Europe’s energy security during Russia's war against Ukraine depends on imports of LNG.OLESYA ASTAKHOVA/Reuters
Kevin Yin is a contributing columnist for The Globe and Mail and an economics doctoral student at the University of California, Berkeley.
After U.S. President Joe Biden’s decision to pause approvals for new exports of liquefied natural gas (LNG), there are grumblings from environmental groups that British Columbia and Canada should follow suit. But global demand for LNG exists regardless.
Without a say in the export policies of other gas-rich nations, such pauses, which are purely supply-side measures, would not be effective for reducing carbon emissions. Only solutions that target LNG demand will.
Ad hoc pauses in export growth come at serious costs that have been pointed out at length. Europe’s willingness to stand up to Russia in its war against Ukraine is directly related to its ability to maintain energy security, which depends on imports of LNG. Gas projects also serve as major socioeconomic opportunities for Indigenous groups, particularly in Western Canada. There are also the losses to the general economy of stalled projects, which puts the livelihoods of would-be workers at risk and creates an uncertain policy environment.
All of these costs might be worth paying for an effective climate policy. But a unilateral moratorium on export development is not an effective policy. Pausing export development without providing alternatives is akin to withholding drugs from an addict, knowing full well they can still buy them down the street. Any long-term solution needs to address demand-side dependency.
Unlike an addict, however, we do have clean alternatives. But they are nascent and will need industrial policy support. Any plan hoping to actually reduce emissions from natural gas should seek to make these substitutes viable and popular.
Building clean capacity at home is one way Canada can make a dent in this problem. Subsidizing the considerable upfront costs of building infrastructure, which can be two to three times larger than for the same fossil fuel output, would be a start. Currently, infrastructure projects also require environmental permits, which take many rounds of feedback and months of lost time. Slashing these approval times for green projects would go a long way. Any managerial expertise or new tech we develop along the way can be shipped abroad to widen its impact.
Incentivizing investment in clean energy companies in Europe and Asia through tax credits can help as well. Canadian investors can earn privileged returns while our partners will have access to more capital to help reduce their reliance on LNG. We would need the discipline to develop a simple but precise definition of what counts as a clean energy investment, to prevent a repeat of the ESG confusion. Doing so would build foreign capacity and line our pockets; what more could you ask for?
This idea also works for foreign direct investment projects by Canadian energy companies. Solar potential, for example, is limited at home, but high in North Africa and Central Asia, where it can be exported to Europe and Asia. This is a prime space to park our corporate capital. Solar panels and windmills don’t need to be built within our borders to be Canadian-funded and Canadian-owned.
Collaborating with importing nations to impose multilateral taxes on carbon would make the fastest difference, though is perhaps the least politically realistic. But at least here we would be working with Europe, a more co-operative partner. Pauses in export expansion only work in tandem with similar policies in Russia and the Gulf States.
The crux of the issue is that people around the world still want LNG. Unilateral supply-side restrictions cannot cut emissions because global demand remains high. Even worse, without these alternatives, this demand will likely continue to grow well into 2050. Any supply slack will be picked up by the largest LNG exporters, many of whom don’t share our green commitments, such as Qatar and Russia.
Those hoping that exporters might simply run out should not hold their breath. At 843 trillion cubic feet of reserves, Qatar alone could supply the entire world with LNG for decades at current global import levels. Given recent expansions in production and export deals with Europe and Asia, it seems they are more than happy to do so.
More virulent environmentalists must understand that questioning the path is not the same as questioning the destination. Nor is this an attempt to whitewash the serious emissions costs of liquefied natural gas, which are often understated by those who overemphasize its role as a transition fuel. But before we demand sacrifices from our economy, our Indigenous groups, and our global allies, we ought to first search for a more effective way.
If these demand-side proposals sound somewhat lofty, that’s because they are. Climate change was never a challenge for the unambitious. But without the political means to truly limit global LNG supply, it is the only way forward.