IEA: The Role of Gas

The Role of Gas in
Today’s Energy
Transitions
1 | The Role of Gas in Today’s Energy Transitions | IEA 2019. All rights reserved.
Foreword
Natural gas is one of the mainstays of global energy: Overall, the case studies in this report show that the
worldwide consumption is rising rapidly and in 2018 gas contribution of gas to energy transitions varies widely
accounted for almost half of the growth in total global across regions, between sectors and over time. They
energy demand. Gas plays many different roles in the also highlight the limits of this contribution: gas cannot,
energy sector and, where it replaces more polluting of course, do it all. It can bring environmental benefits,
fuels, it also reduces air pollution and limits emissions of but it remains a source of emissions in its own right and
carbon dioxide. But how widespread and durable is this new gas infrastructure can lock in these emissions for
role in clean energy transitions? the future.
This report from the IEA’s World Energy Outlook team So there is homework to do for the gas industry. The
provides an evidence base for this important discussion. near-term priority is to minimise emissions all along the
It finds that switching to natural gas has already helped chain from gas production to consumption, with a
to limit the rise in global emissions since 2010, alongside particular focus on methane emissions. For the longer
the deployment of renewables and nuclear energy and term, the industry needs to explore seriously the
improvements in energy efficiency. possibilities to reduce further the emissions intensity of
gas supply via biomethane or low-emissions hydrogen.
More significantly, it finds that existing infrastructure in
the power sector offers an immediate opportunity for Our analysis also highlights another crucial variable for
major additional emissions reductions, if the economic the future, both for coal and gas: the extent to which
and policy conditions are right. This would be enough to emissions are mitigated by large-scale deployment of
turn the rising emissions trend around and get global carbon capture, utilisation and storage technologies.
emissions back down to where they were six years ago.
Air quality is another important consideration, especially
in many emerging economies.
This report reflects the IEA’s “all fuels and technologies”
approach to energy policy, as we seek to shape a more
secure and sustainable energy future. I take this
opportunity to extend my sincere appreciation to all
those who provided input and advice in its preparation.
Dr Fatih Birol,
IEA Executive Director
Executive summary
This World Energy Outlook special report examines the so would bring down global power sector emissions by
role of fuel switching, primarily from coal to natural gas, 10% and total energy-related CO2 emissions by 4%.
to reduce emissions of carbon dioxide (CO2) and air
pollutants. Four case studies, covering the United States, The environmental case for new gas infrastructure is
the European Union, the People’s Republic of China more complex, but we find that in more carbon-intensive
(“China”), and India, reveal the various opportunities, energy systems like China and potentially India, it can
hurdles and limits of fuel switching as a way to address play a significant role alongside the rise of renewable
environmental challenges. energy. Unlike in the US and Europe, the power sector is
not likely to be the main arena for switching. In China,
It is clear that switching between unabated consumption the focus has been on the residential and industrial
of fossil fuels, on its own, does not provide a long-term sectors, as part of a strong policy push to improve air
answer to climate change, but there can nonetheless be quality. In India, much will depend on the pace at which
significant CO2 and air quality benefits, in specific new city gas distribution infrastructure is built out;
countries, sectors and timeframes, from using less switching in the Indian context may affect demand for
emissions-intensive fuels. Deployment of carbon liquids more than coal.
capture, utilization and storage technologies, for both
coal and gas, is another crucial variable for the future. Our analysis takes into account both CO2 and methane
emissions. On average, coal-to-gas switching reduces
The clearest example is the ‘quick win’ for emissions from emissions by 50% when producing electricity and by
running existing gas-fired plants instead of coal-fired 33% when providing heat. Best practices all along the
plants to generate electricity. We estimate that up to 1.2 gas supply chain, especially to reduce methane leaks,
gigatonnes of CO2 could be abated in the short term by are essential to maximise the climate benefits of
switching from coal to existing gas-fired plants, if relative switching to gas.
prices and regulation are supportive. The vast majority of
this potential lies in the United States and in Europe. Doing
Table of contents
Key findings…....……………………………………………………………………………….…………………………………….……………………………………................. 6
Natural gas and its competitors.………………………..………………………….……………………..………………………….………………………….……….. 20
The environmental case for switching.……..….………………………….…………….………………….…….….…………….………………….…………….. 32
United States.......…………………………………………………………………………………………………….………………………………………………………………. 46
European Union ….….…………..………….………………..………………..….………….…………..….………………..………………..….……………………………… 57
People’s Republic of China..….....…………………………….………………………………………………………...………………………………………..…………. 72
India…….……...………………..……………………………….…………..……….……………..……….……..……..…………..……….……………..……….….……….……. 92
Annex….…….……..……………..……………………………...…………..……….……………..……….……..…………………………………………………………………. 105
Key findings
Key findings
Coal-to-gas switching has helped prevent faster growth in emissions since 2010…
CO2 savings from coal-to-gas switching by region compared with 2010
2011 2012 2013 2014 2015 2016 2017 2018

