Gas boom risk a ‘perfect storm’ for economic and climate chaos, report says

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In this file photo taken on April 17, a man stops to refuel his car at a petrol filling station in Paris on the 32nd day of a strict lockdown aimed at curbing the spread of the COVID-19 pandemic, caused by the novel coronavirus. AFP

Global natural gas capacity under construction has doubled in a year, said a new report that warned on Tuesday that the investment boom in the world’s fastest-growing fuel risks a “perfect storm” of climate chaos and stranded assets.

Capital expenditure on liquefied natural gas (LNG) facilities has surged from $82.8 billion to $196.1 billion over the last 12 months, US-based Global Energy Monitor (GEM) said in the report.

 

Following a string of divestments from high-profile LNG funders, the report warned that at least two dozen projects were recently cancelled or are in serious financial difficulty.

GEM research analyst Greg Aitken said: “LNG was once considered a safe bet for investors.

“Not only was it considered a climate-friendly fuel, but there was substantial governmental support to make sure that these mega-projects were shepherded to completion with all the billions they needed.

“Suddenly the industry is beset with problems.”

As the coronavirus pandemic squeezes investors and a growing social movement against new gas projects gathers pace, the report said troubled projects were facing a range of difficulties in sustaining finance.

In the past year US-based Berkshire Hathaway Inc and the governments of Sweden and Ireland were among financiers to drop several billion dollars worth of gas project funding, it noted.

 

While its proponents push LNG as a “bridge fuel” because it is less polluting than coal, a new gas-fired power plant has roughly the same environmental impact as a new coal plant, given the leakage of methane throughout the supply line.

Methane is dozens of times more potent a greenhouse gas than carbon dioxide over a 100-year time scale.

The landmark 2015 Paris climate deal enjoined nations to limit global temperature rises to “well below” two degrees Celsius over pre-Industrial Revolution levels.

The accord also commits countries to work towards a safer warming cap of 1.5C.

The Intergovernmental Panel on Climate Change (IPCC) has said the safest and surest way to reach the 1.5C goal would require a 15 per cent decline in gas use by 2030 and a fall of 43 per cent by 2040.

GEM said any new gas infrastructure “directly contradicts the Paris climate goals”.

Last year, the European Investment Bank (EIB) – the world’s largest multilateral lender – said it was ceasing funding for nearly all new fossil fuel projects.

EIB vice-president Andrew McDowell said investing in new LNG capacity “is increasingly an economically unsound decision.

“We need to take advantage of opportunities that put us firmly on the path to reaching net-zero by 2050 whilst securing more jobs in the short and long term.

“This will undoubtedly be challenging, and it can’t be instant. But it must happen,” he said.