A decade after former President Barack Obama labeled natural gas a “bridge fuel” in his 2014 State of the Union address, his former vice president is grappling with how far to extend its use.
President Joe Biden’s decision last week to pause reviews of proposed terminals that would export liquefied natural gas ignited a political firestorm. Environmentalists praised the president, saying it showed he is serious about phasing out fossil fuels and confronting climate change. Business groups said it would drive other countries into the arms of both the coal industry and gas-producing nations such as Russia, which have fewer environmental rules to control emissions.
But the current debate essentially is an extension of a fight that has consumed domestic energy policy for the last decade — how hard should the U.S. lean on natural gas to green the energy system?
The fuel emits less carbon dioxide than coal when burned, making it a “bridge” to a low-carbon energy system with more wind and solar. But leaky wellheads, pipelines and even residential appliances emit an even more powerful — albeit shorter-lived — greenhouse gas in the form of methane, reducing its climate advantage.
The difference in this year’s fight is that it concerns the role of American gas abroad, and the extent to which LNG exports help cut coal consumption in Asia and backstop Europe as it seeks to remake its energy system without the aid of Russian natural gas.
The United States doesn’t have a “coherent gas policy and we’re going to keep seeing goofy stuff until we do,” said Emily Grubert, an associate professor of sustainable energy policy at the University of Notre Dame who worked at the Energy Department during the first years of the Biden administration. “We’re essentially refusing to confront that our climate goals imply natural gas needs to go away over the next two decades.”
To reach the goals that countries set under the Paris climate agreement — which assumes a zeroing out of emissions by 2050 — fossil fuel demand must fall 80 percent by midcentury, leaving no space for new long-term oil and gas projects, according to the International Energy Agency.
The climate impact of LNG can vary by country. A 2019 Energy Department study found widespread differences across regions. In Asia, life-cycle emissions associated with U.S. LNG were 54 percent to 2 percent less than local coal. In Europe, that figure had an even bigger range — from 56 percent less than coal to a percent more than coal.
The broad ranges reflect differences in how LNG cargoes are used, the distance they travel and supply chain emissions associated with the gas, said Arvind Ravikumar, a professor who studies oil and gas emissions at the University of Texas at Austin.
In China, LNG has displaced coal from district heating. That is likely a net positive for climate not only because coal is carbon intensive when burned, but also because Chinese coal mines are major methane emitters in their own right, Ravikumar said. Even so, LNG isn’t as strong a substitute for power generation or energy-intensive industries since coal remains cheaper.
It’s a different situation in India, where gas is unlikely to compete with either coal or solar. Both power sources are cheap compared to gas, making the type of coal-to-gas switch seen in China unlikely. Indian gas imports largely are used as a feedstock to make fertilizer.
“It’s absurd to think there is one right answer,” Ravikumar said. “It depends on what country you’re talking about.”
Biden’s pause only covers LNG terminals with pending applications. It does not extend to projects already under construction or those already approved by federal regulators. That means any emissions impact related to the pause likely will be delayed, Ravikumar said.
Implementation of the new EPA guidelines on methane emissions from oil and gas facilities, by contrast, could make an immediate impact in reducing emissions from LNG, he said.
“That is really important because irrespective of the broader debate around the future of gas, there are things we can do tomorrow,” Ravikumar said. “We can reduce demand emissions from the supply chain.”
America’s LNG boom is the latest byproduct of the shale revolution. Advancements in horizontal drilling and fracking more than 15 years ago unlocked a sea of cheap gas in the United States and transformed the country’s energy markets. Gas use in the power sector has surged, rising from 27 percent of electricity generation in 2014 to more than 40 percent last year. It is the country’s primary fuel source for residential heating and a key industrial feedstock.
The flood of cheap gas also prompted an export boom.
American gas suppliers can fetch a higher price for their fuel in Asia and Europe, which largely lack the domestic gas resources of the United States. And so they set about building a series of LNG terminals, which transformed the U.S. from a net-gas importer into the world’s largest gas exporter in less than a decade. The terminals cool gas to extremely cold temperatures, liquefy it, and enable it to be loaded onto ships and sent around the world. It is then regasified when arriving in port.
In the wake of Biden’s decision, critics said U.S. allies could face energy shortages and skyrocketing prices. They argued the decision also could hurt Biden’s climate ambitions and encourage countries to burn coal or buy gas from Russia, which has a famously leaky gas system.
“The United States should not undercut our allies or fund our enemies with a policy that will increase global emissions and hamstring an engine of economic growth,” American Gas Association President and CEO Karen Harbert said in a statement.
