The European Union Greenhouse Gas Emissions Trading Scheme (EU ETS) has prevented the burning of over 100 million tonnes of carbon dioxide (CO2) as a result of the price of green certificates. However, following the recent introduction of flexible permits, which allow the burning of natural gas in the absence of a corresponding CO2 reduction, a series of new proposals are being considered by the European Commission that could make the EU ETS even more punitive to energy users. The proposals, which are not yet finalised, include a proposal to substantially increase the price of permits, the introduction of a new target for a 30% cut in CO2 emissions by 2030, and a re-examination of the use of natural gas in the EU ETS.
The natural gas industry is gearing up for a battle over a new policy that will ban homeowners from using gas to heat their homes. The US Federal Energy Regulatory Commission’s final rules make it illegal for homeowners or businesses to hook up equipment to natural gas lines to supply their homes with heat. The rules were issued in order to help cut emissions from power plants, which are the biggest contributor to greenhouse gases.
A battle is raging across the United States: Cities are considering phasing out natural gas for cooking and heating due to climate change concerns, while states oppose such a ban. Major cities like San Francisco, Seattle, Denver, and New York have taken or proposed measures to ban or limit the use of fossil fuels in new homes and buildings, two years after Berkeley, California, enacted the first such ban in the United States in 2019. These bans in turn forced Arizona, Texas, Oklahoma, Tennessee, Kansas, and Louisiana to pass laws banning similar municipal bans in their states before they spread, arguing that they were too restrictive and costly. Ohio is considering a similar measure. The outcome of this battle, which pits Democrat-led cities against Republican-led states, could change the future of the utility industry and the demand for natural gas, of which the United States produces more than any other country. Proponents of phasing out natural gas say their goal is to reduce global warming over time by fully powering new homes and buildings, while expanding wind and solar farms across the country, creating a cleaner energy system. According to the Environmental Protection Agency, homes and businesses account for about 13% of the country’s annual greenhouse gas emissions, largely because natural gas is used for cooking, heating, and washing and drying clothes. Climate advocates say lowering this rate is essential for states to reduce carbon dioxide emissions in the coming decades. Opponents of the gas industry point to the increased costs that would result if many homes went completely electric, and the added security of a second energy source for heating and cooking during extreme weather events. They also point out that many amateur and professional cooks prefer gas cookers. The cost of all-electric new homes is competitive with gas-powered homes in many parts of the country, but retrofitted homes can be much more expensive, depending on the existing heating and cooking systems and the cost to retrofit them. A recent study in San Francisco found that retrofitting all homes currently using natural gas would cost between $3.4 billion and $5.9 billion – costs that would be borne by the residents, the city or both. Induction hobs, which use magnets to directly heat pots and pans, can be more expensive than gas hobs, especially in professional kitchens. Associations of restaurants across the country are expressing concern about the transition to electricity. Utilities that supply both electricity and natural gas may experience smaller impacts if the transition is accelerated. However, those supplying only natural gas face the prospect of slower growth or even a reversal in demand, particularly as a result of the increasing electrification of new and existing homes. Increased reliance on electricity increases the likelihood that parts of the natural gas distribution system will become stagnant assets – assets that are shut down before they are profitable. The Environmental Defense Fund, a nonprofit environmental group, warned in 2019 that in California, where gas companies spend billions of dollars a year on their plants, unused plants could complicate efforts to move away from gas by saddling consumers with higher costs over time. President Biden’s $1.7 trillion infrastructure plan calls for more widespread use of all-electric heat pumps and induction furnaces, leading proponents to hope the government will do more to encourage their adoption.
Gas flare burns in a field near Mentone, Texas, one of many states that have passed laws to ban the use of natural gas in communities.
Photo: Bronte Whitpenn/Bloomberg News Panama Bartolomi, director of the Building Decarbonization Coalition, which supports the electrification of buildings throughout California, said the organization is pushing for the state to reduce emissions from homes and businesses by 40% by 2030 and to adopt emissions-free building codes for each in the coming years. Suddenly there was a conversation that didn’t exist two years ago, Bartolomi said. This is the fastest growth trend we have ever seen. The industry reacted quickly and many utilities and companies spoke out against local gas bans. Last year, Arizona became the first state to pass a preemptive law prohibiting municipalities from banning new gas furnaces. The Arizona Chamber of Commerce helped form a coalition of businesses in support of the legislation, although no ban was being considered in the state at the time. Garrick Taylor, the chamber’s acting executive director, said the legislation was drafted because of concerns that the bans would increase the cost of electricity and limit energy choices for residents and businesses. If you see something in your neighborhood in California, chances are a community in your state is thinking about it, Taylor said.
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Do you support a ban on the use of natural gas in new homes and buildings as a way to solve climate problems? Why or why not? Join the discussion below. The American Gas Association, a national advocacy group, is pushing for state laws to ban local bans. Chairman Karen Harbert said a haphazard approach to large-scale electrification could put pressure on the electricity grid, leading to either higher electricity prices or greater reliance on gas-fired power stations. You have to figure it out, she said. We cannot just say that if we electrify everything, we will solve the problem of climate change. Government agencies in California, Colorado, Massachusetts and New York have begun to examine how the role of natural gas companies may change in the coming years as demand reaches a plateau or declines. Utilities across the country are beginning to ask themselves the same question when considering new investments in the natural gas industry. Jan Berman, Director of Energy Strategy and Innovation at PG&E Corp. which serves 16 million people in northern and central California, said it could eventually reduce its gas distribution system if more homes were converted to full electric service.
Geothermal plant in Otisville, NY in April. Ground source heat pumps extract heat from the ground and provide an alternative to natural gas heating.
Photo: Brian Derbala for The Wall Street Journal We welcome the opportunity to avoid investing in new gas plants that may not be used later as decarbonization efforts in California progress, she said. Southern California Gas Co, a division of Sempra Energy the country’s largest gas company, opposes the ban on new connections, arguing that consumers should have the right to choose. The California Public Utilities Commission recently found that SoCalGas improperly used taxpayer funds to oppose these bans and other energy efficiency measures, and ordered the company to reimburse customers for the cost of these efforts. SoCalGas stated that it appreciates the agency’s finding that there are no violations, penalties or sanctions. SoCalGas recently set a goal of achieving zero emissions by 2045. The utility is working to expand the use of renewable natural gas produced from landfill waste and green hydrogen produced with electricity from renewable energy sources. GENERAL MANAGER Scott Drury stated that he envisions a future where the company’s existing infrastructure is used to supplement wind and solar power, particularly during peak periods. What will flow through those pipes in 2045 will be different than today, he said. How do we take the existing infrastructure and use it in the most thoughtful way to achieve what we are striving for together?
Switching to clean energy
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