China, climate change and COP21: An opportunity for natural gas?

Susan L. Sakmar's picture
Susan L. Sakmar, Independent consultant, author and adjunct law professor, University of Houston Law Center
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From November 30 to December 11, 2015, world leaders will gather in Paris for the 21st Conference of the Parties to the UN Framework Convention on Climate Change (UNFCCC), also known as COP21. The overall aim of COP21 is to reach a global agreement to reduce greenhouse gas emissions (GHG) to try to limit the global temperature increase to less than 2°C above preindustrial levels.

According to a recent report from the International Energy Agency (IEA), globally, coal combustion generates the largest share of CO2 emissions. Moreover, when compared to natural gas, coal is nearly twice as emission intensive. As a result, if countries agree to shift from coal to natural gas as part of their COP21 commitments, this could have a significant impact on global gas markets and global GHG emissions. In this regard, all eyes are on China - the world’s largest energy consumer, a major coal user, and the top emitting country.

On June 30, 2015, China submitted its Intended Nationally Determined Contribution (INDC) to the UNFCCC Secretariat. INDC’s are indications of each country’s post-2020 emissions reduction targets and actions that the country intends to take to meet those targets. In broad terms, China has committed to peaking its carbon dioxide emissions by 2030 but will use “best efforts” to meet this goal earlier.

As a key part of its wide-ranging efforts to achieve a lower-carbon energy system, China has committed to reducing its use of coal, which supplied the majority (66%) of China's total energy consumption in 2012. As a result of high coal consumption, China is the world's leading energy-related CO2 emitter, releasing 8,106 million metric tons of CO2 in 2012.

In addition to reducing its reliance on coal, the Chinese government has also set out a number of policy reforms to boost the share of natural gas to 10% by 2020. In recent years, China achieved double-digit growth in natural gas demand and looked to be on track to meet this 10% target. More recently, however, demand has slowed as China’s overall economy has stalled. While this is of some concern today, the longer-term outlook for increased natural gas use in China remains strong with the IEA noting in its most recent World Energy Outlook 2015 (WEO-2015) that growth in gas demand between 2013-2040 is larger in China than anywhere else in the world.

The expected growth in China’s gas demand, however, is not without risk, most notably coming from renewables, which according to the IEA, contributed almost half of the world’s new power generation capacity in 2014. Moreover, even though the share of gas in China’s primary energy mix more than doubles over the IEA’s projection period, at 11% in 2040, China’s gas demand remains lower than today’s global average of 21%.

Although China’s natural gas demand has failed to live up to expectations this year as the economy has faltered, the long-term outlook for natural gas demand in China remains positive for many reasons, not least of which are China’s COP21 commitments and the need to power the world’s most populous country (1.36 billion people in 2013) with cleaner-burning fuels.

China, climate change and COP21: An opportunity for natural gas? Leave your comments below.

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