Commodity Market Report
North America gas markets sensitivity: No Carbon Policy, developed from the H1 2020 long-term outlook
Report summary
Our H1 2020 long-term outlook base case has an underlying assumption of federal long-term carbon policy, a flat US carbon tax of $2/short ton beginning in 2028 that increases to $26/short ton by 2040, consistent with the global view. However, this No Carbon Policy sensitivity assumes a future without any US federal carbon policy, where power sector carbon emissions can grow unabated outside of state and regional initiatives. Under this scenario, 26 GW of age-based coal retirements outside of those currently announced or deemed uneconomic by 2040 are removed. Renewable generation build will continue to increase but at a slower pace. Power demand for gas will be lower overall, but the story varies by region. Key questions addressed in the analysis: • How much gas demand in the power sector is lost to coal? • Will all regions see lower gas burn? • What is the effect of lower overall power burn on Henry Hub and regional basis prices? • Which supply regions will be most affected?
Table of contents
- This No Carbon case represents our view on the gas market in the absence of any kind of federal carbon policy but with the continuance of non-federal CO 2 cap-and-trade programs and regional CO 2 markets, such as California-AB32,RGGI and Canadian initiatives.
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