The CSR Newsletters are a freely-available resource generated as a dynamic complement to the textbook, Strategic Corporate Social Responsibility: Sustainable Value Creation.

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Wednesday, October 1, 2014

Strategic CSR - Fracking

Recently, there has been a lot of media coverage emphasizing the environmental benefits of fracking, in general, and the fracking of natural gas, in particular. The article in the url below, for example, notes that, because supply of natural gas has increased exponentially, prices have dropped to the point where it makes economic sense to burn gas instead of coal, which reduces carbon emissions:
 
"Coal generation peaked in 2007 at a little over two billion megawatt hours while in 2013 it dropped to 1.58 billion, according to the Energy Information Administration. (A megawatt-hour, or 1,000 kilowatt-hours, is the amount of electricity a typical suburban house uses in a month.) Over the same time, gas generation started at 857 million megawatt-hours and ended at 1.2 billion. If all the increase in gas-fired generation replaced coal, then the switch produced savings of 113.1 million tons of carbon a year."
 
This is good. Unfortunately, these same economic principles apply to any energy source that is more expensive than gas. As such, cheap natural gas is replacing nuclear energy ("zero carbon footprint") and, more worryingly, other non-fossil fuel sources, such as wind:
 
"Wind contributes only slightly to generation capacity needs, but whenever it runs, it saves fuel, mostly natural gas, and that gas is now worth about half of what it was a decade ago."
 
In addition, one of the main products of fracking for oil is natural gas. And, in places where there are no pipelines to take the gas away, it is flared:
 
"According to the Energy Information Administration, last year the producers flared enough gas to have produced 27 million megawatt-hours. That pushed emissions up by 16.5 million tons, about 15 percent as much as the reduction in coal burning saved. And some of the natural gas escapes unburned. Its main component, methane, is a global warming gas and is far more powerful than carbon dioxide, although it does not persist quite as long in the atmosphere. … from 2007 to 2013, the increase in gas consumption added methane with a carbon dioxide equivalent of about 19 million tons."
 
The quote in the article that stuck out most for me, however, concerned the long-term effects of cheap natural gas on any hope of limiting our carbon emissions into the atmosphere:
 
"The problem, said Michael Greenstone, a professor of environmental economics at M.I.T., is that while zero-carbon technologies have advanced significantly in the last 10 years, 'over the same period, there have been practically unimaginable advances in fossil fuels.' Limiting carbon emissions will most likely mean resolving to leave cheap fossil fuels in the ground, he said. Almost nothing valuable is left undrilled or unmined, he said. 'The history of leaving $100 bills buried in the ground is really a short one,' he said."
 
Past experience suggests we are not willing to sacrifice short-term economic profit for long-term environmental security.
 
Take care
David
 
David Chandler & Bill Werther
 
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The Potential Downside of Natural Gas
By Matthew L. Wald
June 4, 2014
The New York Times
Late Edition – Final
B3