The gas market in the United States defies worldwide comparison. The unique nature of the US gas market is a reflection not of a special resource base or energy economic policy, but of how the United States governs itself, promotes competition, and protects the private property of investors. With President Biden releasing the American Jobs Plan—his proposal to invest nearly $2 trillion in infrastructure over the next decade—the topic of public-private infrastructure partnerships and fitting the US gas market into a low-carbon environment is top of mind.

In the second installment of the Industry Economics white paper series, NERA Managing Director Dr. Jeff D. Makholm and Associate Director Dr. Laura T. W. Olive astutely examine the history of gas markets in the United States and offer keen insight into how the US experience differs from that of Europe. They note that we should embrace the differences and support an industry that has aided significant carbon reductions without any particular overarching policy.

There is little debate that tackling carbon reduction problems depends on both government action and innovation. There is proof of concept in cap and trade and carbon tax policies in pursuing carbon reductions at lowest cost—permitting those with the greatest stake in carbon reductions, and greatest chance to innovate profitably, to benefit through such means. This is where the US gas industry stands apart from the rest of the world. In any reasonable mix of future actions to eliminate carbon, US gas manifestly has a different role than European gas. It is easy to see that even with the most advanced and effective carbon reduction policies governments are able collectively to adopt, gas will have a role in the US energy mix long after it has been economically displaced in Europe and elsewhere by other technologies or fuels, such as hydrogen. Thus, the US gas industry has played—and will continue to play—an important role in reducing US carbon emissions.