The G7's uneasy support for gas
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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 — issued after a weekend meeting in Sapporo, Japan — 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."
🖼️ 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.
🔍 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 — and cut risk of stranded assets — while integrating carbon capture and lower emissions gases into the infrastructure.
🏃🏾♀️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."
- But it lacks a firm deadline for ending coal use, where demand has proven nearly relentless.
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."
