Continued from previous page

Recent general modelling studies by Donovan et al. (1997) and Bernstein et al. (1999) suggest that, in Annex B countries, policies to reduce GHGs may have the least impact on the demand for oil, the most impact on the demand for coal, with the impact on the demand for natural gas falling in the mid-range. These results are different from recent trends, which show natural gas usage growing faster than use of either coal or oil, and can be explained as follows.

• Current technology and infrastructure will not allow much switching from oil to non-fossil fuel alternatives in the transport sector, the largest user of oil, before about 2020.
• The electric utility sector, the largest user of coal, can switch to natural gas, but the rate of switching will be limited by regional natural gas availability.
  
• Given the above considerations, modelling studies suggest that Annex B countries are likely to meet their Kyoto Protocol commitments by reducing overall energy use, which is likely to result in a reduction in natural gas demand.

Given the agreement in the modelling studies and the logic that can be used to support the conclusions, this finding is established, but incomplete.

The GHG mitigation benefits of using natural gas depend on minimizing losses in its use. CH₄, the chief constituent of natural gas, is a GHG, and will be emitted to the atmosphere in natural gas leaks, most of which occur in older, low pressure distribution systems. CH₄ losses also are often a by-product of coal production. A full comparison of the benefits of switching from coal to natural gas, a step often included in mitigation strategies, requires a lifecycle analysis of CO₂ and CH₄ emissions for both fuels.

Brown et al. (1999) used GTEM, a general equilibrium model described above, to evaluate the impact of the Kyoto Protocol’s commitments, with and without unrestricted international emissions trading, on the production of natural gas. They found the effect of emissions trading on projected natural gas production is mixed, with some countries seeing higher production rates and others, lower production rates. Because of the many assumptions that have to be made and the sector-specific impacts of emissions trading, only low confidence can be assigned to specific numerical results.

Table 9.5 summarizes a number of global economic modelling studies which project the impact of measures to mitigate CO₂ emissions on the demand for natural gas, expressed as the ratio in change in gas demand to the change in CO₂ emissions. The results are highly variable; the mean ratio is 0.14 with a standard deviation of 0.88. Table 9.5 shows that some studies have pointed towards stronger gas demand of CO₂-abatement measures compared to the reference cases.

Table 9.5: Changes in carbon dioxide emissions and gas demand from the reference case in alternative emissions abatement studies
	Change in CO2 emissions (%)	Change in natural gas demand (%)	Ratio of changes in gas demand to changes in CO2 emissionsd	Year	Region
DRI (1992)	-11.7	-7.2	0.62	2005	EC
Hoeller et al. (1991)	-49.2	-27.4	0.56	2000	World
Bossier and De Rous (1992)	-8.2	3.0	-0.37	1999	Belgium
Proost and Van Regemorter (1992)	-28.8	15.3	-0.55	2005	Belgium
Burniaux et al.(1991)	-53.6	0.0	0.0	2020	World
Barker (1995)	-12.8	-6.2	0.48	2005	UK
Ghanem et al.(1998)	-30.7	-20.1	0.65	2010	World
Baron (1996)a	-8.5b	-4.0	0.47	2000	USA
Birkelund et al. (1994)	-10.7	-8.0	0.75	2010	EU
Bernow et al. (1997)	-17.8	-5.4	0.30	2015	Minnesota
Gregory et al. (1992)	-8.4	-5.2	0.62	2005	UK
WEC (1993)	-11.1	0.0	0.0	2020	World
Scenario B Kratena and Schleicher (1998)	-29.0	-36.4	1.26	2005	Austria
Mitsubishi Research Institute (1998)	-11.3c	9.2	-0.81	2010	OECD
a Citing a study by US Congressional Budget Office (CBO) b Estimated. c Change in fossil fuel demand. d Median ratio (Column 3): 0.47   Mean ratio: 0.26   Std.dev.of ratio: 0.64

Longer term, natural gas would be the easiest of the fossil fuels to convert to hydrogen. This would significantly increase demand for natural gas. For technical details see Chapter 3.

9.2.3.3 Ancillary Benefits of GHG Mitigation in the Oil and Gas Industry

If, as projected, GHG mitigation policies reduce the growth in demand for crude oil they will result in several ancillary benefits: the rate of depletion of oil reserves will be slowed; and air and water pollution impacts associated with oil production, refining and consumption will be reduced, as will oil spills. Reduced growth in demand for natural gas will have similar benefits: slower rate of depletion of this natural resource, less air and water pollution associated with this industry, and less potential for natural gas explosions.

IPCC Homepage