0
Mt CO₂
- 200
- 400
- 600
United States China Europe India Rest of world
Note: Mt CO2 = million tonnes carbon dioxide. Coal-to-gas switching includes emissions reductions in sectors where the market share of coal decreased, and the market
share of gas increased within each region. The baseline increase in emissions assumes no improvement in the carbon intensity of energy or the energy intensity of gross
domestic product (GDP) since 2010. Savings are calculated as those which occur compared to 2010.
Key findings
… mainly in the United States and China
After three flat years, global energy-related CO2 In China, gas demand has risen very quickly in recent
emissions resumed growth in 2017 and 2018; annual years because of a major policy push to improve air
emissions of more than 33 Gt represents a dangerous quality. Gas has substituted for coal-fired industrial and
disconnect with global climate goals. residential boilers in many urban areas, but switching is
much less evident in the power sector.
These emissions would have been closer to 40 Gt
without changes in the global economic and energy With the notable exception of the United Kingdom, coal-
system since 2010 : these include reductions in the to-gas switching has not been a major factor in Europe
energy intensity of the world economy, in part due to in recent years, but today’s configuration of low gas
greater efficiency, as well as reductions in the carbon prices and higher CO2 prices in the European Union is
intensity of the energy sector related to the rise of now giving this process renewed momentum.
renewables and switching to less carbon-intensive fuels.
Coal-to-gas switching avoided more than 500 million In India, gas currently has a small share of the energy
tonnes of CO2 emissions over this period. mix. Large-scale switching has been held back by supply
constraints and affordability issues, as well as a lack of
The role and potential for emissions savings from coal- infrastructure.
to-gas switching vary significantly between different
regions. In this analysis, we provide four case studies to
illustrate these contrasts.
The largest emissions savings from coal-to-gas switching

occurred in the United States. The remarkable rise of shale
gas has pushed down natural gas prices and underpinned
large-scale switching from coal to gas in the power
sector, where emissions dropped by a fifth since 2010.
Key findings
Existing power infrastructure offers a “quick win” for emissions reductions, with
further potential savings in excess of 1 Gt of CO2
Potential CO2 savings from coal-to-gas switching in the power sector at different gas prices, 2019
9
USD/Mbtu
India
8
7 China
6 Europe
5
United States
4
Rest of World
3
0
0 100 200 300 400 500 600 700 800 900 1 000 1 100 1 200
Mt CO₂
Note: MBtu = million British thermal units. Values refer to the average gas price needed for spare available natural gas-fired power generation capacity to be used to
displace coal in 2019. Each region’s average plant efficiencies, maximum capacities, and load factors are taken from the World Energy Outlook’s New Policies Scenario.
Average delivered coal cost to power plants (per MBtu): United States: USD 2.50 European Union: USD 5.00; China: USD 3.50 India: USD 3.00. Carbon prices applied to
Europe (EUR 15/t CO2), Canada, Japan, South Korea, South Africa, Chile and Mexico.
Key findings
Europe has the largest immediate gas switching opportunity with

