Golden Age of Gas? Either way, we’re stuffed

The International Energy Agency has reaffirmed its prediction of a “golden era in gas” – predicting trillions of dollars of investments around the world in coming decades. But it says it will do little to reduce emissions and may even make it worse.

The IEA overnight updated its predictions for gas to take into account the boom in unconventional gas development – including coal seam gas in Australia, shale gas, and other resources that are just now being exploited.

It says it will be a “game changer” for geopolitics because it will mean countries such as the US are no longer dependent on imports – and it will be a big boon to the likes of the US, China and Australia.

But it will do little to arrest the world’s path on emissions because it will still lead to a scenario of emissions at 650 parts per million, and a rise in average global warming of more than 3.5C – well above the targeted 450ppm and 2C rise and thus exacerbating the risk of catastrophic climate change.

The IEA says the boom in unconventional gas is a two edged sword. One hand it is likely to displace more coal generation, but it also results in more emissions than natural gas (between 3 and 12 per cent, depending on how well its “golden rules” are followed) and it is likely to displace development in low carbon technologies such as renewables and nuclear. Indeed, growth in gas is likely to outstrip that of renewable technologies.

It paints two scenarios. One is where developers and government observe its “golden rules” of gas, and act as good corporate citizens and pays regard for the need for full transparency, measuring and monitoring of environmental impacts and engagement with local communities; careful choice of drilling sites and measures to prevent any leaks from wells into nearby aquifers; rigorous assessment and monitoring of water requirements and of waste water; measures to target zero venting and minimal flaring of gas; and improved project planning and regulatory control.

It says this could add 7 per cent costs to the development of unconventional gas, something that IEA economist Fatih Birol says the developers can well afford. He is “cautiously optimistic” that this path may be followed. But even if these rules are followed, it only reduces global emissions from energy production by 0.5 per cent from the base case, and they remain 20 per cent higher than they are now, and well beyond where they need to be.

The second scenario painted by the IEA is where the golden rules are not followed, the exploitation of unconventional gas loses its “social licence” to operate, and little more gas is developed. The reality, says the IEA, is a hybrid scenario given the different abilities and willingness of governments to control their industries, and leave their new found fossil fuel wealth in the ground.

The IEA says, however that even though a “Low Unconventional Case” derives in part from environmental concerns, it is difficult to make the case that a reduction in unconventional gas output brings net environmental gains, because the effect of replacing gas with coal in the Low Unconventional Case is to push up energy-related CO2 emissions up .3 above the golden rules scenario, as coal fired generation is locked in for a longer time.

“Though many of those concerned with environmental degradation may find it difficult to accept that unconventional gas resources have a place in a sustainable energy policy, a conclusion from this analysis is that, from the perspective of limiting global greenhouse- gas emissions, a Golden Rules Case has some advantages compared with the Low Unconventional Case, while also bringing with it other benefits in terms of the reliability and security of energy supply.”

Not exactly a ringing endorsement, and the IEA says, which repeats its belief that “natural gas cannot on its own provide the answer to the challenge of climate change”, and strong policies to promote low carbon energy sources such as renewables, as well as energy efficiency, are essential.

“Renewables are indispensable to this goal and that means government measures for supporting renewable energy must be there for years to come…because otherwise lower gas prices will make renewables uncompetitive,” IEA executive director Maria van der Hoeven said.

Interestingly, the IEA says Australia will stand to gain either way, likely to experience a boom in gas exports – because it can deliver either unconventional sources such as CSG and shale gas, or substitute these with more gas from conventional sources. The latter might cost more, but the price for international gas will be higher, with a follow-on impact on domestic prices.