Natural Gas: Guardrails for a Potential Climate Bridge

Michael Lazarus Stockholm Environmental Institute

Kevin Tempest Stockholm Environmental Institute

Per Klevnäs Stockholm Environmental Institute

Jan Ivar Korsbakken New Climate Economy

May 2015

This analysis weighs the potential benefits and risks of relying on expanded natural gas expansion and use as a “bridge” to a lower-carbon energy future, based on a review of the research literature and of recent modelling studies, as well as interviews with sector experts. It also examines the extent to which natural gas could play such a role, and the conditions that would be required. Two main conclusions are clear:

• Countries should not count on natural gas as a “climate bridge”. Recent U.S. experience was unique in terms of delivering significant benefits to both the climate and the economy. Despite such a best-case scenario, current research suggests that a more enduring climate-economy “win-win” based on increased natural gas supply is far from guaranteed, even in the United States. Efforts to build out gas infrastructure and production capability or to establish policies that promote gas production or improved market function (e.g. creation of a gas trading hub in Asia) should not assume that by default, there will be a net GHG emission benefit.
• Public policy needs to create the enabling conditions if gas is to make a positive contribution. Proactive policies and oversight systems are needed in order for natural gas to offer major benefits to the economy, the climate, and overall well-being. In order for the “climate bridge” to assist in a sturdy transition to a climate-compatible future, certain “guardrails” are necessary. In particular, approaches for addressing substitution, methane leakage, and scale effects will be required to achieve any significant climate benefits. Climate-specific policies must also create expectations of increasing stringency over time (e.g. rising carbon prices or stricter emissions standards) so that gas infrastructure investment does not effectively lock out lower-emissions technologies and futures.