Final Obama administration analysis shows expanding oil supply increases CO2

A persistent problem in U.S. government analyses of new fossil fuel infrastructure has been their tendency to overlook how expanding oil supply also increases consumption and, therefore, net CO₂ emissions.  This was the biggest flaw in the U.S. State Department’s analysis of the Keystone XL pipeline.

The U.S. Department of Interior’s Bureau of Ocean Energy Management (BOEM) made the same mistake in its draft analysis of new Artic and Atlantic offshore oil drilling. Yet in the final report, issued in November, BOEM starts to correct the problem.

As BOEM Director Abigail Ross Hopper states in the foreword, this last report was intended to be “the most comprehensive analysis conducted to date by a Federal resource management agency of the GHG emissions associated with the activities it authorizes.” And indeed, the report goes well beyond what the agency had done previously.

In particular, the report marks one of the first times that a federal resource management agency has quantified the global market implications of a U.S. fossil fuel supply decision. Here is the key sentence, from page 23: “for the global oil market, MarketSim substitutions under the No Action Alternative show a reduction in foreign oil consumption of approximately 1, 4, and 6 billion barrels of oil for the low-, mid- and high-price scenarios, respectively, over the duration of the 2017–2022 Program” (compared with production if the areas were leased as in the Proposed Program).

Though this may not seem surprising, the statement means that, in BOEM’s own assessment, not leasing the areas in the 2017–2022 Program would decrease rest-of-world oil consumption. That is a big acknowledgment, because before the agency had concluded (as had State Department previously) that changes to oil supply would not make any difference in global oil consumption.

Unfortunately, BOEM stopped short of doing the simple calculation of what that change in oil consumption would mean for CO2.  But it isn’t hard to do. Using standard energy contents (from the U.S. Department of Energy) and carbon contents (from the U.S. Environmental Protection Agency), and discounting the oil used in products and not combusted (International Energy Agency), this reduction in global oil consumption translates to 2.3 billion tonnes CO₂ in high-price scenarios for oil, 1.6 billion in mid-price scenarios, and 0.4 billion with low global prices.

These decreases in rest-of-world emissions dwarf the official estimated increases in U.S. emissions that BOEM’s official Programmatic Environmental Impact Statement reports for its No Action Alternative (relative to the Proposed Program), which instead amount to just 0.13 billion, 0.12 billion and 0.013 billion tonnes CO₂ for the high, mid, and low-price scenarios, respectively.Those calculations exclude the far larger emissions attributable to the global market effect.

So, for the first time, BOEM’s new analysis makes clear that the potential incremental impact on global greenhouse gas emissions over the life of the 2017–2022 Program, accounting for international oil consumption effects, could be 2 billion tonnes CO₂ (in high price scenarios), exceeding a year of emissions from the entire U.S. transportation sector (1.7 billion tonnes CO₂).

Whether BOEM’s calculation influenced President Obama’s subsequent decision to withdraw the Arctic permanently from oil exploration is anybody’s guess. And President Trump may well seek to overturn that decision, leading then to increase in CO₂ emissions.

Still, for a federal resource management agency to correct its math and recognize the impact of increasing oil supply on global oil consumption (and, implicitly, CO₂ emissions) is notable. Analysts elsewhere – at U.S. state environmental agencies, or consultants who work on environmental impact assessments, or national energy ministries in other countries – should adopt similar analytical techniques.