President Biden recently announced a “temporary pause on pending approvals of liquefied natural gas exports.” This announcement comes on the heels of news that in 2023 the U.S. surpassed Qatar and Australia to become the world’s two largest LNG exporter.
This decision has sparked debate and raised several key points. I will discuss the reasons behind the pause, potential implications, and next steps.
Reasons for the Pause
The key reason cited for the pause was climate change concerns. Natural gas, while much cleaner than coal, still emits greenhouse gases when burned. The administration believes expanding LNG infrastructure could lock in fossil fuel dependence and hinder progress toward climate goals. I have a different opinion on this, which I address below.
Some have also argued that prioritizing domestic needs for natural gas should come before exporting it. The pause allows the Department of Energy to assess the potential impacts of increased exports on domestic energy prices and availability.
But one significant reason for the announcement – recently acknowledged by White House climate adviser Ali Zaidi – was to address concerns of young and climate-focused voters. The administration needs these voters in the fall, and the hope is that announcing this pause will energize them to vote for Biden in the November election. After all, Biden has pledged to cut climate pollution in half by 2030, but the oil and gas industry continues to break production records during his administration.
Potential Implications
The U.S. currently has seven operational LNG terminals, predominantly located in Louisiana and Texas, and anticipates up to five more becoming operational in the coming years. President Biden’s action won’t impact the existing projects. However, it may cause delays for about a dozen pending or planned LNG projects, such as the significant Calcasieu Pass 2 project along Louisiana’s Gulf Coast. This project, if realized, would be the largest export terminal in the United States.
In the long run, these delays might affect global energy markets, potentially leading to higher natural gas prices in countries that rely on LNG imports.
The long-term economic benefits of expanded LNG exports are being evaluated. Some argue that exporting more gas would create jobs and boost the economy, while others contend it could drive up domestic energy costs and harm certain industries.
The pause has ignited a political debate, with supporters of the decision praising its focus on climate and domestic energy security. At the same time, critics argue it stifles economic growth and undermines U.S. leadership in the global energy market.
How the Decision Could Increase Carbon Emissions
According to data from the 2023 Statistical Review of World Energy, over the past 15 years, the U.S. has experienced the largest decline in carbon dioxide equivalent emissions of any country. This reflects carbon dioxide equivalent emissions from energy, process emissions, methane, and flaring.
The single biggest reason for this decline was natural gas displacing coal in power production. In 2007, coal had more than a 40% share of all power production, while natural gas held only a 20% share. By 2022, coal had significantly been displaced by natural gas. Coal’s share had fallen to 20%, and the natural gas share had increased to 40%. Because coal produces more than double the amount of carbon dioxide per unit of power production than natural gas (source), this resulted in a huge decrease in U.S. carbon emissions.
Renewables were the second largest contributor to coal’s decline, but natural gas allowed coal-fired power plants to be switched to the lower-emission fuel. That would not have happened with renewables alone, at least certainly not as quickly as it did. It would be much more challenging to replace a large coal-fired power plant with renewables, for reasons of scale and reliability.
In the process, U.S. carbon emissions decreased by 879 million metric tons, or 14%. Thus, natural gas can enable coal-dependent countries to slash carbon emissions much faster than could be achieved with renewables.
India and China will continue to add renewable power, but if you expect them to shut down coal-fired power plants and replace them with solar plants, that’s not going to happen to any significant degree. However, they could replace that coal-fired power with natural gas – if the natural gas is available.
Thus, the potential unintended consequence of this pause could be to keep countries hooked on coal longer than they need to be, and therefore increasing carbon emissions over a scenario in which these countries use LNG to displace coal.
I would note that critics argue that if significant amounts of methane leak during the process of producing and transporting LNG, the carbon savings against coal may be lost. That is true but would require leaks far beyond the estimates of the Environmental Protection Agency. Further, the above emissions calculation from the Statistical Review includes estimates of associated fugitive methane emissions from the International Energy Agency.
Next Steps
The DOE will comprehensively review the potential impacts of LNG exports and update its analysis methods. This review is expected to take several months. The administration has invited public comments on the pause and the DOE review process. This ensures stakeholders have a voice in shaping the future of LNG exports.
After the DOE review and considering public input, the administration will decide whether to lift the pause, impose permanent restrictions, or implement other policy changes related to LNG exports.
Overall, President Biden’s decision to pause new LNG export terminals is a complex issue with various economic, environmental, and political considerations. The coming months will be crucial for understanding the full implications of this decision and determining the future of LNG exports in the United States.
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