James Coleman and Sarah Jordaan are co-authors of the C.D. Howe Institute study Clearing the Air: How Canadian LNG Exports Could Help Meet World Greenhouse Gas Reduction Goals.
With a glut of North American natural gas, the future of Canada's gas industry could hinge on the success of exports of liquefied natural gas from the West Coast.
As the federal government assesses the environmental impact of these exports, one of the biggest public controversies has been how LNG exports will impact global greenhouse gas emissions. This question is crucial for businesses, too: If greater use of LNG is inconsistent with global goals for reducing GHG emissions, LNG projects could prove to be risky long-term investments.
The federal government is poised to release the findings of its first environmental assessment of a major LNG facility by October. It is impractical to assess how any individual facility will affect the overseas energy markets that would use Canadian LNG. But LNG from B.C. has the potential to reduce global GHGs if it is used to replace coal power abroad.
Determining whether a particular fuel will raise or lower global GHG emissions can be tricky. Scientists rely on a tool called "life-cycle assessment" to answer this question, but it relies on uncertain estimates and assumptions. The impact of LNG exports on GHG emissions would depend on what power sources they replace. This, in turn, depends on the destination of those exports.
If Canadian LNG serves coal-dependent countries in Asia, it will likely lower global greenhouse gas emissions. B.C.'s LNG industry is well positioned to support this effort. B.C. has easy ocean access to markets in Asian countries. Countries such as China, India, Japan and Taiwan are heavily dependent on coal-fired power, so they could cut their GHG emissions significantly by replacing these sources with natural gas from Canada.
On the other hand, LNG would raise global emissions if it slowed the growth of solar and wind power or was used to cut back on low-carbon sources, such as nuclear power. These scenarios would be more likely in European countries that use more renewable power and are considering reducing their use of nuclear power. So LNG exports from B.C. might play a greater role in emissions reductions than Canadian and U.S. LNG facilities on the East Coast that are better suited to serving European demand.
Although it is important for policy makers to consider the global impact of LNG exports at a high level, it is impractical for regulators to assess how individual LNG export facilities will affect overseas GHGs. At the time a facility is approved, federal regulators cannot know where the LNG will eventually go or what power sources it will replace in importing countries.
Instead, provincial governments should focus on the portion of the GHG emissions from LNG that are unambiguously within their power to control. They should focus on cost-effective ways to reduce domestic emissions. For example, governments could address methane leaked during production and transport as well as GHGs vented during LNG processing.
The federal government should also use diplomacy to encourage potential importers of its LNG to retire coal power. Canadian governments could also commit to ratchet up the stringency of its regulations in response to emissions reduction regulations elsewhere. For example, B.C. could commit to increases in its carbon tax once China implements a stringent carbon price.
Canadian LNG can play a positive role in addressing one of the world's economic and environmental problems if Canadian regulators maintain focus on controlling emissions within their authority and rely on diplomacy to encourage emissions reductions overseas.