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For the Sake of the Global South, It’s Time for the World to Treat Natural Gas Like the Fossil Fuel It Is

In Egypt, at the 2022 UN climate convention, all eyes are on whether rich countries provide the money they have promised to poorer, less-developed nations to help them adapt to the devastation climate change has already brought to many of their countries, and to help them get on a cleaner, more resilient energy path.

Yet another decision rich countries will be pressed to make at COP is perhaps even more important when it comes to preventing the planet from overheating: Will climate funding from wealthy nations permanently support development of natural gas?

If rich countries decide to permanently revise climate financing criteria to enable the proliferation of fossil gas in the Global South, it could be a turning point in the fight against the climate crisis. Effectively, this decision would negate any possibility of keeping global warming below the 1.5°C target – the science-based threshold to avert the worst consequences of climate change and torpedo the goals heralded by the Paris Agreement.

Against this backdrop, many developing countries are now considering transitioning to fossil gas to drive their economic development. This is a bad idea for energy security, economic growth, and the global climate system.

Currently, climate finance provided by rich countries through multi-lateral funding entities like the Green Climate Fund do not allow for the financing of natural gas (further referred to as fossil gas). Over the past year, however, a handful of petrostates in the Global South have pressured rich countries — which provide concessionary climate finance to developing countries — to fund fossil gas projects.

Deceptively coined “natural” gas, this source of power generation has been seen as a bridge fuel between fossil fuel generation and clean energy for energy production. Wealthy countries like Germany have become highly reliant on fossil gas for their electricity generation. Although it is a cleaner fuel than fossil fuels like coal, the production of fossil gas leaks methane, which has 86 times the warming potential of carbon dioxide. When methane is allowed to escape into the atmosphere unburned, it is among the most dangerous of all greenhouse gases (GHGs) to the global climate system.

It is critical that developing countries learn from Europe’s painful experiences in 2022, when the price of fossil gas shot up exponentially, before supply from Russia was ultimately cut off due to ongoing political tensions.

Supply dependency. First, 80 percent of the world relies on importing fossil fuels from a handful of countries. This raises issues of energy security — underscored by the energy crisis Germany and other European countries are experiencing due to their reliance on Russia for their fossil gas. Clean energy is indigenous — 90 percent of people live in countries with abundant renewable energy — making it the ultimate form of energy security.

Price volatility. Second, due to the limited number of global suppliers, fossil gas prices are highly volatile. In the first half of 2022, prices averaged over $30/mmBtu — a tenfold increase from 2020, and twice as high as average prices last year — due to the Ukraine crisis and its impacts to Russian production, the second largest global producer of fossil gas. At the same time, renewable energy and storage costs, building on more than a decade of price declines, readily undercut fossil fuel costs in most of the world and are structurally poised to continue falling, even despite short-term increases due to inflation and supply chain pressures. Quite simply, the economics prove that fossil gas is not a good investment — particularly for countries that are still developing, as evidenced by the rapid scaling of wind technology in Brazil and China, and solar energy in Vietnam and India over the past decade.

GHG leakage. Finally, while fossil gas can be a cleaner fuel source than other fossil alternatives when utilized efficiently, developing country energy systems are often inefficient and are much more likely to leak unburned methane into the atmosphere. If a significant number of developing countries transition to fossil gas, it is highly probable that the amount of methane leaked into the atmosphere will increase significantly — a disaster for the global climate system.

Whether or not rich countries permanently revise climate finance criteria to enable the proliferation of fossil gas in the Global South — or emerging markets and developing economies choose to utilize fossil fuels as a significant part of their fuel mix as a driver toward economic development — the world’s global climate goals are already in serious jeopardy. That being said, it should be recognized that there are short term benefits in select geographies and sectors to leverage fossil gas in the immediate term.  However, the decisions being made today regarding the development of long term fossil fuel infrastructure and supply will resonate for years to come. It is important that these decisions be made with a full understanding of the consequences at stake.

For RMI’s in-depth analysis of how Global South countries can invest in their power sector and increase economic development without using liquified natural gas, read our new report: Power Sector Growth without Liquified Natural Gas.