But analysts said American allies are unlikely to see gas shortages anytime soon.
U.S. LNG exports are poised for a boom in the coming years. The country’s export capacity stood at more than 14 billion cubic feet a day at the end of 2023. Five projects with a combined export capacity of 11.6 bcf per day are under construction and projects with another 16 bcf per day have been approved by federal regulators, according to an Energy Department fact sheet.
“The issue is not future availability. There is plenty of LNG out there,” said Ira Joseph, a senior research associate at Columbia University’s Center on Global Energy Policy and longtime gas analyst. “The issue is what kind of standard does it set for future policy? What is a pause, and what does it mean going forward?”
Biden’s pause arrives at an inflection point for the gas industry. Global gas consumption grew by 25 percent between 2011 and 2021, accounting for 40 percent of the growth in primary energy supplies over that time, according to the IEA. But the industry’s growth came to a sharp halt in 2022, when Russia’s invasion of Ukraine sent gas prices soaring and prompted many countries to turn to coal and renewables as cheaper alternatives.
Global gas demand grew by a paltry 0.5 percent in 2023, with increases in the U.S. and Asia offset by a sharp decline in Europe. The future is cloudy. Europe represents a potential downside scenario for the industry. The IEA projects European gas demand will be 20 percent below 2021 levels by 2026, the same time period during which already approved new U.S. LNG terminals are expected to nearly double current U.S. export capacity.
Russia’s invasion of Ukraine sparked deep reflection within the European Union — not just about how much the bloc relied on Russia for a key source of energy, but also on its overall use of fuels driving climate change. American LNG helped backfill lost Russian gas, rising to 21 percent of European gas supplies, according to Bruegel, a Brussels-based think tank.
At the same time, the EU launched a plan to wean itself off Russian gas by accelerating its investments in wind and solar and emphasizing the need for energy savings. A spike in energy prices helped drive down demand, particularly in gas used to power industries.
EU gas demand has stabilized somewhat following consecutive years of steep declines, said Georg Zachmann, a senior fellow who tracks energy markets at Bruegel. But, he added, “speedy renewables deployment, progressing climate change (less heating degree days), massive deployment of heat pumps, etc. all point towards quickly declining gas demand.”
A group of 60 mostly left-leaning European lawmakers wrote a letter to Biden and Energy Secretary Jennifer Granholm before the decision was announced, calling on them not to use EU gas demand as a reason to justify expanding exports.
If Europe represents the potential downside for gas, Asia offers the industry reason for optimism.
The region is projected to account for 70 percent of new global gas demand in the medium term, according to the IEA. The advent of more LNG terminals could drive down prices, making gas cheaper relative to its competitors and spur more demand.
That is a scenario where Biden’s pause comes into play, analysts say. The delay in permit reviews could complicate contract negotiations for the planned terminals, and prompt buyers to look to alternative suppliers or other fuel sources.
“It could hinder [the] energy transition. It could hinder these climate incentives solely by the fact that if we take away needed LNG for regions in Europe and Asia, there could be a kind of a backstep or backpedaling towards coal usage,” said Emily McClain, vice president of North America Gas Market Research at Rystad Energy, a consultancy.
Arguments that a pause in U.S. permitting would result in greater Asia coal consumption ignore basic demand trends in the region, said Sam Reynolds, a research lead with the Institute for Energy Economics and Financial Analysis, a think tank that supports a shift to clean energy.
The largest buyers of U.S. LNG historically have been South Korea and Japan. But in Japan, LNG imports fell 8 percent last year and are expected to continue that downward trend as it brings more nuclear power online. Demand in South Korea could fall up to 20 percent by the mid-2030s, Reynolds added.
In growth markets such as China, Southeast Asia and South Asia, U.S. LNG has struggled to compete with cheaper and geographically closer suppliers such as Qatar, Malaysia and Australia, Reynolds said.
Paulina Jaramillo, a professor of engineering and public policy at Carnegie Mellon University, said the Biden administration was warranted in pausing to review the climate impact of additional LNG terminals. Some level of U.S. LNG exports should be expected. When the United Nations International Panel on Climate Change modeled pathways to net zero, it found gas consumption likely would continue through midcentury, she noted.
But global gas consumption needs to fall to limit global temperature rise to 2 degrees Celsius or less — making a large expansion of U.S. LNG exports inconsistent with the country’s climate targets, Jaramillo said.
“A bridge by its nature is meant to lead to a destination,” she said. “It is time to get off the bridge.”
