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The impact of shale gas on the costs of climate policy

: Kersting, Jan; Duscha, Vicki; Schleich, Joachim; Keramidas, Kimon


Climate Policy 18 (2018), No.4, pp.442-458
ISSN: 1469-3062
ISSN: 1752-7457
Journal Article
Fraunhofer ISI ()
climate policy; Energy prices; greenhouse gas emissions; Mitigation costs; Shale gas

The use of shale gas is commonly considered as a low-cost option for meeting ambitious climate policy targets. This article explores global and country-specific effects of increasing global shale gas exploitation on the energy markets, on greenhouse gas emissions, and on mitigation costs. The global techno-economic partial equilibrium model POLES (Prospective Outlook on Long-term Energy Systems) is employed to compare policies which limit global warming to 2°C and baseline scenarios when the availability of shale gas is either high or low. According to the simulation results, a high availability of shale gas has rather small effects on the costs of meeting climate targets in the medium and long term. In the long term, a higher availability of shale gas increases baseline emissions of greenhouse gases for most countries and for the world, and leads to higher compliance costs for most, but not all, countries. Allowing for global trading of emission certificates does not alter these general results. In sum, these findings cast doubt on shale gas’s potential as a low-cost option for meeting ambitious global climate targets.