Without gas, the alternative for many Asian countries will be coal

by Paul Everingham

Asia’s energy demand will more than double by 2050. How will Western nations ensure the fast-growing countries of emerging Asia shift from their heavy reliance on coal?

As the nations of Asia debate how to ensure their energy security while also meeting their climate goals, many are overlooking the transition fuel that could help meet the important objective of an energy source that is accessible, affordable and acceptable to the public.

Natural gas has come a long way in recent years as a critical fuel source as Asia transitions away from coal and the environmental challenges it poses toward cleaner fuels and ultimately to renewables.

Asia’s gross domestic product is expected to quadruple by 2050 while the region’s energy demand more than doubles.

As economies grow, they demand more electricity. Governments in Asia are thus increasingly challenged with balancing their energy needs against environmental priorities, including meeting emissions reduction commitments under the 2015 Paris Agreement.

In practical terms, energy security means keeping the lights on with energy available to, and accessible by, the public at affordable prices. It is not yet scientifically possible for any country to implement an energy solution that relies entirely on renewable energy due to issues such as high cost and intermittent output.

A mix of natural gas and renewables can be a complement that works for most Asian countries. In terms of fuels for generating power, natural gas can reduce carbon dioxide emissions by up to 60% compared to coal.

It is therefore incumbent to ensure that natural gas — an available, affordable and acceptable lower-carbon energy source — is part of every country’s energy mix.

Consider the following conundrum.

The domestic energy resources of most southeast Asian nations are dwindling. Gas production in Vietnam, Thailand and Indonesia is expected to drop an average of 11% a year between 2031 and 2040. Meanwhile, gas demand just in Vietnam is projected to rise at a compound annual growth rate of 4.7% between 2022 and 2050.

Asia is a net importer of energy, but many countries are getting priced out of liquefied natural gas import markets because of Europe’s increased reliance on LNG since the eruption of the Ukraine crisis. Europe has spent around $1 trillion to secure affordable alternative energy supplies and subsidize industries and consumers since Russia’s invasion; most Asian countries simply cannot match this spending.

As such, like some of their European peers, some Asian nations are increasing use of coal, prioritizing short-term economic concerns at the cost of their long-term decarbonization efforts.

Research findings from a study conducted by Rystad Energy and commissioned by the Asia Natural Gas and Energy Association have put a spotlight on the risk of placing developing Asian nations into a state of “energy poverty” and stalling energy transition efforts.

Put simply, the cost of inaction among wealthy and LNG-producing countries will be a continued reliance on coal among fast-growing Southeast Asia nations. Every country will determine its own energy transition pathway, but emerging Asia needs pragmatic energy policy support that recognizes the critical role of natural gas.

As leaders gathered for the Group of Seven summit in Hiroshima, Japan, there was a great need for policy at all levels that prioritizes the return of a more stable and balanced global natural gas market to support international efforts to limit global warming.

Continued volatility and high gas prices risk causing adverse environmental effects by propelling fuel switching to more carbon-intensive fuels, such as coal. This trend has been observed in many countries, including in EU member states.

Thus, leaders should work to reduce volatility and increase energy supplies through long-term natural gas supply contracts that can insulate a nation from energy shortages, ensure timely build out of gas infrastructure through streamlined and transparent regulations and expedite appropriate financing for responsible natural gas projects by providing assurances that can make responsible investments in flexible infrastructure possible.

Without access to resources or financing for infrastructure, energy security and the energy transition will be elusive for the people of Southeast Asia.

Critically, we must promote the progressive decarbonization of gas demand through the development and delivery of large volumes of lower carbon and renewable energy, such as natural gas, ammonia and hydrogen, as soon as is feasible.

We must scale up bilateral and multilateral efforts to tackle energy-related methane emissions and to share good practices and build capacity across Asia, expand domestic renewables, upgrade energy grids and decarbonize greenhouse gas emissions from power generation and hard to abate sectors via carbon capture usage and storage and phasing out coal.

These policy recommendations, if implemented, can help ensure that Asian countries can continue to grow their economies while also meeting their critical energy security and energy transition goals.

As they prepared to meet in Hiroshima, we wrote to the wealthy countries of the G-7 seeking their support for energy security and a path to decarbonization for fast-growing Asian economies that would limit reliance on coal as a primary energy source.

ANGEA and its members welcome the G7’s subsequent recognition of the important role that LNG (and natural gas) can play in accelerating global energy transition and providing energy security in the face of challenging geopolitical circumstances.

We will continue to work with governments and industries around the world to highlight the need for increased investment in the development of natural gas projects, to help Asia access the energy it needs for economic growth and to make progress on climate goals.

Paul Everingham is the inaugural CEO of the Asia Natural Gas and Energy Association (ANGEA), which works with governments, society and industry throughout Asia to build effective and integrated energy policies that meet each country’s climate objectives.

This article was originally published in Nikkei Asia.