Director of publications
Teresa Ribera

Pierre Barthélemy, Marion Gourdin

Anna Kiff et Architexte


Unconventional wisdom: an economic analysis of US shale gas and implications for the EU
T. Spencer, O. Sartor, M. Mathieu. Study.

This study demonstrates that shale gas exploitation has had a minimal impact on the US macro-economy and on the decarbonisation of its energy mix. And, according to the authors, it is unlikely that the EU will repeat the US experience.
This study has also been published as a Policy Brief, N°05/14.

Des catastrophes... « naturelles » ?
A. Magnan, V. Duvat.

A book on adaptation to natural disasters, of which humans would be both the "initiators" and the victims, written by Alexandre Magnan and Virginie Duvat, published by Éditions du Pommier.
Forthcoming, 12 March 2014

february 2014N° 48

The shale gas revolution: miracle or mirage?

The US shale gas has ignited curiosity, conflict, and envy in Europe and in France. The supposed benefits for the US economy and manufacturing have also created concern. However, in this highly charged debate there is no small degree of misunderstanding and misinterpretation.

The stakes involved and the need for clarity inspired IDDRI to launch a 5-month research project on the economics of the shale gas revolution in the US and its implications for Europe. The aim was to have a rational, empirical assessment of the economic issues. In so doing, it was decided to leave aside for now important environmental issues—life-cycle emissions and local pollution—because the current political priority is jobs and competitiveness.

The result of this work is a long empirical study recently published on IDDRI’s website: "Unconventional wisdom: an economic analysis of US shale gas and implications for the EU" (Study N°02/14). This study uses public data and a transparent methodology. What did it find?

There can be no doubt that the US unconventional oil and gas revolution has been rapid and profound. However, the economic impacts need to be put in perspective. Increases in gasoline bills have significantly outweighed decreases in gas bills for households. A small number of gas intensive subsectors have benefited from cheaper gas prices. However the US trade deficit in manufacturing has continued to grow. Thus the economic benefits of shale gas are largely local and sectoral, limited to a small number of highly gas intensive sectors. Looking forward, it appears likely that the US will become a net exporter of natural gas in this decade, but will still be a major importer of oil. Further policies such as carbon pricing and/or emissions standards are needed in order to drive a significant reduction in US emissions.

Looking closer to home: Europe is at the very beginning of the search for shale gas. Conditions are likely to be more difficult in terms of geology, geography, regulation and public acceptance. This does not mean that shale production will not take place. But it will take significant time and its scale is likely to be limited. The study estimates that a median scenario would see shale gas making up about 3-10% of EU gas demand in 2030. Europe’s import dependency would continue to grow. Europe’s energy prices would remain dependent on high and volatile international market prices.

What does this mean for Europe’s energy, climate and competitiveness challenge? Firstly, shale gas is not a panacea by any means: Europe’s energy disadvantage will remain and grow in the coming decades. Secondly, this means that Europe needs to continue to put its focus on a comprehensive energy and climate strategy. This should comprise energy efficiency, the most significant means of reducing consumer bills. Eco-innovation is also crucial to ensure the continued competitiveness of European industries. Europe needs to strengthen its internal energy market, to increase security and reduce prices. Finally, Europe needs to rapidly develop domestic sources of clean energy, such as renewables.

In March, Europe will negotiate the next steps for its climate and energy policy. Long-term, comprehensive orientations are needed in order to address Europe’s energy, climate and competitiveness challenge. And shale gas is not a miracle solution to the hard but necessary task of building a sustainable competitive energy system in Europe. In the run up to the recent publication of the Commissions's proposal for the 2030 climate and energy package, IDDRI has been engaged in a reflection—and already published several policy briefs—on the context, need and possible content for the next EU climate and energy package; these address the question of the rationale and modalities for the 2030 package, the inclusion of renewables targets in the package, as well as the treatment of competitiveness issues.