March towards net zero carbon could leave gas investments stranded: Study

This risk is seen because International Energy Agency had in June said that achieving net zero emissions globally would depend on halting all future fossil fuel development

A planned $379-billion expansion of gas infrastructure in Asia is based on the prospects of shifting from coal to natural gas but the assets risk becoming stranded. This risk is seen because the International Energy Agency had in June 2021 said that achieving net zero emissions globally would depend on halting all future fossil fuel development.

According to a new report by Global Energy Monitor (GEM), the increased investment comes in the wake of an unprecedented amount of coal cancellation throughout Asia, due to widespread public opposition, dwindling coal financing options, and ballooning coal plant costs. Rather than turn to zero-carbon renewable power, however, many countries are turning to gas.

Investment in natural gas projects are proposed and are under construction across East, South, and Southeast Asia. China dominates planned investment, accounting for $131 billion. Beyond China, the largest gas expansions by investment are planned in Vietnam, Indonesia, India, Thailand, Bangladesh, South Korea, the Philippines, Japan, Myanmar, Taiwan, and Pakistan.

Of those, India, Thailand, and Indonesia are the countries with the most investment in infrastructure currently under construction, building projects amounting to about $16 billion, $8 billion, and $7 billion, respectively, said the report.

India’s planned coal power has decreased nearly 90 per cent from 250 Gw to 28 Gw since 2015, while coal power under construction more than halved, from 79 Gw to 36 Gw. India has $29.5 billion of gas projects in development, including 1 Gw of gas-fired power, 21,000 km of gas pipelines, and 68 mtpa of LNG import capacity.

Japan canceled all planned coal plants in 2021 and pledged to end new overseas coal plant finance. Yet earlier this year, Japan pledged US$10 billion in public and private financial aid for “decarbonization projects in Asia including coal-to-gas switching.” Japan has $13 billion of gas projects in development, including 15 gigawatts (Gw) of proposed new gas-fired power plant capacity.

The report quotes from a latest draft of Vietnamʼs new Power Development Plan (PDP) that proposed no new coal plants except those already under construction or planned for completion by 2025. However, the PDP called for 18 Gw of LNG-based power capacity, which would amount to 13 per cent of Vietnam’s energy mix by 2030. Overall the country has $58.6 billion of gas projects in development, of which $52.8 billion are gas plants.

China, however, continues to plan and build more coal plants than the rest of the world though newly commissioned coal plants have fallen from the 2005-2015 peak, and the country is looking to gas to fill some of its heating and power needs. There are plans to develop an estimated $130.5 billion of new gas projects in China, including 90 Gw of new gas-fired power capacity.

In 2020, the Philippines declared a moratorium on new coal plants that were not already in the permitting pipeline. Now the country plans to build $14 billion in new gas infrastructure, including 16 Gw of new gas-fired power capacity, which would represent a five-fold increase on existing capacity.

South Korea has committed to no new coal plants entering into construction, and to ending overseas finance for coal plants. Yet South Korea has projects amounting to $16.1 billion in the gas development pipeline, including 20 Gw of new gas-fired power capacity in the construction and pre-construction phases.

“Asia’s proposed gas build-out is a risky, $379 billion bet,” said Robert Rozansky, author of the report. “If built, this new fleet of gas infrastructure could threaten Asian countries’ efforts to reach net-zero emissions by the middle of the century, while leaving them with assets that are—or soon will be—uncompetitive against ever cheaper renewable power. It’s a lose-lose proposition for the climate and Asian countries’ economies.”

“Emissions from existing gas projects are already too great for the world to have at least a 50% chance of limiting global warming to 1.5 C,” said Ted Nace, Executive Director of GEM. “If built, these new Asian gas projects would lock-in emissions for decades, and worsen the long-term effects of climate change.”

GEM’s study finds that public institutions provided $22.4 billion in financing for gas projects in Asia between 2014 and 2018. Recent announcements by the Asian Development Bank, World Bank, and others show that these institutions have not yet committed to withdrawing from gas financing, and remain open to funding midstream infrastructure and power.