Guest Contributor William Krist with Dani Litovsky: LNG – to export or not to export, that is the question

The United States is rapidly moving from being dependent on imported fossil fuels to becoming a major world producer.  We’re sitting on vast supplies of natural gas, and recent technological innovations have made it possible to tap previously unattainable resources.  So what should we do with these new-found riches?  Producers of natural gas, by and large, want to be able to sell where they can get the best price, and often that will mean selling overseas.  But consumers oppose exporting our natural gas, arguing that keeping these supplies to ourselves will keep the price here in the U.S. lower than the world price, and that this will give them a competitive advantage.  They believe this will add more value to the economy and trade account than exporting LNG.  And some environmentalists oppose exports because they believe this would raise the price of natural gas and thereby encourage more production.

From an economic perspective, allowing exports would lead to some increase in domestic prices, but the price of natural gas in the U.S. is far lower than in many other markets, for example, $2.66 per thousand cubic feet on average in the U.S. in 2012 compared to some $10 in the U.K. Somewhat higher prices in the U.S. because of exports would encourage greater U.S. production, but prices in the U.S. would still be lower than in most markets because of transportation costs, and this would continue to give manufacturers that use natural gas a cost advantage.  From an environmental perspective, natural gas is less polluting than other fossil fuels.  Until renewable energy such as wind and solar can meet the world’s energy needs – a prospect that is likely to be at least a decade away – encouraging the use of natural gas probably has a positive environmental impact.

From a trade policy perspective, restricting exports would likely run afoul of World Trade Organization (WTO) rules, and it would weaken our complaints about other countries’ export of vital minerals, which many believe is an attempt by China to gain a competitive advantage at its trade partners’ expense.

The economic impact of allowing natural gas exports is likely to be small, as is the environmental impact.  So perhaps this debate is more like “much ado about nothing.”

(Click here for a paper that sets out these issues in more detail.)

William K. Krist is a Senior Policy Scholar at the Woodrow Wilson Center.  He is a former Senior Vice President of the American Electronics Association.  He has written extensively on trade, development, and the environment.

Guest Contributor William Krist: Environmental Goods and Services in APEC Negotiations

Leaders of the Asia-Pacific Economic Cooperation (APEC) resolved to cut tariffs on environmental goods to 5 percent or less by 2015 and to remove barriers to expanded trade in environmental goods and services at their meeting November 8 to 13 in Honolulu. If accomplished, this could be a boon to both U.S. exporters and to the environment.

U.S. tariffs on many green goods are already 5 percent or less, so fulfilling this commitment would not require significant action by the U.S. However, tariff rates maintained by China and some other APEC members are significantly higher, and reducing these to five percent or less could help American exporters. Reducing trade barriers also has the potential to promote better environmental stewardship by APEC members.

However, implementation of this commitment will be difficult.  APEC members agreed to develop a list of environmental goods to be covered, but defining environmental goods has proven to be a sticking point in the WTO Doha round negotiations. If APEC members succeed in this effort however, it could be a model for the deadlocked WTO Doha round negotiations, since APEC members account for fifty percent of the world’s GDP and forty percent of world trade.

An advantage of APEC is not to legally bind its member economies, which can promote self-motivated initiatives by each member and enable APEC to compromise on more ambitious goals; however, this principle can be a disadvantage as it makes compliance more problematic.

Sources: APEC

Photo Credit: EIA

William K. Krist is a Senior Policy Scholar at the Woodrow Wilson Center.  He is a former Senior Vice President of the American Electronics Association.  He has written extensively on trade, development, and the environment. Takanori Hayashi is a Research Assistant at the Woodrow Wilson Center.

You are Invited – Book Discussion: World Under Pressure

The Program on America and the Global Economy (PAGE)

Presents a Book Launch:

World Under Pressure:

How China and India are Influencing the Global Economy and Environment

Featuring:  Author, Carl Dahlman, Henry R. Luce Associate Professor

School of Foreign Service, Georgetown University

Moderated by: Kent Hughes, Director, Program on America and the Global Economy

Carl J. Dahlman is an Associate Professor at the Edmund A. Walsh School of Foreign Service at Georgetown University.  He joined Georgetown in January 2005 after more than 25 years of distinguished service at the World Bank. At Georgetown, Dr. Dahlman’s research and teaching explore how the rise of the BRICs are affecting global power, and  how rapid advances in science, technology and information are influencing the growth prospects of nations  and economic relations in a rapidly globalizing world. At the World Bank Dr. Dahlman served as Senior Advisor to the World Bank Institute and managed the Knowledge for Development (K4D) Program starting in 1999. He has conducted extensive analytical work on major developing countries including Argentina, Brazil, Chile, Mexico, Russia, Turkey, India, Pakistan, China, Indonesia, Korea, Malaysia, Philippines, Thailand, and Vietnam. He has co-authored eight books on the development strategy of different countries and many chapters and articles on competitiveness, education and skills, and innovation.  His newest book is The World under Pressure: How China and India are influencing the Global Economy and Environment, published by Stanford University Press in the Fall of 2011. He is currently doing research on the global innovation system which provides a broad perspective on the forces shaping competition and cooperation across nations including governments, transnational corporations, and universities.  Dr. Dahlman earned a B.A, magna cum laude from the Woodrow Wilson School of Princeton University (1972) and a PhD in economics from Yale University (1979).

Friday, December 9, 2011   3:00-4:30 pm.

5^th Floor Conference Room, Woodrow Wilson Center

RSVP (acceptances only) to page@wilsoncenter.org

Posted by: PAGE Staff