Apr 17, 2023 - Energy & Environment

The G7's uneasy support for gas

Illustration of a question mark made out of blue fire

Illustration: Sarah Grillo/Axios

One awkward, endless sentence in a new joint statement from Group of Seven energy ministers shows how natural gas sits uneasily at the intersection of resource security and climate policies.

Driving the news: The gas section of the G7's communique notes Russia's invasion of Ukraine has intensified competition for supplies, and that high prices hurt economies and vulnerable people.

The intrigue: The statement β€” issued after a weekend meeting in Sapporo, Japan β€” then drops an 81-word (!) sentence that makes all these points at once, and more:

  • Accelerating clean energy is a huge priority.
  • Gas demand should be cut, but supply investment "can be appropriate to help address potential market shortfalls provoked by the crisis."
  • But investment should be "subject to clearly defined national circumstances," mindful of climate change, and avoid "creating lock-in effects" (code for unnecessarily prolonging use).

Why it matters: It reflects wider tensions over how to ensure adequate supplies, even as meeting Paris Agreement goals requires rapidly shifting away from fossil fuels.

Between the lines: Reuters reported an earlier draft contained language wanted by Japanese officials that supported "necessary upstream investments in LNG and natural gas."

πŸ–ΌοΈ The big picture: Nobody knows the future of global demand, which makes things tricky for investors and policymakers.

  • Making things dicier still: Expensive and scarce gas could prolong coal use in Asian economies.

πŸ” Zoom in: The International Energy Agency projects that under nations' existing policies, demand will rise slightly this decade, then will plateau through 2050.

  • But if nations' current climate pledges are met, demand would be 10% lower in 2030, and 40% lower in 2050. Some investment is needed to offset declines in existing fields.

What they're saying: A new IEA report for the G7 says the range of futures creates a "key dilemma" for investors considering expensive LNG projects.

  • One solution is to shorten contracts for new gas deals, but this requires much higher prices to recoup costs.
  • Other strategies include efforts to "future-proof" investments β€” and cut risk of stranded assets β€” while integrating carbon capture and lower emissions gases into the infrastructure.

πŸƒπŸΎβ€β™€οΈCatch up fast: The wider communique backs strong climate and renewables goals, calling for phasing out coal-fired power and "achieving a fully or predominantly decarbonized power sector by 2035."

The bottom line: Alden Meyer of the climate group E3G, in a Twitter spaces event Sunday, called it "substantially better" than earlier drafts.

  • But he knocked several aspects and said: "It falls short of being the clarion call to action that was needed."
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