Back in January of this year, the Biden administration announced a controversial decision to pause approvals of new licenses to export liquefied natural gas (LNG). President Biden announced that during the pause the U.S. Department of Energy will review and assess whether the nation’s considerable LNG exports are “undermining domestic energy security, raising consumer costs and damaging the environment.” As the single biggest exporter of LNG in the world, this decision greatly impacts the global energy sector and presents a major challenge for countries that are historically dependent on U.S. LNG exports to keep the lights on and the economy running smoothly.
It’s especially worrying for developing countries that see affordable natural gas as the only accessible alternative to coal. While the Biden administration contends that the LNG pause is in the interest of safeguarding the environment, among other interests, it may end up exacerbating global emissions by pushing nations back to heavy coal dependency.
This risk runs particularly high in the case of Asian countries. Asia is a net importer of energy, much of which is supplied by coal. In many of the continent’s fastest growing nations – mostly in Southeast and South Asia – developing the economy and helping rapidly growing populations to rise above the poverty line remain the top priorities, with climate change ranking as a lesser concern. For these countries, affordability and accessibility of fuel sources determine the overall energy mix. LNG, a relatively low-emissions fossil fuel, has provided a promising alternative to coal by ticking those boxes. But it will only remain affordable and accessible as long as the United States continues to produce and export the energy source at a relatively high level.
“Massive volumes of coal must be displaced through the 2030s and beyond across emerging Asia to achieve the region's net-zero aspirations. This inevitably will mean substantial gas imports,” Nikkei Asia reported earlier this week. “As the sole realistic coal alternative in terms of affordability and energy density, LNG from the U.S. offers a much cleaner option for always-available power generation that, in partnership with renewables, can meet growing energy demand while facilitating climate progress,” the report continues.
More prosperous Asian countries (such as Japan, South Korea, Singapore, Taiwan and Thailand) are also dependent on LNG from the United States for their own energy security plans, as well as the future decarbonization of their economies. While renewable energy sources are much better for curbing emissions than natural gas, LNG is seen as a key “bridge fuel” to help countries transition away from fossil fuels to a completely renewable energy mix without facing major energy shocks and grid failures.
However, the utility of LNG as a “bridge fuel” has recently been called into question. Recent science has shown that the fuel source is not always a cleaner alternative to coal, and that the greenwashing of natural gas could impede global climate efforts. In fact, these new findings are among the reasons for the current LNG pause. Other industry experts, however, contend that even if LNG is dirtier than previously thought, it’s still a hell of a lot better than coal, and demonizing natural gas would be a dangerous misstep at this early stage of the global decarbonization transition.
All of this uncertainty is leading to widespread policy confusion and instability for nations that are trying to plan for the future. Many Asian nations have already solidified or are solidifying plans for their energy transitions, many of which were relying on natural gas exports from the United States. A 2023 report commissioned by the Asia Natural Gas and Energy Association from Norwegian energy research company Rystad Energy found that the United States will have to use its full LNG export potential to meet Asia’s decarbonization demands by 2040. That marks a 52% increase from current approved levels.
By Haley Zaremba for Oilprice.com
ADVERTISEMENT
More Top Reads From Oilprice.com:
- China's Mediation Efforts: A Closer Look at Beijing's Ukraine Strategy
- Market Sentiment Shifts as Buyers Resist Steelmaker Price Increases
- What Costco’s Gold Bar Bonanza Tells Us About the Economy
