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Gas could have role in low-carbon world, but emissions policies critical – study


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Gas could have role in low-carbon world, but emissions policies critical – study

Natural gas could continue to play a key role in a decarbonized global economy, but there might be significant regional differences and conflicts with local decarbonization goals that could influence the future of U.S. LNG, according to a study from the research nonprofit organization Energy Futures Initiative.

The study, released June 14, summarized a series of regional expert workshops focusing on the place of gas in a world committed to deep reductions in carbon emissions by midcentury. One takeaway: North American LNG is an attractive fuel in other regions of the world, but carbon abatement policies will increasingly influence the future of the fuel.

"We think it's going to have a significant role, and yet there is an obvious tension as we get more and ambitious," said former U.S. Energy Secretary Ernest Moniz, the CEO and founder of the Energy Futures Initiatives, during a launch event hosted by the think tank Atlantic Council. "Even in a country like the United States with a substantial amount of coal left which could be displaced, the reality is that natural gas is a significant contributor overall to carbon emissions, and that will have to change, at least in terms of unabated natural gas combustion over time."

Countries and their carbon policies

The report found that growth in North American gas exports will depend upon carbon abatement policies. These policies include border adjustment carbon taxes on imported goods, such as the plan the European Union is preparing to announce in July; the potential inclusion of shipping emissions in countries' commitments under the Paris Agreement on climate change; and other national policies aimed at reducing emissions of greenhouse gases.

Buyers of LNG are increasingly concerned with minimizing life-cycle carbon emissions associated with LNG exports. LNG sellers, including the largest U.S. LNG exporter, Cheniere Energy Inc., have begun competing to offer the greenest supplies.

One area of concern is methane emissions, which have a potent near-term warming effect. The report said methane emissions along the natural gas value chain accounted for the largest share of energy sector methane emissions in 2019 at about 45 million tonnes. It also pointed to International Energy Agency estimates that current technologies could reduce total oil and gas methane emissions by 75%.

"Natural gas will be competing for investment dollars with countries that either have firm commitments or targets of renewable technologies in their NDCs" said Melanie Kenderdine, managing principal at Energy Futures Initiative, referring to countries' nationally determined contributions for reducing greenhouse gas emissions under the Paris Agreement. Kenderdine worked with Moniz at the U.S. Energy Department.

In developed economies, gas may be viewed as an "enabler of — and complement to" decarbonization efforts, such as the support of variable renewable power generation resources on electric grids, according to the study. But the report also found that in Europe, Northeast Asia, North America and other regions moving toward net-zero emissions targets, "any continued natural gas use will require accompanying carbon capture or alternative emissions abatement technologies."

World in transition

Still, natural gas is likely to be an important part of the energy transition in Europe, according to Anouk Honoré, a senior research fellow at the Oxford Institute for Energy Studies who spoke during a panel accompanying the launch.

"Europe is not a uniform region," Honoré said. "The countries have very different starting points. They have different access to resources, and they have different economic structures, which means that the pathways to net-zero will need to differ from one country to another. And that means that natural gas can and will be part of the transition well past 2030 in some countries."

In developing countries, gas could be seen as a next step for energy and economic development, with the potential to improve grid reliability and local air quality issues, the report said. Growth of gas usage in developing countries could still face challenges, since many of these countries do not have the financial means to make substantial investments in new gas infrastructure, according to panelist Robert Stoner, deputy director of the MIT Energy Initiative, who spoke at the Atlantic Council event. This means they must rely on foreign capital from private entities or development banks.

A key driver for the future of gas will be northeast Asia. China, Japan and Korea account for almost half of the global LNG market, Ken Koyama, chief economist at Japan's Institute of Energy Economics, said during a panel. Koyama said the rise of U.S. LNG exports over the past five years has been "a game-changer" for many Asian players as a source of supply diversity, flexibility and competitiveness.

Affordability and infrastructure investment are critical issues in Asia, where growing gas demand is likely even as countries pursue cleaner energy technologies, Koyama said. He cited innovations such as carbon-neutral LNG cargoes, hydrogen, and carbon-free ammonia that could improve the carbon footprint of the natural gas market.

"Under the circumstances at least to 2030 and 2040 I think that natural gas and LNG are going to play a key role in Korea and Japan, and in China for longer term," Koyama said. "2050 and beyond I think it much depends on the seriousness of these countries to address carbon neutrality."