current fuel and CO2 prices
The clearest case for switching from coal to gas comes The scale of switching depends on relative prices and on
when there is the possibility to use existing infrastructure regulation. Ample supply from new liquefied natural gas
to provide the same energy services but with lower capacity has helped push spot prices in Europe below
emissions. Given the time it takes to build up new USD 5/MBtu in 2019; with a rising carbon price, this has
renewables and to implement energy efficiency put more than two-thirds of the European Union’s gas-
improvements, this also represents the quickest route to fired capacity within a competitive switching range. In
emissions reductions. the United States, a further 200 Mt CO2 can be avoided
in the United States if prices fall by USD 1/MBtu.
The vast majority of near-term switching potential lies in
the electricity sector: we estimate that up to 1 200 Mt Realising the full global potential for switching would
CO2 could be abated worldwide by switching from coal require an extra 450 billion cubic metres (bcm) of gas
to existing natural gas-fired power plants. each year, some 12% of today’s global gas production.
If all of this were to be utilised, it would reduce global

coal demand by 15%, bring down global power sector
emissions by 10% and total energy-related CO2 emissions
by 4%.
Most of these potential savings lie in mature energy

markets with relatively flat electricity demand growth
and significant spare gas capacity, notably the United
States and Europe. These markets could displace around
half of their respective coal-fired power output.
Key findings
The potential to switch away from Asia’s young coal-fired fleet is more limited…
Share of coal-fired plants in selected countries/regions by age
Age (years)
China
0-10
10-20
20-30
India
30-40
40+
Europe
United States
0% 20% 40% 60% 80% 100%
Key findings
… and gas is not the main challenger to coal for electricity generation in China
and India
Using existing power sector infrastructure to switch from India does have spare gas-fired capacity, and running it
coal to gas is one of the least-expensive abatement at higher utilisation rates could reduce power sector
options in the United States and Europe. But it is a much emissions by around 25 Mt CO2 . However, much of this
more difficult proposition in China and India, where capacity is sitting idle because an expected wave of
electricity market dynamics, demand trends, and relative cheaper domestic gas never materialized and – as in
prices are different, and there is not much spare gas- China – imported gas is too expensive to find a place in
fired capacity. the merit order.
China has a large, young, and highly efficient coal-fired In both countries, at the prevailing gas prices, new
fleet. Investment decisions for new gas-fired power onshore wind and solar photovoltaic (PV) are much
stations in China were slightly higher than coal-fired cheaper ways to generate electricity than new
plants in 2018, for the first time, but the coal fleet is combined-cycle gas turbines (CCGTs). Under these
nonetheless ten times larger than the gas-fired fleet. circumstances, the major contribution of gas-fired
Potential savings of around 100 Mt CO2 from switching generation to displacing coal is likely to be an indirect
are small relative to China’s overall power sector one, by aiding the integration of renewables.
emissions of 4 500 Mt CO2 .
Relative prices make switching challenging, even with

the planned introduction of a CO2 price in China from
2020. We estimate that gas prices would need to fall
below USD 4/MBtu to generate market-based switching at
scale; this is less than half the cost of today’s imported gas.
Key findings
In China, coal-to-gas switching is underway in industry and in the residential sector

as part of the fight for cleaner air
Range of air quality measurements for the “2+26” cities and Chinese monthly gas consumption
300 30
μg/m³
bcm
Particulate matter
250 25
200 20 Monthly natural

