IDEAS home Printed from https://ideas.repec.org/p/mns/wpaper/wp202102.html

The Economics of Natural Gas Venting, Flaring and Leaking in U.S. Shale: An Agenda for Research and Policy

Author

Listed:
  • Mark Agerton

    (Department of Agricultural and Resource Economics, University of California Davis and Non-Resident Fellow at Baker Institute for Public Policy, Rice University)

  • Ben Gilbert

    (Department of Economics and Business, Colorado School of Mines)

  • Gregory B. Upton Jr.

    (Center for Energy Studies, Louisiana State University)

Abstract

Natural gas venting, flaring and leaking (VF&L) are closely intertwined environmental policy issues for U.S. shale oil and gas operations. In this paper, we lay out an agenda for researchers and policymakers. We describe why VF&L are closely related, both physically and in terms of policy. We perform an interdisciplinary literature review on measurement of VF&L. We marshal granular industry data to identify constraints in the natural gas system correlated with upstream VF&L. Motivated by this descriptive analysis, we discuss the economic reasons for VF&L and the market distortions that could exacerbate VF&L. We then discuss the external cost of VF&L. We calculate that reported 2015 and 2019 flaring and venting imposed climate damages of $0.9 to $1.8 billion and $1.7 to $3.4 billion. We calculate that climate damages of 2015 upstream U.S. methane emissions estimated by Alvarez et al. (2018) were $16.8 billion. Finally, we discuss both existing policy and economic insights relevant to future policy.

Suggested Citation

  • Mark Agerton & Ben Gilbert & Gregory B. Upton Jr., 2021. "The Economics of Natural Gas Venting, Flaring and Leaking in U.S. Shale: An Agenda for Research and Policy," Working Papers 2021-02, Colorado School of Mines, Division of Economics and Business.
    • Handle: RePEc:mns:wpaper:wp202102
    as

