Author:Kathryn Neville
Master student, Johns Hopkins University School of Advanced International Studies.
The world's worst polluter has pledged to use more LNG, in what may be the smartest move they have ever made for the environment.
If China tries to resolve its energy trilemma, which is the balance between security, sustainability and affordability, its 27-year liquefied natural gas (LNG) partnership with Qatar last month is a step in the right direction. Beijing rightly recognizes that LNG will address future volatility, help phase out coal and meet demand. In contrast, in the United States, natural gas is not given the same amount of importance as it is seen as running counter to the country's long-term climate strategy. It may sound counterintuitive to look for value in the energy transition strategies of the world's worst polluting countries, but China is poised to be a leader in climate action. U.S. policymakers need to take a more pragmatic stance on natural gas production to complement renewables, or risk losing strategic advantage and security.
Natural gas consumption will continue to be in the spotlight and drive policy and investment strategies. While the U.S. plans to reduce its reliance on LNG in the coming decades, China is using long-term LNG contracts to diversify and hedge risk.
The landmark agreement between China and Qatar strengthens the relationship between the world's largest LNG merchant and the world's largest energy consumer, enabling stable and reliable natural gas** for decades to come. In addition, it ensures that China has an equity stake in Qatar's northern gas field, which in turn will allow it to participate in the operation of future LNG projects.
The agreement also strengthens ties between the Gulf region and China, opening the door to future cooperation. Qatar is an attractive alternative to Australia, China's traditional LNG supplier, and the United States. The equity component of the deal cannot be overlooked. China is increasingly demanding equity in production agreements, crowding out Western companies. Chinese energy companies now have the expertise to compete in the operation and management of future gas infrastructure.
China recognizes the role of natural gas in meeting its climate goals. With half of China's greenhouse gas emissions coming from industry and the other half from the power sector, it must carefully balance energy** with economic development. For China, natural gas is indispensable for phasing out coal, reducing greenhouse gas emissions, and achieving decarbonization.
The United States once believed that the demand for natural gas would disappear in the short term, while China believed that it would not be able to do without it for a long time to come. At the current stage of the global energy transition, it is not common to sign LNG contracts that last up to more than 20 years. Other major gas importers, such as Japan, have been reluctant to sign such a lengthy agreement, but China has shown a unique willingness in its recent agreement with Qatar as it expects the flow of natural gas to be limited in the future.
Proportion of global natural gas consuming countries from 1965 to 2022 (data**: Energy Institute - World Energy Statistical Review;Unit: megawatt hours).
The U.S. has reservations about investing in natural gas over renewables, but the nuances of China's approach offer valuable lessons. China is preparing for a protracted war by diversifying its energy resources and hedging risks. U.S. policies and regulations have completely ignored domestic and global energy needs. ** Shows that we are approaching the peak of fossil fuel use, but the global demand for LNG is increasing year on year. While Biden** intends to reduce greenhouse gas emissions and reduce demand for fossil fuels by restricting production, this will not curb demand for fossil fuels in the United States and globally.
Natural gas is replaceable. If the United States does not produce, other countries will fill the void, and China recognizes this fact. As the world's thirst for natural gas intensifies, at least for decades to come, Qatar is poised to seize a more significant share of production, while China is eager to carve out a larger share for itself. The U.S. is at a disadvantage on both the supply and demand sides, weakening its energy security and the balance of U.S. business, while also failing to reduce global greenhouse gas emissions.
Even in the current phase of the climate crisis, the United States should take a more realistic approach to natural gas. U.S. policymakers cannot confuse increasing renewable energy capacity with a rapid phase-out of fossil fuels. Since the shale revolution in 2008, U.S. greenhouse gas emissions, especially in the power sector, have plummeted, in part because coal has been replaced by cleaner natural gas. China understands that this transition will take time to materialize. Ultimately, the U.S. and the planet will benefit from a state of equilibrium: embracing renewables while recognizing the reliability and transitional benefits that strategic natural gas investments provide.
When considering the factors influencing the global energy transition, Washington and Beijing share a common goal, regardless of their approach. China recognizes that an institutionalized partnership with Qatar is essential to deal with future market volatility, and that natural gas will be an indispensable tool to phase out coal and meet energy needs that will never be met. This is a decisive decade for the climate. Like it or not, the production and consumption of natural gas change in tandem. As long as there is demand, there will be production. Although the use of natural gas is increasing year on year, why does natural gas have to be in the shadow of the U.S. energy transition?Perhaps China's status as the world's leading emitter has given them some tolerance in using transition fossil fuels. But to effectively respond to the climate crisis, U.S. policymakers must take a less idealistic stance, or risk undermining their strategic advantage and security. At this critical juncture, natural gas deserves policy recognition and investment, and it takes a certain amount of courage to publicly defend its merits. That's where China's strength lies.