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Is Natural Gas a Fossil Fuel Trap or a Bridge to Clean Energy?


These translations are done via Google Translate

Advocates of natural gas have long made the argument that it can facilitate the transition to cleaner energy, both by reducing dependence on dirtier coal and by compensating for the inability of wind and solar power to produce electricity consistently at all hours in every season. The world’s governments were seen as endorsing that view in the COP28 climate deal of late 2023, in which they acknowledged the role of unnamed “transitional fuels” even while making a historic commitment to move away from fossil fuels.

Global Gas Demand Potential

Change in global demand, normalized from 2000, actual and projected under a BNEF scenario in which nations take limited action to tackle climate change

Source: BloombergNEFNote: The economic transition scenario is BNEF’s base case that envisions governments relying solely on economically competitive technologies, putting the world on course to warm 2.6 degrees Celsius from pre-industrial times

With the rapidly growing energy needs of emerging market economies driving demand for gas, energy companies are spending heavily to boost their capacity to export it. The risk is that rather than serving as a bridge to clean energy, gas will become so entrenched it will prove a fossil fuel trap, locking in greenhouse gas emissions at a level that sustains a dangerous escalation of global warming.

Here’s your guide to the natural gas boom, the arguments around it, and what’s at stake:

When using gas reduces emissions, and when it doesn’t

The experience of the US over the past two decades would seem to lend credence to the argument for natural gas as a transition fuel. Because gas burned to generate electricity produces about half as much CO2 as coal, switching to the less polluting fuel in the power sector has helped bring measured greenhouse gas emissions down. This kind of swapping has been facilitated by the fact that electricity consumption has been basically stable in the US for years, allowing providers to burn less coal as they burned more gas after the shale revolution unlocked vast reserves of cheap fuel.

As the US Powered Up Gas, It Powered Down Coal …

Sources of US electricity generation, measured in megawatt hours

Source: US Energy Information Administration

… and Reduced Total Greenhouse Gas Emissions

US emissions by sector in millions of metric tons of carbon dioxide equivalent

Source: Environmental Protection Agency

The situation is different in the developing countries propelling the natural gas boom today. As these nations industrialize and connect more of their people to electricity, their energy needs are rising rapidly. Globally, electricity demand is expected to increase by an average of 3.4% per year through 2026, according to the International Energy Agency, with the majority of the growth being driven by China, India and Southeast Asia. In such places, there’s a risk that rather than displacing existing coal generation, new gas infrastructure will add to emissions.

“So far in emerging markets in Asia there’s no country that’s even come close to shutting down existing coal plants because in many places electricity demand is growing 5% to 8% a year,” said Mark Hutchinson, a Singapore-based director at the Global Wind Energy Council and an independent non-executive director at REE Corp., a publicly listed Vietnamese renewable power producer.

Even in more mature markets, such as the US and EU, electricity use is forecast to begin rising again given the energy appetite of data centers that drive artificial intelligence and the growing numbers of vehicles and heating systems powered by electricity.

A $290 Billion Investment Cements Natural Gas's Relevance for Decades
Employees view construction at the Cheniere LNG facility in Corpus Christi, TexasPhotographer: Mark Felix/Bloomberg

Carbon dioxide isn’t the only greenhouse gas

It’s certainly better for the environment overall if new power demand is satisfied with gas rather than coal, though zero-emission renewables would be better still. Compared with coal, natural gas emits less fine particulate matter, which causes premature deaths in people with heart and lung disease. And it has a lighter carbon footprint, though this advantage is being eroded as more gas is transported as a liquid rather than dispatched via pipeline. Because energy is required to chill gas so that it liquifies, keep it cold while it’s transported, and warm it back up, liquefied natural gas (LNG) is more emissions-intensive than piped gas.

At the same time, it’s become increasingly clear that the gas industry is responsible for significant emissions of a heat-trapping gas other than CO2: methane. Natural gas itself is comprised mainly — 70% to 90% — of methane, which, if released, enters the atmosphere without being burned. Whereas carbon dioxide prevents the sun’s heat from escaping into space for centuries, most of methane’s warming power dissipates within 20 years. But it traps far more heat — 80 times more ton for ton — than CO2 during those two decades.

Methane Surge

Atmospheric concentrations of methane are 2.5x higher than in pre-industrial times

Sources: U.S. Environmental Protection Agency; National Oceanic & Atmospheric Administration

These emissions are likely being undercounted. An analysis by scientists in 2023 concluded that methane discharges from oil and gas exploitation were actually about 30% higher than what countries estimated in reports to the United Nations.

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One source of methane emissions is equipment such as natural gas-driven pneumatic pumps that are designed to release gas to regulate pressure. Many pipeline operators deliberately vent methane when purging a line for maintenance because capturing it can increase costs or extend downtime. Accidental leaks can occur when equipment malfunctions or a homeowner or property developer punctures an underground gas line. Reducing methane emissions is a high priority for many policymakers and industry operators. But it’s proving challenging. Halting intentional releases requires upgrading equipment as does detecting leaks in order to plug them.

