Advances in Economics and Business Vol. 3(11), pp. 479 - 495
DOI: 10.13189/aeb.2015.031103
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Measuring the Economic and Environmental Impacts of Using Shale Oil and Gas Resources: A Computable General Equilibrium Modeling Approach


Farzad Taheripour *, Wallace E. Tyner
Department of Agricultural Economics, Purdue University, USA

ABSTRACT

US supplies of oil and gas from shale resources have increased significantly recently and are expected to continue to grow in the future. Using these resources generates significant economic benefits for the US economy. Interestingly, prior to 2007, except for those in the industry, shale resources were not at all part of the picture. Thus, it is reasonable to consider the economic benefits of shale as a sort of dividend. This paper first quantifies the shale dividend for the US economy and then asks how much of the dividend would we have to give up to achieve significant GHG reductions defined in the President Obama's Clean Energy Standard (CES) and the Corporate Average Fuel Economy (CAFE) policies. We modify and use a well-known computational general equilibrium model to accomplish these tasks. Our results confirm that the shale technology is a game changer for the US economy yielding annual benefits between 2008 and 2035 averaging $302 billion per year relative to 2007. We also estimated the costs for the US economy of implementing the CES and CAFE jointly. These two policies jointly reduce the shale dividend from $302 billion per year to $148 billion per year on average. In other words, the shale economic gains can be used to pays the cost of emissions reduction.

KEYWORDS
Shale Oil and Gas Resources, Economic Gains, General Equilibrium, US Emission Reduction Policies

Cite this paper
Farzad Taheripour , Wallace E. Tyner . "Measuring the Economic and Environmental Impacts of Using Shale Oil and Gas Resources: A Computable General Equilibrium Modeling Approach." Advances in Economics and Business 3.11 (2015) 479 - 495. doi: 10.13189/aeb.2015.031103.