Upton: What decarbonization means for Louisiana’s economy

(Photography by Jordan Hefler) Gregory Upton

Greg Upton isn’t a climate scientist. He can’t tell you about the effect greenhouse gas emissions have on the climate or how the climate might change over the course of the next century.

But as an economist who currently serves as interim executive director of the LSU Center for Energy Studies, what he can opine on are the opportunities that decarbonization presents for Louisiana’s energy sector and for the state’s economy as a whole.

Speaking at the Tec-Next Conference in downtown Baton Rouge on Wednesday, he did just that.

Upton began his presentation by pointing out how much Louisiana’s upstream oil and gas sector has changed over the course of the past 10 years, with sector employment totals plummeting on two separate occasions—the 2015 oil price plunge and the COVID-19 pandemic.

“Today in Louisiana, we employ half the number of people in the upstream oil and gas sector as we did just a decade ago,” Upton said. “Think about how fast that transformation has happened.”

Although upstream oil and gas production is up along the Gulf Coast, sector employment in Louisiana has not recovered from either of the aforementioned crises in any meaningful way. Employment in the state’s chemicals and refining sector, though, has increased within that same timeframe. That growth isn’t driven by U.S. energy demand, which has remained mostly flat in recent years. It’s driven by the energy needs of the developing world—Africa, China and India, predominantly. Unlike the national economy, Louisiana is actually a net exporter.

But with a growth in production comes naturally a growth in emissions. And as global decarbonization efforts continue to reach new levels of urgency with each passing year, balancing cost competitiveness with emissions competitiveness has been top-of-mind for the companies that are making the big investment decisions in the energy sector. In Louisiana, where industrial emissions account for two-thirds of the state’s greenhouse gas emissions, striking that balance is going to be critical going forward.

This is where opportunity arises.

According to Upton, decarbonization creates considerable capital investment opportunities. That’s largely because, when compared with China, India and Russia, U.S. emissions intensity of GDP is relatively low.

“We are way more competitive in terms of our emissions intensity than other parts of the world,” Upton said. “We have a really good case to make when going to the world and selling these products.”

Louisiana’s road to decarbonization, Upton continued, will be paved with four main components: the decarbonization and electrification of the electric grid; efficiency improvements; a shift away from natural gas combustion in favor of hydrogen combustion; and carbon capture and sequestration.

There are also risks associated with decarbonization, however. The long-term effects of decarbonization along the Gulf Coast are still a big unknown, and they’ll be determined by the global market’s willingness to pay a premium for cleaner products that are more costly to produce. Whether or not that willingness will materialize is, at this point, up for debate.