Environmental campaign groups are switching their aim to public and private financing for natural gas projects as they get closer to winning the battle over thermal coal.
In the lead up to and during the G7 summit in the UK on June 11-13, several major economies pledged to work towards removing fossil fuels from energy generation during the next two decades.
But the only firm commitments on financing were on thermal coal, where the G7 nations – Canada, France, Germany, Italy, Japan, the UK and the US – committed to “take concrete steps towards an absolute end to new direct government support for unabated international thermal coal power generation by the end of 2021” including export finance and trade support.
But data from Oil Change International, a non-profit that campaigns against the use of fossil fuels, suggests the move will make little impact on overall public financing for fossil fuels.
Public financing for coal by G7 countries was only a sliver of their total support for fossil fuels between 2017 and 2019. Only Japan provided significant public financing for coal during that period.
The rest of the G7 offered only negligible financing for coal but have lent billions to the oil and gas sectors. Canada, Japan and the US ploughed the most money into oil and gas energy sources, around US$60bn, during the period, the data shows.
Gas alone received an average of US$16bn in public financing globally in each of the two years, according to an International Institute for Sustainable Development (IISD) analysis of the same data.
Natural gas emits less carbon dioxide than coal when burned to create energy, according to the US Energy Information Administration, but still creates about 53 kilogrammes of the greenhouse gas per unit of energy output.
The liquefied natural gas (LNG) industry has positioned itself as a lower-emissions energy source to help meet climate goals while countries ramp up development in renewable energy.
Japan, China, South Korea and India are top LNG importers, sourcing the fuel from major exporters such as Australia, Qatar and the US.
“We’ve long warned that the gas industry is attempting to present itself as a climate solution, but we know they are climate villains,” Adam McGibbon, UK campaign lead with shareholder activist group Market Forces, tells GTR.
“There’s no room for gas in a transition, and just as we’re seeing funding dry up for the coal industry, we’re going to see funding dry up for gas too. We’re already seeing the tide turning on gas… the financial institutions that prop up the climate-killing gas industry are next.”
Fossil fuels targeted
Ahead of the summit, the G7 nations also said they will “phase out new direct government support for carbon intensive international fossil fuel energy, except in limited circumstances at the discretion of each country” in an attempt to keep the global temperature from rising more than 1.5 degrees Celsius above pre-industrial levels.
A draft energy policy for the Asian Development Bank, published in early May, foreshadows halting financing for new “oil and natural gas field exploration, drilling or extraction activities”.
The organisation’s director, Masatsugu Asakawa, said in a speech on June 15 that the continent’s energy sector needs to start “avoiding the use of fossil fuels and switching to low-carbon fuels”.
In a repeat of the campaign over thermal coal, which has seen an avalanche of public and private lending, along with insurance, away from the sector, campaigners are pushing for firm targets on other fossil fuels.
“Decisions by governments and financial institutions to not fund more coal-fired generation are becoming increasingly common,” John Söderbaum, from energy consultancy Acil Allen, tells GTR. “The next logical area for pressure to build is on the natural gas sector.”
An open letter from 300 economists, published by the Thomson Reuters Foundation ahead of the G7 summit, calls on the seven nations to end all gas and oil financing by 2021, the same deadline they have given themselves to stop support for thermal coal.
“According to the [International Energy Agency]’s recent net zero scenario, which gives a 50% chance to limit global warming to 1.5° degrees Celsius, ‘there is no need for investments in new fossil fuel supply beyond 2021’. This applies not only to coal, but also oil and gas,” the letter says.
“Even if coal were phased out overnight, the emissions from oil and gas fields already under development would push the world beyond 1.5°C, into catastrophic climate change. Due to carbon lock-in and path dependency, further investments in oil and gas would undermine achievement of the Paris Agreement’s goals.”
The UK announced earlier this year that it will no longer provide public financing or trade support for fossil fuel projects overseas, with limited exceptions.
Oil Change International says “it is critical that the UK works with other G7 members to ensure they follow its lead”.
But the campaigners’ arguments are at odds with countries’ current and expected appetites for natural gas. Unlike coal, demand for which is expected to slow permanently, consultancy McKinsey expects demand for LNG to be growing, albeit slowly, as far out as 2050.
It forecast in February that gas will be the only fossil fuel to experience growth beyond 2030, peaking in 2037, although the continued use of gas in the chemical and industrial sectors is expected to mask a more significant decline in its use for energy, the focus of campaigners’ ire.
Its controversial role as a transition energy source will also be more pronounced in developing markets, where there will be “higher demand… as they more rapidly move away from coal use”, McKinsey predicts.
Higher use of gas by lower income countries was highlighted in a report published on June 7 by the IISD, which found that gas received more public finance, from international sources, in less developed countries than any other energy source, and far more than renewables.
While a rising wave of banks is moving away from coal, there has been less appetite for a shift from gas. Extraction projects in major exporting nations such as Australia and Qatar continue to attract significant investment, including from export credit agencies in importing nations such as Japan and South Korea.
The Australian government last month announced it will provide up to A$600mn to a new gas-fired power station in the state of New South Wales.
Söderbaum from Acil Allen says it is ironic the decision was announced on the same day that the IEA said there could not be further investment in fossil fuel energy supply projects if the world was to reach net-zero emissions by 2050.