gas consumption
(right axis)
150 15
100 10
50 5
0 0
2015 2016 2017 2018
Note: µg/m3 = microgramme per cubic metre. The “2+26” cities are Beijing and Tianjin, plus an additional 26 cities in the surrounding provinces of Hebei, Henan, Shanxi, and
Shandong.
Sources: IEA analysis based on air quality data from the Ministry of Ecology and Environment.
Key findings
Further switching in China – and the outlook for India – will depend on policies, prices
and infrastructure
Gas has low or zero emissions of the main air pollutants: opting for electric heating, suggesting that Chinese
the policy push for coal-to-gas switching in China has provincial governments still back the expansion of gas
been concentrated in urban areas, with the objective to networks, despite concerns about affordability and
replace coal-fired boilers in industrial facilities and higher imports.
residential buildings. These smaller-scale boilers (unlike
those at large coal-fired power plants) are rarely India, like China, has ambitions to expand the role of gas
equipped with advanced pollution controls and are a in its energy mix. The example of the state of Gujarat, on
major contributor to poor air quality. Reducing their use, the country’s west coast where per capita gas use is ten
particularly for winter heating, is a key part of the effort to times the national average, shows that gas can gain
“make China’s skies blue again”. ground. Bidding rounds in 2018 and 2019 reflect a major
ambition to expand India’s city gas infrastructure for
In the industrial sector, improved access to gas for industry, residential cooking and water heating, and
Chinese consumers is an important complement urban compressed natural gas (CNG) transport.
to the country’s gradual shift towards lighter
manufacturing sectors. In the residential sector, an extra However, gas networks in India have faced numerous
27 million households were connected to the gas grid in permitting and financing issues, and affordability remains
2005-16 and an additional 7 million in a major hurdle. In the absence of sufficient access to gas,
2017-18 alone. China, unlike India, has a significant the expansion of India’s industrial base may continue to
requirement for residential winter heating. be characterised by a high reliance on coal.
Electricity provides the main alternative route away from

reliance on coal. However, not all industrial applications
can easily switch to electricity, and the number of new
residential gas users in 2018 was twice as high as those
Key findings
A full lifecycle analysis shows the emissions benefits of gas versus coal …
Full lifecycle emissions intensity of global coal and gas supply, 2018
Heat Electricity
2 000 2 000
kgCO₂-eq/MWh
1 500 1 500
1 000 1 000
500 500
0 0
0% 20% 40% 60% 80% 100% 0% 20% 40% 60% 80% 100%
Coal Natural gas
Note: kg CO2-eq = kilogrammes carbon dioxide equivalent; MWh = megawatt hours; Mtoe = million tonnes of oil equivalent. Emissions intensities include both indirect and
combustion emissions for coal and gas. Horizontal axes equal the total gas and coal used for heat and electricity in 2018 (this excludes coking coal). Heat
includes 1 000 Mtoe of coal and 1 300 Mtoe of gas used for heat in industry and buildings in 2018. Electricity includes 2 600 Mtoe of coal and 1 300 Mtoe of gas used in
power plants. For electricity, coal and gas are converted to electricity using the average efficiency of power plants across the 25 regions included in the World Energy
Model. One tonne of methane is assumed to be equal to 30 tonnes of CO₂-equivalent (the 100-year global warming potential).
Key findings
… and suppliers can enhance these benefits with high standards all along the gas
value chain
Natural gas releases less CO2 than coal when programmes or the electrification of liquefied natural gas
combusted, but a complete comparison of the climate (LNG) liquefaction have the potential to further reduce
impacts of the two fuels must also incorporate their the emissions intensity of natural gas. The oil and gas
indirect emissions – the CO2 and methane released industry is placing increased emphasis on reducing
during production, transport and processing. methane emissions along the supply chain, while some
governments are considering measures to ensure gas is
Our detailed assessment of today’s lifecycle emissions produced and delivered in as clean and environmentally
of gas and coal supply finds that switching to natural conscious a manner as possible.
gas yields significant emissions reductions in nearly all
cases. In 2018, gas on average resulted in 33% fewer Beating coal on environmental grounds sets a low bar for
emissions than coal per unit of heat used in industry natural gas, given there are lower-emissions and lower-
and buildings, and 50% fewer emissions than coal per cost alternatives to both fuels. The falling cost of
unit of electricity generated. renewable technologies in the power sector is the
clearest case in point. In many power markets, wind and
While there is a wide variation across different sources of solar PV are already among the cheapest options for new
coal and gas, we estimate that over 98% of gas generation, and the role of gas is coming under pressure
consumed today has a lower lifecycle emissions intensity as a result. The volume of electricity generated by gas-
than coal when used for power or heat (coking coal is fired plants can be squeezed, but they can nonetheless
excluded from this comparison since it is used as a provide important value by guaranteeing flexible and
reducing agent in steel production). reliable operation of fast-changing power systems.
There is significant scope to further measure and

address indirect emissions from oil and gas supply. For
example, upstream leak detection and repair
Key findings
Looking ahead, the opportunity for gas to contribute to further emissions reductions
differs by region
Change in gas demand in the New Policies Scenario and Sustainable Development Scenario, 2017 versus 2040
500
bcm
400 New Policies

