Increasing the use North American natural gas provides the best and most realistic path for meeting U.S. energy demand and achieving the greatest reductions in greenhouse gas emissions, according to BP America Chairman and President Lamar McKay, who spoke today at the Financial Times U.S. Energy Business Conference (www.ftconferences.com/energyny).

“For a fraction of the cost of other options, BP (www.bp.com) estimates that as much as 30 percent of the near-term Waxman-Markey CO2 reduction target could be delivered through expanded gas use for power and switching a variety of home appliances to gas,” McKay said, during his speech.

The Waxman-Markey bill has passed the U.S. House of Representatives, but is still pending in the Senate. It calls for a 17 percent reduction in carbon emissions from major U.S. sources by 2020, compared to 2005 levels.

BP supports adoption of market-based mechanisms to reduce emissions with the cost of reductions spread as equitably as possible across all energy sectors.

“That”s one of our core beliefs,” McKay said. “If it is not done equitably – massive misallocation of capital and insulated consumption will occur. That would seriously impede – or make much more costly – the very carbon reductions that we intend. Bottom-line: a ton of carbon is a ton of carbon – whether it comes out of tailpipes or smokestacks.”

According to McKay, in the power sector, the United States could achieve significant early emissions reductions by replacing the nation”s oldest, least efficient and most carbon-intense, coal-fired power plants by expanding use of existing natural gas facilities.

Natural gas is a relatively clean-burning fossil fuel, resulting in 60 percent less carbon emissions than coal per kilowatt hour of electricity. Natural gas is also abundant, with BP estimating a 50- to 100-year supply in the United States thanks to proven technology and improved recovery techniques that have driven a 45 percent increase in U.S. gas reserves over the last decade.

As of June 2009, 36 new coal plants are permitted, under construction or near construction in the U.S., with 47 more announced. Coal is projected to provide 47 percent of U.S. electric power in 2030, a level almost unchanged from today, according to BP.

“At a time when we are supposedly looking to make the American energy portfolio greener, we are doubling down on the most carbon-intensive form of energy known to exist,” McKay said. Today, coal accounts for 81 percent of the carbon emissions associated with the generation of electricity.

“The prize is great,” McKay said. “If we apply the necessary technology within a stable fiscal and regulatory framework, natural gas can transform America”s energy outlook in the decades going forward.”

To read a full transcript of McKay’s speech, click here.