Over the past decade, the United States has become the world’s largest exporter of liquefied natural gas, or LNG. Since the fracking boom, gas companies have set up seven massive export terminals along the Gulf Coast, allowing them to sell fracked natural gas overseas for the first time. These terminals compress natural gas into a dense liquid so that it can be loaded onto tankers and moved around the world like oil.
The industry is poised for more massive growth: there are several other export projects awaiting approval from the Biden administration’s Department of Energy, and more in the pipeline. If approved, these facilities can almost double the country’s export capacity by the end of the decade. The question of whether or not to approve this surge in exports has become one of the biggest climate issues facing President Biden as he begins his re-election campaign.
The administration appeared to move to answer that question this week. The Department of Energy announced on Friday that it would suspend approvals for new LNG exports for several months while reviewing how it regulates them. Over the coming year, the administration will develop a new approach that will highlight the potential climate impacts of natural gas exports, suspending approvals in the meantime. The decision does not affect active export terminals.
“During this period, we will take a hard look at the impact of LNG exports,” President Joe Biden said in a statement about the measure. “This pause on new LNG approvals sees the climate crisis for what it is: the existential threat of our time.” In a press call with reporters, senior administration officials noted that U.S. LNG export capacity has more than tripled since the Energy Department first developed standards for deciding whether to send gas overseas.
Environmental activists hailed the news of a pause as a victory for nearby residents and the climate. Roishetta Ozane, an activist in Louisiana who has organized to try to stop LNG terminals, said the news “shows that the government recognizes the need to protect the rights and well-being of [Gulf] communities.” Bill McKibben, the longtime climate activist who founded 350.org, said the decision means Biden “has done more to check dirty energy … than any of his predecessors.”
But the ultimate outcome of the Biden administration’s pause on export approvals is far from certain. Measuring the public interest of new LNG exports is easier said than done, especially when it comes to how those exports affect the trajectory of global warming.
On the one hand, natural gas is naturally a fossil fuel, and burning it releases carbon dioxide. There is no doubt that its use contributes to climate change – and that the raw emissions from US LNG would be very large. Venture Global’s CP2 project in Cameron Parish, Louisiana, one of the largest proposed LNG terminals, could move enough gas to produce about 5.7 billion tons of carbon dioxide over its 30-year lifetime. That’s more than 20 times as much carbon as Alaska’s controversial Willow oil project, which Biden approved last year, according to a analysis by the Sierra Club.
However, every country that buys US LNG will be buying it to replace existing energy sources. if the administration stops allowing new exports, energy demand in Europe and Asia will not disappear—those countries will just use other sources to meet it. The ultimate impact of gas exports on the world’s carbon budget — the rapidly declining amount of carbon dioxide that can still be emitted if global warming is to be limited to internationally agreed levels — depends on how exactly that replacement plays out. For example, if the gas mostly replaces more carbon-intensive energy sources like coal, it can actually stretch that carbon budget further than it would otherwise hold.
“The reason these export terminals are interesting is because they are a way for the US government to have an effect on international emissions,” said Sean Smillie, an energy researcher who has studied the global LNG market as part of a doctoral project at Carnegie Mellon University. . “But we are not really sure which direction it will take.”
In the case of Lake Charles LNG, one of the largest terminals awaiting approval from the Department of Energy, the exported gas will have a few different destinations. The company behind the project, Energy Transfer, has signed six long-term contracts to supply gas to various buyers. Four of those contracts would send gas to Asian countries, including China, and two of them would sell it to oil traders such as Shell, which would flip it to the highest bidder. Venture Global’s CP2 project has meanwhile entered into three long-term supply contracts in Europe, three in Asia and three with speculative traders. To determine the total climate impacts of exporting LNG, the Biden administration will have to calculate how all these contracts balance against each other. (Neither Venture Global nor Energy Transfer could immediately be reached for comment.)
“The question we’re trying to answer is just completely muddled,” said Arvind Ravikumar, an associate professor at the University of Texas at Austin and a co-director of a research group that focuses on energy policy. “The answer is, ‘it depends.’ You should carefully consider what is happening in other countries. What are they doing with LNG?”
