Environmental Engineering Reference
In-Depth Information
Other impacts are important as well. The shale boom creates
substantial employment growth, with jobs growing on average about
1.8% in the positive shock and declining about 1.1% in the negative
shock for a net of about
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2.9% employment gains. With the shale
expansion, oil and gas prices drop by 6% and 16%, respectively, in the
period 2007-35. This price drop stimulates an expanded economic
activity. If gas exports are restricted, natural gas prices drop 24.1%,
providing additional economic stimulus.
1 Introduction
In this chapter we take on the daunting task of estimating the overall eco-
nomic and environmental impacts of the shale oil and gas boom in the US.
We do this using a modified version of a well-known computable general
equilibrium (CGE) economic model (GTAP). We use the improved model and
database to first project what would have been the economic and environ-
mental impacts had the shale boom not occurred (a negative productivity
shock representing reduction in gas and oil resources in the absence of new
shale resources). Then we simulate the economic and environmental
impacts of the shale boom by positively shocking productivity in oil and gas
production. Finally, we examine the important issue of the impacts of
liquefied natural gas export restrictions. The chapter is organised as follows:
(1) review of relevant literature; (2) description of the standard GTAP energy
model; (3) description of the modifications we have made to the GTAP model
and database for this analysis; (4) presentation of the three modeling
experiments; (5) simulation results; and (6) finally, we conclude with a
discussion of the major findings.
2 Literature Review and Background
Recently, a limited number of studies have tried to quantify the economic
and environmental consequences of the new developments in the US energy
market. Brown et al.
1
examined how the expected expansion in gas shale will
affect the US energy market and the link of this expansion to climate pol-
icies. These authors examined six different scenarios using the National
Energy Modeling System (an energy-economy market equilibrium model -
NEMS) and reached two major conclusions: (1) more abundant gas supplies
will expand uses in most economic activities; and (2) the expansion in supply
of natural gas in combination with appropriate carbon polices will help the
US economy to achieve low-carbon standards in future.
Paltsev et al.
2
also analysed the expansion in US natural gas. These authors
highlighted the uncertainties in the scale and cost of gas resources, the costs
of competing alternative potential technologies and mitigation emissions
policies. They used two computable general equilibrium models and con-
cluded that: the expansion in shale gas resources will increase the supply of