Concerns about the environmental impact of natural gas were part of the reason US President Joe Biden’s administration in January paused new export licenses for the liquified version of the fuel to countries that aren’t US free-trade partners. The Energy Department will use updated information to study, among other things, the potential effects on climate change of increased US gas production and exports. The US is the world’s biggest exporter of LNG. Qatar is no. 2.

QATAR-ECONOMY-GAS-OIL
Ras Laffan Industrial City serves as a hub for Qatar’s natural gas industryPhotographer: Karim Jaafar/AFP/Getty Images

The Role of LNG

The maturation of the LNG industry made today’s natural gas boom possible. The liquefaction of natural gas makes it denser so it can be loaded onto ships in large quantities and transported around the world, freeing it from fixed pipelines. Companies, investors and governments doled out more than $235 billion on new LNG export plants from 2019 to 2023, according to an estimate by Rystad Energy; it forecast that a further $55 billion could be invested through 2025.

Projects that have already broken ground should add more than 200 million tons of new LNG export capacity over the next five years or so, BloombergNEF calculates. If additional early-stage projects move forward, that figure will be closer to 300 million tons, according to Baker Hughes Co. That would add new capacity equivalent to 70% of the total current annual trade, enough to power half a billion homes.

These investments reflect a shift in priorities by major energy companies, some of which have weakened previously announced climate targets. Shell Plc in March dropped its goal of a 45% reduction by 2035 in net carbon intensity, a measure of emissions associated with the units of energy the company sells. The company cited “uncertainty in the pace of change in the energy transition.” BP Plc. scaled back its target for emissions reductions in 2023.

Importers have been making commitments to buy supplies that would flow from the new gas projects. Since the start of 2022, Chinese firms have signed more long-term LNG contracts than any other nation, according to BNEF data. Not far behind is the European Union, whose members are keen to secure supplies after Russia radically cut exports of piped gas to the bloc in retaliation for sanctions associated with its war on Ukraine.

In some cases, there’s no good alternative to these purchases. Roughly a third of natural gas globally is consumed in the industrial sector for uses such as fertilizer and ceramic production, which require fossil fuels. In India and China most gas imports go directly to factories. These facilities emit greenhouse gases by directly burning the fuel, through chemical reactions and leaks.

For generating electricity, using renewables would be a much cleaner option. But adding that kind of capacity, especially in developing countries such as Vietnam and Pakistan, can be challenging, or at least slower than boosting gas imports. Solar and wind farms require more space than gas infrastructure. More significantly, bringing on renewable capacity can require upgrading the grid and adding batteries to supply power when the sun doesn’t shine or the wind doesn’t blow, creating an issue referred to as intermittency. Gas, on the other hand, produces electricity around the clock regardless of the season, which is why it’s sometimes called a baseload source.

Advocates of natural gas say it can facilitate the adoption of wind and solar power by compensating for their intermittency, at least until an emissions-free solution can be substituted. Apart from adding battery storage, options include building emissions-free capacity that isn’t intermittent, such as hydro, geothermal or nuclear power, or possibly green hydrogen technology, though it’s still prohibitively expensive. The risks are that new natural gas projects will crowd out rather than promote investments in cleaner sources so that the transition to them will happen too slowly to meet goals meant to prevent catastrophic global warming.

A dangerous trajectory

Environmentalists worry that this is the trajectory the world is on, and not without reason. The Gas Exporting Countries Forum expects global gas demand to grow nearly 30% by mid-century from 2022 levels, to 5,360 billion cubic meters. That’s way off what the International Energy Agency thinks it should be for the world to get to net-zero emissions by 2050 in order to limit the global temperature rise to 1.5 degrees Celsius above mid-19th century levels. In its most ambitious scenario for reaching that goal, the IEA calculates that gas requirements need to plunge 78% to just 900 billion cubic meters from 2022 to 2050. In a less aspirational outlook, the agency imagines gas demand falling about 42% to 2,400 billion cubic meters.

Because of the climate impact of natural gas, the IEA says that in its net-zero scenario, “there is little to no room for gas to act as a transition fuel.” In both of the agency’s analyses, emissions-free sources are the primary drivers of decarbonization.

Rising Natural Gas Use Threatens Climate Goals

Where gas use may be headed versus where the International Energy Agency says it should go, in billion cubic meters

Sources: Gas Exporting Countries Forum; International Energy Agency

The gap between where the world is headed and where it needs to go to limit climate change is narrower if gas exporters are overestimating future demand for their product, as some researchers suspect. The Institute for Energy Economics and Financial Analysis, a progressive economic think tank funded by climate organizations, has warned of a looming oversupply, saying that LNG projects targeted to begin operating after 2026 “may be entering a much smaller demand pool than bullish market forecasts anticipate.” Morgan Stanley sees supply additions beginning to outpace demand as soon as next year.

If the prices of clean energy and batteries continue to fall, making more fossil fuel plants uneconomical, LNG assets could end up underutilized or even stranded within 10 to 15 years. That would deliver a financial blow to those investing in them while offering the world at large a greater chance of avoiding perilous warming.

— With assistance from Akshat Rathi



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