Scenario
300
200
Sustainable
Development
100 Scenario
- 100
- 200
- 300
China India United States European Union
Key findings
Overall, coal-to-gas switching provides around 8% of the emissions reductions

needed in the Sustainable Development Scenario …
The contribution of coal-to-gas switching to global emissions reductions in the Sustainable Development Scenario
40
Gt CO₂
Other
35 Coal-to-gas
switching
30
25
20
15
10
0
Emissions NPS Reductions SDS NPS Reductions SDS
2018 2025 2040
Note: NPS = New Policies Scenario; SDS = Sustainable Development Scenario. Coal-to-gas switching includes the contribution of gas fitted with carbon capture, storage,
and utilisation technology. Other includes emissions reductions from improvements in end-use efficiency; greater deployment of renewables, biofuels, and nuclear energy;
reducing upstream emissions; and other fuel switching.
Key findings
… but the benefits provided by gas need to be weighed against the risks of locking in
future gas-related emissions
In the World Energy Outlook New Policies Scenario to Gas plays a more prolonged role in emerging economies
2040, gas use increases by an average of 1.6% each year, that are very carbon-intensive today, helping to push more
helping to meet existing energy policy commitments polluting fuels out of the system, notably in China and
and ambitions. However, the New Policies Scenario puts India’s industrial sectors. Gas demand is, therefore, similar
energy-related CO2 emissions on an upward trend to in China between the New Policies Scenario and the
2040, far from the emissions trajectory required to Sustainable Development Scenario and is higher in India.
tackle climate change.
While renewables and efficiency do the heavy lifting, coal-
Renewable energy and efficiency measures are the most to-gas switching contributes around 8% of the emissions
important drivers of the energy sector transition of the savings required in the Sustainable Development Scenario.
Sustainable Development Scenario – a scenario that is Switching also helps to improve air quality, especially in
fully consistent with the Paris Agreement. Natural gas still the near term; it contributes to the 50% reduction in coal-
plays a role in this scenario, although this varies by based sulphur dioxide (SO2), and particulate matter (PM2.5)
country, sector, and timeframe. emissions in the period 2015-25.
In mature markets like the United States and European A crucial variable for the future is the extent to which
Union, coal-to-gas switching is a compelling near-term carbon capture, storage and utilisation (CCUS)
option for reducing emissions, given existing technologies are deployed. CCUS can reduce emissions
infrastructure and spare capacity. Gas can also from the combustion of coal and gas in power
contribute to security of supply by balancing variable generation and deliver deep emissions reductions in
renewables and meeting peaks in demand. However, industrial sectors such as steel, cement and chemicals.
given the need for decarbonisation efforts to intensify, a CCUS plays a role in the Sustainable Development
role for unabated gas in the energy mix becomes Scenario, especially for industry, but this would require a
increasingly challenging beyond 2030. major acceleration in deployment compared with today.
Natural gas and its competitors
Natural gas and competitors
Gas has had a golden run
Gas demand for 2018 compared with projections from the IEA report, Golden Age of Gas (2011)
4 000
bcm
3 000
2 000
1 000
0
2008 2018 2018 Golden Age of Gas projection
Renewables and gas have been the major growth stories of recent years …
In 2011, a World Energy Outlook special report asked There have been noticeable shifts in individual sectors
whether the world might be poised to enter a “golden and countries, but the growth in renewables and gas –
age of gas”. This upside scenario for gas was based on alongside steady improvements in energy efficiency –
supportive assumptions about gas availability and price, has not yet pushed the consumption of other fuels into
as well as policies on the demand side that could decline. Global coal use did fall in 2015-16 but has since
promote its use in certain countries, notably China. bounced back. Oil demand has been robust, rising at an
annual rate of well above 1 million barrels per day.
A few years on, global gas consumption is now very
close to this golden age projection; the story of a relative
abundance of gas – led by the United States – has come
to fruition, and economic expansion and air quality
concerns have underpinned rapid growth in China.
Natural gas accounted for 45% of the increase in global
energy demand in 2018.
The rise of natural gas has been accompanied by a

