Unconventional Fossil-Based Fuels: Economic and Environmental Trade-Offs

Unconventional Fossil-Based Fuels: Economic and Environmental Trade-Offs

Unconventional Fossil-Based Fuels: Economic and Environmental Trade-Offs

Unconventional Fossil-Based Fuels: Economic and Environmental Trade-Offs

Synopsis

In this report, RAND researchers assess the potential future production levels, production costs, greenhouse gases, and other environmental implications of synthetic crude oil from oil sands and fuels produced via coal liquefaction relative to conventional petroleum-based transportation fuels. The findings indicate the potential cost-competitiveness of these alternative fuels and potential economic-environmental trade-offs from their deployment.

Excerpt

Petroleum products derived from conventional crude oil constitute 55 percent of end-use energy deliveries in the United States and more than 95 percent of energy used in the U.S. transportation sector. Although less CO -intensive per British thermal unit (Btu) than coal, oil-derived liquids account for 44 percent of the nation’s carbon-dioxide (CO) emissions. There also are concerns about the long-term cost of petroleum-based energy, the economic and other implications of large wealth transfers to oil exporters, and price instability in petroleum markets.

These rising concerns about both energy security and greenhouse-gas (GHG) emissions from use of petroleum-based motor fuels have stimulated a number of public and private efforts worldwide to develop and commercially implement alternatives to conventional petroleumbased fuels. A major focus in the near term has been improving fuel economy, both in the aggregate and through increased penetration of hybrid electric vehicles. The most commonly considered alternative fuel options for the medium term (roughly 10–20 years) are biomassbased fuels (e.g., ethanol, biodiesel) and unconventional fossil-based liquid fuels derived from heavy oils, oil sands, coal liquefaction, and oil shale, as well as advanced plug-in electric hybrids. In the longer term, hydrogen (H) may also emerge as a solution, although this fuel currently faces many more fundamental technical hurdles than the other options mentioned here.

In this report, we assess the potential future production levels, production costs, GHG emissions, and other environmental implications of two fossil-based alternative fuels. These are fuels derived from bitumen extracted from oil sands and fuels produced by conversion of coal to liquid fuels. The first is often called synthetic crude oil (SCO), while the second is often referred to as coal-to-liquids (CTL). Production of liquid fuels from a combination of coal and biomass is also briefly considered. Although oil shale is also an important potential unconventional resource, we do not address it in this report because fundamental uncertainty remains about the technology that could ultimately be used for large-scale extraction, its costs, and environmental implications. The omission from this report of renewable fuel options should not be interpreted as a conclusion that the fossil-based options are superior.

See EIA (2007c, Tables 1.3, 2.1b–2.1f, and 10.3). A summary chart can be found at EIA (2007d).

For historical as well as contemporary context on energy-security concerns and misconceptions, see Parry and Darmstadter (2003).

Each option has costs and benefits, and each must be weighed and compared to others on that basis. For further information about renewable options, see Toman, Griffin, and Lempert (2008); Bartis, LaTourrette, et al. (2005) provided a detailed analysis of oil shale.

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