Differentiation of Natural Gas Markets by Climate Performance
Any commodity can be described by its unique set of attributes. These attributes can include intrinsic characteristics, such as what the commodity is (e.g., natural gas), and where, how, and by whom it was produced. These attributes can quantify the externalities associated with production, processing, transport, and consumption. Commodity differentiation has also taken place in the energy sector. Electricity is a homogeneous commodity, yet electrons are produced in different ways. Electrons produced by a coal-fired power plant have a much different attribute profile than those generated by a wind turbine or solar panel. In the case of power generation, there are established, robust, well-developed, and expanding markets for electricity with “green” attributes, including for voluntary renewable energy credits. Remarkably, similar attribute differentiation has yet to take place for fossil fuels, despite attempts by companies to distinguish their products through advertising. One way hydrocarbon production can be differentiated is by greenhouse gas emissions. Estimates of the life cycle carbon emissions embedded in different US and Canadian oils range from the highest at Canada Abathasca (736 kilograms of carbon dioxide equivalent [kg CO2e] per barrel) to the lowest at Texas Eagle Ford (458 kg CO2e per barrel).
