Natural gas and renewable energy do compete. A unit of energy demand met by natural gas is not available for, say, wind. However, the same might be said about the relationship between two natural gas producers or between two manufacturers of wind turbines. Competition does not preclude common interests.⁴³ In the case of natural gas and renewable energy, those common interests can be found in four areas: (1) policies that push energy markets to consider environmental costs; (2) the development and deployment of hybrid systems that rely on both natural gas and renewable energy; (3) the suitability of both gas generators and renewables to small-scale, distributed installation; and (4) the role that they might play in creating a "renewable hydrogen" economy.

1. Environmental Benefits

Natural gas firms are not, in general, composed of environmentalists, but of businesspeople attracted to gas for its commercial characteristics, among which are its comparative environmental advantages over other conventional fuels. In contrast, many members of the renewable energy industrial sector classify themselves as environmentalists. That difference notwithstanding, both communities have a potential interest in the adoption of policies that encourage energy markets to consider environmental as well as private costs of energy use.

The most obvious policy-the inclusion of "environmental externalities" in energy costs in order to compare supply options-probably has a limited future due to abandonment of state-guided resource planning. Yet, both gas and renewables will benefit from a new generation of environmental policies that allow polluters increased flexibility in meeting standards in return for heightened environmental performance. Cap-and-trade regimes are a good example of this approach: regulators determine the maximum permissible emissions of various substances for each class of polluters-the "cap"-and allow firms with superior performance to sell or trade their extra pollution allowances to dirtier producers. Facilities using renewables or gas would thus produce an additional saleable product-emissions allowances. Indeed, the Clean Air Act awards such credits to renewable energy facilities for SO₂ emissions avoided, but polluters have found measures such as importing low-sulfur coal cheaper than zero-emission facilities. The Clinton Administration has proposed a similar cap-and-trade mechanism for carbon emissions; some environmentalists support cap-and-trade regimes for NO_X as well.

In several instances, the natural gas and renewable energy industries have cooperated on the basis of the environmental benefits that both energy sources offer. A notable example is a recent study co-sponsored by the American Gas Association, the Solar Energy Industries Association and the Alliance to Save Energy of how a market-driven energy future could lower emissions of greenhouse gases and major air pollutants.⁴⁴ More recently, the Business Council for Sustainable Energy, which advocates environmentally sound energy policy, has united members of the gas community such as the Gas Research Institute, Enron Corp. and Brooklyn Union with renewable energy firms and allies such as Zond Systems and the Worldwatch Institute.⁴⁵

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