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U.S. CO2 Emissions Down 3% As Shale Gas Supply Surges, Renewables Displace Coal

U.S. carbon dioxide (CO2) emissions in 2016 fell more than anywhere else in the world, down 3% year/year, driven by a flood of shale natural gas supply and renewable power increasingly displacing coal, the International Energy Agency (IEA) said.

The 3% decline from 2015, or by 160 million metric tons, came even as the domestic economy grew by 1.6%, the worldwide energy watchdog said in its annual report.

"Emissions in the United States last year were at their lowest level since 1992, a period during which the economy grew by 80%," IEA researchers said.

Globally, energy-related CO2 emissions were flat for the third straight year in 2016 even as the worldwide economy grew 3.1%, signaling a "continuing decoupling of emissions and economic activity."

Emissions fell not only on coal-to-gas switching, growing renewable power generation and improvements in energy efficiency, but on structural changes in the worldwide economy.

"These three years of flat emissions in a growing global economy signal an emerging trend and that is certainly a cause for optimism, even if it is too soon to say that global emissions have definitely peaked," said IEA Executive Director Fatih Birol. "They are also a sign that market dynamics and technological improvements matter. This is especially true in the United States, where abundant shale gas supplies have become a cheap power source."

Global emissions from the energy sector stood at 32.1 gigatonnes last year, the same as the previous two years, according to IEA estimates. CO2 emissions were down not only in the United States but also in China, the world's two-largest energy users and emitters, and they were stable in Europe, offsetting increases in most of the rest of the world.

Coal demand fell worldwide but the drop was "particularly sharp" in the United States, with demand down 11% from 2015. For the first time, electricity generation from natural gas was higher than from coal last year in the United States, IEA said.

During 2016, renewables supplied more than half the global electricity demand growth, with hydro accounting for half of that share. The overall increase in the world's nuclear net capacity last year was the highest since 1993, with new reactors coming online in the United States, China, South Korea, India, Russia and Pakistan.

"With the appropriate policies, and large amounts of shale reserves, natural gas production in the United States could keep growing strongly in the years to come," according to IEA. "This could have three main consequences: it could boost domestic manufacturing, supply more competitive gas to Asia through liquefied natural gas exports and provide alternative gas supplies to Europe." IEA last detailed U.S. gas prospects last November in its annual World Energy Outlook.

Meanwhile, in China, emissions last year fell by 1% as coal demand declined while the economy expanded by 6.7%. IEA cited several reasons for the declining trend including an increasing share of renewables, nuclear and natural gas in the power sector, "but also a switch from coal to gas in the industrial and buildings sector that was driven in large part by government policies combating air pollution."

Two-thirds of China's electricity demand growth, which was up 5.4%, was supplied by renewables, mostly hydro and wind, as well as nuclear. Five new nuclear reactors were connected to the grid in China, increasing its nuclear generation by 25%.

"In China, as well as in India, the growth in natural gas is significant, reflecting the impact of air quality measures to fight pollution as well as energy diversification," said Birol. "The share of gas in the global energy mix is close to a quarter today, but in China it is 6% and in India just 5%, which shows they have a large potential to grow."

In the European Union, emissions were "largely stable" in 2016 as gas demand rose about 8% and coal demand fell 10%. Renewables also played a significant, but smaller, role. The UK saw a significant coal-to-gas switching in the power sector, thanks to cheaper gas and a carbon price floor, researchers said.

"Market forces, technology cost reductions and concerns about climate change and air pollution were the main forces behind this decoupling of emissions and economic growth," according to IEA. "While the pause in emissions growth is positive news to improve air pollution, it is not enough to put the world on a path to keep global temperatures from rising above 2 degrees C."

To take full advantage of the potential of technology improvements and market forces, IEA said "consistent, transparent and predictable policies are needed worldwide."

In related news, the International Renewable Energy Agency (IRENA) on Monday said CO2 emissions could be reduced by 70% by 2050 and "completely phased out" by 2060 with a net positive economic outlook. The Berlin-based agency presented its case that increasing deployment of renewable energy and energy efficiency in the Group of 20, or G20, countries and globally "can achieve the emissions reductions needed to keep global temperature rise to no more than 2 degrees C, avoiding the most severe impacts of climate change."

Renewable energy now accounts for 24% of global power generation and 16% of primary energy supply, according to IRENA. To achieve decarbonization, it said by 2050, renewables should be 80% of power generation and 65% of total primary energy supply.

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