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G-7 decision to leave natural gas, oil off table raises eyebrows


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G-7 decision to leave natural gas, oil off table raises eyebrows

With much of the post-summit commentary focusing on the Group of Seven promise to phase out public financing for coal plants, the fact that world leaders omitted any mention of natural gas and oil was just as significant, some critics said after the high-level meeting concluded June 13.

Although the U.S. and other developed nations are transitioning away from coal-fired generation, natural gas continues to replace much of that capacity — a trend that will make U.S. President Joe Biden's goal to decarbonize the power sector by 2035 difficult to achieve. But the G-7 communique did not mention ending government subsidies for the oil and gas industry domestically or overseas, nor did it set a time frame for when to wean nations off such fuels.

Between 2017 and 2019, G-7 countries provided $86 billion in public finance for fossil fuels, of which 88% went to oil and gas companies, according to estimates by the Club of Rome, a thought leadership group headed by scientists. Clean energy companies received just one-third as much.

"Unfortunately the fossil fuel industry still holds enormous political power and stands in the way of serious G-7 and global commitments to also stop using oil and gas for energy," Clair Brown, an economics professor at the University of California, Berkeley, told S&P Global Market Intelligence June 14. "The G-7 communique supported the critical climate goal 'to limit the rise in global temperatures to 1.5 degrees.' However, it did not mention the policies required to do this."

Brown and more than 100 other economists from around the world last week called on the G-7 summit held in the U.K. to end government financing for all fossil fuel sources, not just coal.

Citing the International Energy Agency's groundbreaking May report, which called for all fossil fuel investments to end in 2021, the economists warned that oil and gas fields under development today will lock in decades of dependency and push global warming past 1.5 degrees C "into catastrophic climate change."

Today, the U.S. gets about 40% of its electricity from natural gas plants and 19% from coal plants. This, along with rapid investments in renewables, helped the power sector reduce emissions 28% between 2000 and 2019, a report from the group Ceres showed last year.

"Coal to natural gas fuel switching in the power sector has been the leading driver of U.S. emission reductions," the trade group American Petroleum Institute tweeted June 14, weighing in on the debate over the G-7's climate promises. "The availability of low-cost natural gas, combined with strong export policy, presents an opportunity for global climate solutions."

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Although natural gas-fueled facilities produce half as much carbon dioxide as coal plants, gas plants' larger U.S. power market share made them account for 44% of the sector's emissions in 2020, data from the U.S. Energy Information Administration shows. Gas production and natural gas infrastructure also release methane, a potent greenhouse gas, into the atmosphere.

The oil-guzzling transportation sector, meanwhile, has surpassed the power industry to become the single largest source of greenhouse gas emissions in the U.S.

Biden must deliver before Glasgow

With the U.S. and other G-7 nations now being on the record saying that they will be "accelerating efforts to cut greenhouse gas emissions and keep the 1.5°C global warming threshold within reach," all eyes are now on the international climate negotiations in Glasgow, Scotland, in November. The promise to end public finance for coal plants this year was a step forward, some climate negotiators say.

"I welcome new commitments from [G-7 countries] to increase climate finance to 2025 ahead of COP26," said Alok Sharma, the president of the COP-26 climate summit in Glasgow.

G-7 nations did promise to boost climate aid for developing nations and provide the $100 billion rich nations had promised back in 2009 to send annually by 2020, although only Canada and Germany offered specifics. Climate finance will be a sticking point at the upcoming climate talks and some warned that the negotiations this fall will go nowhere unless rich nations make good on their promises.

The G-7 communique also starts the clock for the U.S. to enact legislation to map out its plans for meeting its decarbonization goals, noted Frances Colón, senior director for international climate at the D.C.-based think tank Center for American Progress. Passage of that legislation or lack thereof will dictate the cards negotiators for the U.S. can play when they get to Glasgow in November.

"I think definitely what happens in the next few months with the infrastructure package negotiations will determine a lot of what we are able to bring to the table to achieve our goals to reduce emissions," Colón said. "What I see is, they are still in conversations [with Congress] and that there is very likely a way they will find agreement and find a way to work together with these senators. So not everything is done. I think we still have a ways to go to work some of this out.”