strong increase in renewable energy, particularly in the
power sector, where renewables accounted for 45% of
the growth in power generation in 2018. Renewables
now account for around one-quarter of total power
generation worldwide, second only to coal (at 38%).
Expanding the use of low-carbon electricity is a major
vector for energy transitions.
… but global CO₂ emissions have yet to turn a corner
Change in global energy-related CO2 emissions by year
600
Mt CO2
400
200
- 200
2014 2015 2016 2017 2018
Is gas part of the solution, or part of the problem?
After three flat years, global energy-related CO2 policies, and technologies will be required at different
emissions resumed growth in 2017 and 2018, a trajectory times. These will be led by renewables and efficiency,
that represents a dangerous disconnect with global but – in certain timeframes and sectors – we find that
climate objectives. switching away from more polluting fuels to gas can play
an important role.
Natural gas has low air pollutant emissions, giving it the
potential to rapidly improve air quality when substituting Gas delivers valuable energy services, some of which –
other combustible fuels. Switching from coal to gas also notably seasonal storage, high-temperature heat for
reduces CO2 emissions by around 40% for each unit of industry, and winter heating for buildings – are difficult to
energy output. Methane leaks to the atmosphere along replicate cost-effectively with low-carbon alternatives.
the gas and coal value chains (considered in detail The problem lies with the related emissions, either from
below) are also an important part of the picture. combustion or from methane leaks. As discussed below,
these emissions can be reduced.
It is evident that switching between the unabated
combustion of fossil fuels, on its own, is not going to
provide the answer to the challenge of climate change.
This was recognised in our 2011 analysis: a golden age of
gas does not mean a golden age of emissions
reductions.
But this does not preclude a role for gas in the

