Former senator and Secretary of State John Kerry has launched a new climate coalition complete with bipartisan support, Hollywood celebrities, and military leaders, according to reporting by The New York Times. While the starting funding of $500,000 is laughably small, the group's ability to cross political and ideological divides gives it intriguing potential to succeed.
So does the coalition's acknowledgement of the importance of one particular emissions-reducing tool: natural gas. As John Kasich, former governor of Ohio and a member of the new group, told the Times, "If I've got to sign up to be an anti-fracker, count me out." He was referring to hydraulic fracturing, the latest production method for natural gas.
Natural gas may not pass the climate action purity test or appease supporters of the Green New Deal, but the numbers make it clear that the fossil fuel will play a crucial role in meeting climate obligations. In fact, it already has -- and investors (and the planet) can continue to reap the benefits before it gets phased out.
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Step 1 is natural gas, not renewable energy
If the goal is to reduce emissions as quickly as possible, then it makes little sense to deride the advantages of natural gas. It's simple: Every metric ton of carbon dioxide (CO2) emissions avoided in 2020 counts for 30 metric tons of total CO2 emissions avoided in the three decades between now and 2050, the planet's agreed-upon due date for climate action. We should bank those savings however we can get them.
Today, coal is the lowest-hanging fruit to target for reducing planetary emissions. The United States generated roughly 1.3 billion tons of CO2 emissions from coal-fired power plants in 2017, more than the total emissions of all but four countries. China generated over 7 billion tons of CO2 emissions from coal for power and industry in 2017, 33% more than the total emissions of the United States, the world's second-leading emitter. Global climate change action must prioritize coal's demise.
The easiest way to replace coal today is with natural gas, which produces half the emissions for the same amount of electricity, is abundant, and allows for efficient heat production. The United States has proved this strategy.
According to analysis from the U.S. Energy Information Administration (EIA), the power sector of the United States saved 755 million metric tons of CO2 emissions by lessening its dependence on coal between 2005 and 2018. An estimated 58% of the emissions savings came from natural gas, with the remaining 42% coming from zero-carbon power sources. The latter includes increased output from nuclear facilities provided by efficiency gains to existing reactors, which were responsible for more emissions savings than solar energy in that span.
Of course, the world will eventually need to limit its use of natural gas, too, but the fossil fuel ranks well behind coal and petroleum in priority of emissions reduction efforts. While the United States will also lead the way on the next step of the energy transition (replacing natural gas with renewables), American natural gas will continue to play an important role in international climate policy.
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Emerging economies, and energy-poor ones, need natural gas
The United States has delivered steeper emission cuts than any other country this century. The problem is that China and India, two rapidly growing economies with expanding middle classes, have accounted for virtually all of the planet's emissions growth. Throw in Japan and South Korea and four of the world's top nine carbon spewers are in energy-poor Asia, primarily due to their reliance on coal. One solution may reside in American exports, specifically of liquefied natural gas (LNG).
The United States went from nonexistent energy exports in 2016 to the world's third-largest exporter of LNG in 2019. The world's top producers, Qatar and Australia, each have roughly 10 billion cubic feet per day (Bcf/d) of export capacity online, with more on the way. That's impressive, but the United States has an astounding 44 Bcf/d of export capacity awaiting regulatory decisions.
Right now, Cheniere Energy (LNG 0.96%) and Tellurian (TELL 28.11%) are two companies leading the charge.
Cheniere Energy was the first to earn regulatory approval for exporting large volumes of LNG. It expects to have up to 6.34 Bcf/d of export capacity online within the next few years, easily making it the nation's top exporter. The company reported $6.4 billion in LNG revenue and an operating profit margin of 21% in the first nine months of 2019. Both should increase as the company ramps up export volumes from its Sabine Pass and Corpus Christi terminals.
Tellurian doesn't expect to have its first export terminal, Driftwood LNG, operating until 2023, but it will be one of the largest in operation when completed, with an export capacity of 4 Bcf/d. The company recently signed a memorandum of understanding with Petronet of India in the presence of Prime Minister Narendra Modi. If the facility comes online within the expected timeline, then Tellurian could become a formidable growth stock for investors with a long-term mindset.
Realistic climate action includes natural gas
The ability to jettison coal from the power sector has the United States on pace to meet its carbon-reduction targets from the Clean Power Plan and the Paris Agreement until at least 2025 -- even though the federal government is no longer trying to do so -- according to an analysis from researchers at Carnegie Mellon University. That achievement wouldn't have been possible without natural gas.
While the United States can lean on favorable geography and falling costs of wind and solar to begin moving beyond natural gas in its power sector within the next few years, the same cannot be said for China and India. The two rapidly growing economies are at a different point in their trajectory, and therefore require different solutions than post-industrial economies in North America and Europe. They'll one day rely on renewables for the bulk of their energy needs, but they'll need a hefty dose of imported natural gas to get there. Luckily, John Kerry's climate coalition understands that.