It looks different in every country. Some buyers such as China use LNG to replace coal for heating, which has a beneficial effect on the climate, since coal creates more carbon dioxide than natural gas does to produce the same amount of energy. India uses it as a raw material for fertilizer production. Other countries such as Germany are buying it to replace Russian gas they stopped buying after Russia invaded Ukraine and to avoid having to restart shuttered coal plants.
“The industry can say that this is true everywhere,” Ravikumar said. “They would say anyone who buys US LNG is replacing coal or dirtier gas. I don’t think that’s true.”
Ravikumar points out that countries like South Korea and Japan buy LNG to generate electricity, which they could also theoretically get from carbon-free sources if they invest in solar or wind farms, or even build nuclear power plants. In those cases, there is a good argument that LNG exports slow the energy transition.
Nowhere is this dilemma more vexing than in Europe. The continent was the leading buyer of LNG from the United States over the past two years, as countries such as Germany race to replace lost Russian gas. This export boom has helped the continent break its previous energy dependence and detach itself from Vladimir Putin’s rule. For this reason, gas industry groups in the US say that LNG exports are critical to ensuring global energy security.
“US LNG provides energy security to our allies in Europe and around the world and has helped alleviate the largest European energy crisis in recent history,” Charlie Riedl, the head of the Center for LNG, a liquefied gas trade association, said in November said. Press release. “Limiting US LNG exports will only cause higher energy costs at home and in Europe.” The statement comes as Democrats in Congress pressured the Biden administration to reject new export applications.
But some experts say that Europe no longer needs gas from the United States. The continent’s political leadership recently billions of dollars poured in heat pumps and renewable energy – reducing the need for natural gas for both home heating and electricity. As a result, most analysts expect European gas demand to decline over the coming years. By the time new gas shipments start flowing from proposed export terminals in 2026 or 2027, Germany may not even need them. Indeed, some argue the widespread availability of new cheap gas could encourage increased energy use, adding more emissions to the global carbon ledger.
“There is no reason to believe that Europe’s energy security depends on further expansion of LNG export capacity that will not come online until the end of this decade,” said Felix Heilmann, a policy analyst at the German think tank Dezernat Zukunft which tracks the LNG industry.
This is in line with projections from the International Energy Agency, or IEA, a global energy research institution. The IEA has in its annual energy outlook last year that he expects global gas demand to peak by 2030, meaning “there is little headroom left for either pipeline or LNG trade to grow after that.”
The issue of timing is critical, as the climate impacts of new export terminals will extend well beyond the end of the decade. These terminals cost billions of dollars to build, and companies must operate them for decades to recoup their initial investments. The same applies to import terminals that countries such as South Korea and Pakistan is building to take American gas. Environmental groups argue that building more LNG infrastructure now will “lock in” a dependence on gas in many countries, forcing them to keep burning fossil fuels even as renewable energy expands. In the call with reporters, a senior Biden administration official said the potential for this dependency is one of the administration’s concerns going into the break.
This may not be as much of a concern in Europe, as countries such as Germany have invested in cheaper and more flexible ones floating input terminals which has not had to work for decades. In other parts of the world, however, there is a risk that LNG could slow the adoption of solar power in countries such as Pakistan.
“If you build an LNG terminal today, it’s not like it’s going to work for five years and then shut down,” Ravikumar said. “Between now and 2030, globally, LNG may reduce global emissions on average compared to a counterfactual scenario, but 20 years from now it may not.”
For Smillie, the researcher who studied LNG at Carnegie Mellon, that uncertainty will make the Biden administration’s analysis very difficult. The export question has become a divisive issue in climate politics, but the effects of a U.S. policy in either direction will not be clear for years—and they depend largely on decisions in countries other than the United States.
“A big part of the story is other countries’ climate policies and climate laws,” he said. “In the end, this is what will determine whether these LNG terminals have a positive or negative effect on the climate. It’s not really something we can predict.”