transformation of the energy sector. There is no single
solution to turn emissions around: multiple approaches,
There have been major shifts in the coal–gas balance in key markets
Change in shares of coal and gas in primary energy in selected countries and regions between 1990 and 2018
80%
1990
Share of coal in primary energy
70%
China 2010
60% 2018
50%
India
40%
30%
United States
20%
10%
European Union
0% 5% 10% 15% 20% 25% 30% 35%
Share of gas in primary energy
Gas plays very different roles in the four countries and regions examined in
this report
The four countries and regions chosen for in-depth Switching to natural gas has a long history in Europe; the
analysis in this report – the United States, Europe, China development of indigenous gas resources in northwest
and India – display a wide range of market and policy Europe during the 1960s and 1970s supported a move
dynamics, which affects the ways in which coal and gas away from oil and coal in the residential heating sector,
compete. and there were also notable shifts away from coal to gas
in industry and in power. However, since 2010, the
Thus far, gas has played a relatively minor role in the shares of both coal and gas have fallen as policy support
energy mix in both China and India. In both cases, the for renewables and efficiency has accelerated.
energy mix is dominated by coal: China and India
account together for more than 60% of global coal In the United States, the shale revolution has had a
demand today. Both countries are large producers of dramatic effect on gas supply and prices. Alongside
coal, and the affordability, convenience, security and some state-level as well as federal-level environmental
economic activity associated with domestic coal supply policies – such as Mercury and Toxic Standards (MATS)
features in policy discussions alongside the undoubted regulations governing industrial pollutant emissions –
environmental downsides of its use. this has pushed gas into the energy mix while pushing
out coal. Since 2005, the market share of gas has
In recent years, gas consumption and imports have increased more than any other energy source.
grown very strongly in China, pushed primarily by
increasing Chinese concerns about the quality of the
country’s development, and the quality of the air in
particular. These policy efforts have produced a 30%
increase in gas demand in the last two years. India also
has ambitions to expand the role of gas in its energy mix,
but these have not yet been realised because of supply,
infrastructure and affordability issues.
Helped by the US shale revolution, gas is becoming more competitive versus coal
worldwide…
Difference in levelised cost of electricity from natural gas (CCGT) versus coal plants (supercritical) in selected regions
USD/MWh 15 15
United European
USD/MWh
States Union
0 0
- 15 - 15
- 30 - 30
2013 2014 2015 2016 2017 2013 2014 2015 2016 2017
80 80
China India
USD/MWh
USD/MWh
60 60
40 40
20 20
0 0
2013 2014 2015 2016 2017 2013 2014 2015 2016 2017
Notes: Levelised cost of electricity (LCOE) is calculated as LCOE of gas CCGT minus LCOE of supercritical coal in each region.
… but the economic case for gas varies widely by region
The shale revolution in the United States has brought at around USD 4/MBtu to USD 4.5/MBtu for Europe and
down the prices at which gas markets find equilibrium USD 5/MBtu to USD 5.5/MBtu for Asian destinations.
around the world, first indirectly – as gas originally
developed for the US market sought alternative While subject to variation, these costs alone (excluding
consumers – and now directly via US gas exports. The the underlying costs of the gas itself) already exceed the
growth of destination-flexible, hub-priced LNG exports delivered costs of coal imports at USD 100/t. This means
from the United States is providing a catalyst for a more that a policy push is typically required in gas-importing
liquid global gas market. markets to bolster the case for coal-to-gas switching.
This can take the form of a CO2 price or other regulations
However, even though global gas markets are becoming that tilt the calculation in favour of gas.
more interconnected, there is still no “global gas price”.
The lower energy density of gas compared to oil or coal How the economics work for gas depends also on how
means that transportation by pipeline or as LNG takes a the fuel is used and what alternatives are available. This
relatively high share of the delivered cost, making can vary widely across different parts of the energy
geographical proximity to resource-rich areas an sector and will also vary over time with the falling cost of
important determining factor for affordability. key renewable technologies.
In regions and countries that import gas over long

distances, as is the case for Europe, India and China,
processing and transport costs push up the price of gas
significantly compared with exporting countries like the
United States. These regional price differentials, relative
to the United States, settle in the New Policies Scenario
Gas is going head-to-head with coal in power and industry…
Selected flows of coal and gas in the global energy balance, 2017
Note: Industry includes other energy sector and other non-energy use. Figure excludes gas and coal use in the transport sector.
… but there are alternatives beyond gas, and their costs are falling faster
Change in capital costs of selected fuels and energy technologies
120
2010 = 100
Upstream oil
and gas
100
Solar PV (utility-
80 scale)
Onshore wind
60
40 Battery storage
(utility-scale)
20
0
2010 2011 2012 2013 2014 2015 2016 2017 2018
Source: IEA analysis using calculations for solar PV and wind costs based on data from International Renewable Energy Agency (IRENA).
The competitive landscape for gas therefore varies substantially by sector
The switching calculation for gas, and the competing buildings sector comes from electricity, the direct
fuel, changes across different parts of the energy sector. application of renewables, e.g. from heat pumps, and
The main arena for competition between coal and gas in from energy efficiency.
the United States and Europe has been electricity
generation, but – as we discuss below in the case studies In the transport sector, natural gas can provide an
– this is not necessarily the case in the emerging markets alternative to oil products for passenger, freight, and
of Asia. maritime uses. Gas is often cheaper (USD 70/barrel of oil
is equivalent to USD 12.50/MBtu gas) and offers
Among the end-use sectors, industry is a major source of advantages in terms of pollutant emissions – although
projected growth in gas demand. Gas has a clear only a 20% reduction in CO₂ emissions. However,
competitive advantage in industrial applications where it refuelling infrastructure is typically a constraint, and in
displaces more costly oil products. Light industries (e.g. most countries, electricity is emerging as the preferred
manufacturing, textiles, and food and beverages) that way to move away from oil for passenger vehicles.
rely on coal may also be willing to switch to gas even if it
is more costly, simply because gas is more convenient
and cleaner.
The majority of gas used in buildings today is for space

