Environmental Engineering Reference
In-Depth Information
the energy market, and that leads to an expansion in demand for coal (and
eventually in its supply). This is the substitution effect. In the first experi-
ment the net of the expansion and substitution effects is positive, and that
increases the production/consumption of coal in the absence of expansion
in oil and gas. On the other hand, the expected expansion in the crude oil
and gas production (in Experiments II and III) improves the level of economic
activity and increases employment. That leads to higher demand for energy
items, including coal. However, the expansion in oil and gas reduces the
prices of these items due to the substitution effect. This eventually leads to a
reduction in demand for coal, in particular when exports of gas are limited.
6.2 GDP Impacts
From a macro perspective, Figure 3 represents the expected changes in the
US GDP at constant prices for the three main experiments over time. This
figure indicates that, in the absence of new shale technologies (i.e. in Ex-
periment I), US GDP drops by 1.6% during the period 2007-35. In this case,
the rate of reduction would be slightly smaller in 2007-17 and 2017-22.
From 2008 to 2035 on average the US GDP will be 1.3% lower than its ori-
ginal level in 2007. With the expected expansion in shale oil and gas, the US
GDP goes up by 2.6% in Experiment II during the period 2007-35. From 2008
to 2035 on average the US GDP will be 2.2% higher than its original level in
2007. This average number for Experiment III (where we restrict exports of
gas) is about 2.3%. In fact, expansion in shale resources on average improves
the US GDP by 3.5% (the difference between the average impacts on GDP
obtained from Experiments I and II). The difference reaches 3.6% if we re-
strict exports of gas. That is to say, US GDP is expected to be 3.5-3.6% higher
due solely to availability of shale technology. This is a level change and not a
growth rate.
Figure 3 Percent changes in US GDP at constant prices.
