition, invention and innovation cold make all the differenc in our evolution to a global clean-energy economy.

    Comment by Kenneth Gibson — August 21, 2011 @ 6:00 pm

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