Yangshan LNG terminal, Shanghai, China

Canadian LNG could help fight climate change

And if Canada negotiated international carbon offsets, LNG could also enable us to meet our Paris commitments.

Climate change is an important global issue, requiring action across industries and across borders. Climate change cannot be tackled by individual countries, but must be approached from a global perspective, with nations working together to reduce global net greenhouse gas (GHG) emissions, not individual country emissions.

Access to energy is essential. Globally one billion people live without electricity and three billion people use fuels like wood or biomass to cook, impacting their health and quality of life (Source: World Bank 2018). The International Energy Agency (IEA) reinforces that fossil fuels – specifically oil and natural gas – remain the dominant sources for meeting the world’s growing energy demand in the foreseeable future.

According to the IEA World Energy Outlook 2018, by 2040 global demand for natural gas will increase by 43 per cent over 2017 levels, replacing coal as the world’s second-largest energy source. Falling consumption of coal in the European Union and United States will be balanced by rising demand in India and Southeast Asia, resulting in just a five-per-cent-decrease in 2040 demand over 2017 levels. China will become the world’s leading importer of liquefied natural gas (LNG) if they can replace coal with natural gas.

Canada has an abundant natural gas resource that is estimated to be 1,220 trillion cubic feet; enough to serve current markets for 300 years while growing to meet emerging demand worldwide. Natural gas from Canadian LNG has lower life-cycle emissions than coal, and Canadian LNG facilities will have lower emissions intensity than LNG produced anywhere in the world. Canada has strong environmental performance and has a track record of continuous improvement and technology development.

By the mid-2020s, growing global markets for LNG are expected to require additional liquefaction capacity beyond that which is currently in place or under construction. Canada’s significant natural gas resources can help meet global demand and reduce global GHG emissions by displacing coal-fired electricity generation in Asia.

Canada’s opportunity

Canada has an opportunity to capitalize on the coming growth for LNG and reduce global GHG emissions by displacing coal-fired electricity generation in China, India and Southeast Asia.

Estimates show by 2040, about 1,500 megatonnes of carbon dioxide equivalent (MtCO2e) emissions could be eliminated every year if new power plants in China, India and Southeast Asia are fuelled by natural gas instead of coal. These reductions are contingent on approximately 375 megatonnes of LNG annually displacing current coal electricity generation. This estimate was based upon a CAPP internal study using the Pace Global 2015 report for life cycle GHG intensities of both coal and LNG.

According to its most recent 5-year plan, China intends to switch from coal to natural gas to reduce smog and lower greenhouse gas emissions.

What does this mean? The total net global GHG reduction from each Canadian LNG plant is estimated to be about 100 MtCO2e per year.

Meeting our Paris commitments

Canada can help reduce net global emissions with our lower emissions intensity LNG as the principal supplier to global markets. These emissions reductions must be recognized both domestically and internationally and contribute to our commitment under the Paris Agreement. Canada must acquire offsets.

Article 6 of the Paris Agreement must enable countries to share offset credits – called Internationally Transferable Mitigation Outcomes (ITMOs) – from another country. This was debated for more than two weeks of negotiation at COP 24 in December 2018 but participants failed to finalize the chapter governing Article 6. Negotiators struggled with a host of issues, including how to account for ITMOs among diverse policy types. Draft decisions were carried over to COP 25 in 2019, with a new deadline of finalizing them at that time. While understanding this is a complex issue, it is essential these rules are in place following COP 25 in 2019.

Canada must look beyond our borders to take a global perspective on emissions reduction. To encourage international partnership and adoption of the rules, Article 6 must guarantee ITMOs to be split between participating nations as an option that enables the shift from coal to natural gas use, and results in a net reduction in global GHGs.

Recognizing ITMOs would be beneficial for Canada in two ways:

Through global offset credits, Canada could still achieve its commitments under the Paris Agreement, instead of implementing costly measures that are inefficient and only focus on domestic emissions reduction.

Canada can grow our natural gas and LNG industries to meet global market demand while helping to reduce global GHGs and creating economic and other benefits across the country.

Canada must take a leadership role and finalize these negotiations so Canadians receive the benefit we deserve for our contribution to reducing net global emissions.

Based on estimates that each West Coast LNG plant would reduce global greenhouse emissions by 100 megatonnes of CO2 (MtCO2e) equivalent a year, and if Canada negotiated 50 per cent carbon offset credits, five LNG plants would enable Canada to surpass its Paris greenhouse gas reduction target.