    Download full text from publisher

    File URL: http://econbus-papers.mines.edu/working-papers/wp202102.pdf
    File Function: First version, 2021
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Lade, Gabriel E. & Rudik, Ivan, 2020. "Costs of inefficient regulation: Evidence from the Bakken," Journal of Environmental Economics and Management, Elsevier, vol. 102(C).
    2. Malik Arun S., 1993. "Self-Reporting and the Design of Policies for Regulating Stochastic Pollution," Journal of Environmental Economics and Management, Elsevier, vol. 24(3), pages 241-257, May.
    3. Austin, David & Dinan, Terry, 2005. "Clearing the air: The costs and consequences of higher CAFE standards and increased gasoline taxes," Journal of Environmental Economics and Management, Elsevier, vol. 50(3), pages 562-582, November.
    4. Matthew Kotchen & Kathleen Segerson, 2020. "The Use of Group-Level Approaches to Environmental and Natural Resource Policy," NBER Working Papers 27142, National Bureau of Economic Research, Inc.
    5. Benjamin Hmiel & V. V. Petrenko & M. N. Dyonisius & C. Buizert & A. M. Smith & P. F. Place & C. Harth & R. Beaudette & Q. Hua & B. Yang & I. Vimont & S. E. Michel & J. P. Severinghaus & D. Etheridge &, 2020. "Preindustrial 14CH4 indicates greater anthropogenic fossil CH4 emissions," Nature, Nature, vol. 578(7795), pages 409-412, February.
    6. Severin Borenstein & James. Bushnell & Steven Stoft, 2000. "The Competitive Effects of Transmission Capacity in A Deregulated Electricity Industry," RAND Journal of Economics, The RAND Corporation, vol. 31(2), pages 294-325, Summer.
    7. Matthew J. Kotchen & Kathleen Segerson, 2020. "The Use of Group-Level Approaches to Environmental and Natural Resource Policy," Review of Environmental Economics and Policy, University of Chicago Press, vol. 14(2), pages 173-193.
    8. Wang, Jingfan & Tchapmi, Lyne P. & Ravikumar, Arvind P. & McGuire, Mike & Bell, Clay S. & Zimmerle, Daniel & Savarese, Silvio & Brandt, Adam R., 2020. "Machine vision for natural gas methane emissions detection using an infrared camera," Applied Energy, Elsevier, vol. 257(C).
    9. Mark Agerton & Gregory B. Upton Jr., 2019. "Decomposing Crude Price Differentials: Domestic Shipping Constraints or the Crude Oil Export Ban?," The Energy Journal, , vol. 40(3), pages 155-172, May.
    10. Anastasios Xepapadeas, 2011. "The Economics of Non-Point-Source Pollution," Annual Review of Resource Economics, Annual Reviews, vol. 3(1), pages 355-373, October.
    11. Kaplow, Louis & Shavell, Steven, 1994. "Optimal Law Enforcement with Self-Reporting of Behavior," Journal of Political Economy, University of Chicago Press, vol. 102(3), pages 583-606, June.
    12. Upton, Gregory B. & Snyder, Brian F., 2017. "Funding renewable energy: An analysis of renewable portfolio standards," Energy Economics, Elsevier, vol. 66(C), pages 205-216.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Häckner, Jonas & Herzing, Mathias, 2017. "The effectiveness of environmental inspections in oligopolistic markets," Resource and Energy Economics, Elsevier, vol. 48(C), pages 83-97.
    2. Ulrich Blum & Nicole Steinat & Michael Veltins, 2008. "On the rationale of leniency programs: a game-theoretical analysis," European Journal of Law and Economics, Springer, vol. 25(3), pages 209-229, June.
    3. Shouqiang Wang & Peng Sun & Francis de Véricourt, 2016. "Inducing Environmental Disclosures: A Dynamic Mechanism Design Approach," Operations Research, INFORMS, vol. 64(2), pages 371-389, April.
    4. Christian Langpap, 2007. "Pollution abatement with limited enforcement power and citizen suits," Journal of Regulatory Economics, Springer, vol. 31(1), pages 57-81, February.
    5. Timothy Stanley, 1995. "Optimal Penalties for Concealment of Crime," Law and Economics 9507001, University Library of Munich, Germany, revised 27 Dec 1995.
    6. Lin, Shi-Woei, 2010. "Self-reporting mechanism for risk regulation," Journal of Business Research, Elsevier, vol. 63(5), pages 528-534, May.
    7. François Bareille & Matteo Zavalloni & Davide Viaggi, 2023. "Agglomeration bonus and endogenous group formation," American Journal of Agricultural Economics, John Wiley & Sons, vol. 105(1), pages 76-98, January.
    8. Iwasaki, Masaki, 2020. "A model of corporate self-policing and self-reporting," International Review of Law and Economics, Elsevier, vol. 63(C).
    9. Evgenia Motchenkova & Rob Laan, 2011. "Strictness of leniency programs and asymmetric punishment effect," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 58(4), pages 401-431, December.
    10. Wang, Hua & Wheeler, David, 2005. "Financial incentives and endogenous enforcement in China's pollution levy system," Journal of Environmental Economics and Management, Elsevier, vol. 49(1), pages 174-196, January.
    11. Stranlund, John K. & Murphy, James J. & Spraggon, John M., 2011. "An experimental analysis of compliance in dynamic emissions markets," Journal of Environmental Economics and Management, Elsevier, vol. 62(3), pages 414-429.
    12. Motchenkova, E. & Laan, R., 2005. "Strictness of Leniency Programs and Cartels of Asymmetric Firms," Discussion Paper 2005-74, Tilburg University, Center for Economic Research.
    13. Katrin Millock & David Zilberman, 2006. "Collective penalities and inducement of self-reporting," Cahiers de la Maison des Sciences Economiques v06048, Université Panthéon-Sorbonne (Paris 1).
    14. Buccirossi, Paolo & Spagnolo, Giancarlo, 2006. "Leniency policies and illegal transactions," Journal of Public Economics, Elsevier, vol. 90(6-7), pages 1281-1297, August.
    15. Inés Macho-Stadler, 2008. "Environmental regulation: choice of instruments under imperfect compliance," Spanish Economic Review, Springer;Spanish Economic Association, vol. 10(1), pages 1-21, March.
    16. Guerrero, Santiago & Innes, Robert, 2008. "Statutory Rewards to Environmental Self-Auditing: Do They Reduce Pollution and Save Regulatory Costs? Evidence from a Cross-State Panel," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6204, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    17. Leone, Andrew J. & Li, Edward Xuejun & Liu, Michelle, 2021. "On the SEC's 2010 enforcement cooperation program," Journal of Accounting and Economics, Elsevier, vol. 71(1).
    18. Philippe Bontems & Gilles Rotillon, 2000. "Honnêteté et conformité environnementale," Économie et Prévision, Programme National Persée, vol. 143(2), pages 117-127.
    19. Robert Innes & George Frisvold, 2009. "The Economics of Endangered Species," Annual Review of Resource Economics, Annual Reviews, vol. 1(1), pages 485-512, September.
    20. Alm, James & Shimshack, Jay, 2014. "Environmental Enforcement and Compliance: Lessons from Pollution, Safety, and Tax Settings," Foundations and Trends(R) in Microeconomics, now publishers, vol. 10(4), pages 209-274, December.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • Q35 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Hydrocarbon Resources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mns:wpaper:wp202102. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Jared Carbone (email available below). General contact details of provider: https://edirc.repec.org/data/decsmus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.