According to Drewry, several issues were discussed in the Group of Seven (G7) world leaders meet ranging from terrorism to climate change. But the most pertinent topic from the perspective of LNG shipping was leaders intending to stop using fossil fuels by the end of the century and reduce global emissions by up to 70% from 2010 levels by 2050.
The G7 leaders agreeing to phase out fossil fuels by the end of the century is certainly not good news for the LNG industry, as gas itself is a fossil fuel. However, the stakeholders of the LNG sector need not worry on this front, as the topic has been in news for long enough now. This also raises the question of what could be the possible alternatives to fossil fuels. Of course policy makers have renewable resources in mind, but we believe renewables have their inherent limitations (such as speed of wind and heat intensity). According to the EIA, only 11% of world’s energy consumption comes from renewable energy resources. The US, one of the largest consumers of energy added, 1.3 GW of solar capacity in the first quarter with plans to install additional eight GW this year. However, this will cater to only 1% of the total electricity demand.
The target of reducing carbon emissions is more reasonable, as developed countries have already started taking initiatives to reduce emissions. Considering the limitations of renewable sources of energy, gas will be the preferred choice as it is the cleanest of all the fossil fuels. China’s current five-year plan is promoting the use of gas while European countries are looking to increase carbon taxes to encourage the use of gas in power production. India is also trying to increase the share of gas in its energy mix. Since these countries do not have sufficient gas reserves and depend heavily on gas imports, they will continue creating demand for LNG shipping.
At a time when LNG shipping is going through a tough phase, the G7 meeting raises hopes and gives a positive message to the LNG shipping sector.
Source: Drewry
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