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Is Abundant Natural Gas a Bridge to a Low-carbon Future or a Dead-end?

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Abstract:
A fierce debate rages on whether abundant natural gas is a bridge to a low-carbon future or a hindrance to long-term decarbonization. This paper uses a detailed energy-economic market equilibrium model to study the effects of an upper bound case of natural gas availability. We show that a market-driven abundant natural gas supply can provide substantial reductions in air pollution but does not considerably reduce CO2 emissions in the longer-term, especially relative to a moderate carbon price. However, we quantify large welfare benefits from abundant natural gas. The spatial disaggregation of our results allows for a clear picture of the distributional impacts of abundant natural gas under different carbon price scenarios, illustrating welfare gains by most regions regardless of whether there is carbon pricing, but substantial heterogeneity in the welfare gains.

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Keywords: Welfare, Natural gas revolution, Distributional impacts, Carbon pricing.

DOI: 10.5547/01956574.40.2.kgil

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Published in Volume 40, Number 2 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.