heating. However, demand for space heating in most
developing countries is limited (with the important
exception of China), even though other end uses, such
as cooking and water heating, are increasing in
importance. The competition for gas in the
What is the environmental case for switching?
The environmental case
Gas makes a relatively small contribution to today’s emissions…
Share of gas in total energy-related emissions of selected air pollutants (2015) and CO₂ (2018)
Particulate matter 32 Mt
Sulphur dioxide 73 Mt
Nitrogen oxides 108 Mt
Carbon dioxide 33 Gt
20% 40% 60% 80% 100%
Gas Coal Oil Bioenergy Non-combustion
Note: Non-combustion emissions are process emissions in industry and non-exhaust emissions in transport.
Source: IEA analysis based on data from International Institute for Applied Systems Analysis (IIASA).
…Making gas an ally in the fight to curb the health impacts of poor air quality
Premature deaths attributable to household and outdoor air pollution, 2015
Household: 2.6 million Outdoor: 2.9 million
Africa 21%
Rest of world
China 32% 15% Europe 14%
China 31%
Other Developing
Asia 7%
Other
Developing Southeast
Asia 11% Asia 10%
India 25% Rest of world 2% India 18% Africa 9% Southeast Asia 6%
Source: IEA analysis based on data from International Institute for Applied Systems Analysis (IIASA).
Combustion emissions from gas are limited but rising as gas use grows
The emissions that arise from the combustion of natural As of 2018, the combustion of gas was responsible for
gas show clear advantages for gas relative to other fossil 21% of energy sector CO2 emissions, well behind the
fuels and, for particulate emissions, a favourable shares of coal (44%) and oil (35%). However, the share of
comparison with bioenergy. gas in global CO2 emissions is edging higher as its role in
the energy system expands, in some areas at the
In relation to CO2, the combustion of natural gas results expense of coal.
in emissions savings of some 40% relative to coal for
each unit of energy output. The advantage over oil is less In the New Policies Scenario, gas-related CO2 emissions
striking but still substantial: CO2 emissions from gas rise from just under 7 Gt today to almost 10 Gt in 2040,
combustion are around 20% lower than for oil. corresponding to an increase in the share of gas in total
emissions from 21% to 27%. In the Sustainable
The edge of natural gas over other combustible fuels is Development Scenario, gas-related CO₂ emissions in
reinforced by looking at the emissions of the main air 2040 are around today’s levels but comprise a much
pollutants: PM2.5; sulfur oxides, mainly SO2; and nitrogen larger share of the total, at almost 40%.
oxides (NOX). These three are responsible for the most
widespread impacts of air pollution, either directly or
once transformed into other pollutants via chemical
reactions in the atmosphere.
The controlled burning of natural gas releases very few

particulate emissions into the air, while nearly all SO2
naturally present in natural gas is removed prior to
transport. The combustion of natural gas does produce
NOX, although gas accounts for less than 10% of global
energy-related NOX emissions.
Coal-fired power is by far the largest component of today’s CO₂ emissions
Global energy-related CO2 emissions
35
Gt CO₂
Other
30
25 Other coal use
20
Coal-fired power
generation
15
10
0
1990 1994 1998 2002 2006 2010 2014 2018
There is a huge disconnect between today’s emissions trends and global climate goals
Driven by higher energy demand, in 2018 global energy- In addition to coal used for power generation, there is
related CO2 emissions rose by 1.7% to a historic high of just under 4.5 Gt of coal-related emissions in end-use
33.1 Gt CO2. Emissions from all fossil fuels increased, and sectors; most of this is for industrial use (steam coal and
the power sector accounted for nearly two-thirds of coking coal), although there is also some continued use
emissions growth. of coal for municipal and residential heating.
Coal-fired power plants were the single largest Global energy-related CO2 emissions need to fall below
contributor to the growth in emissions observed in 2018, 18 Gt by 2040 to meet the objectives of the Sustainable
with an increase of 2.9%, or 280 Mt, compared with 2017 Development Scenario. This includes a 75% reduction in
levels. Nearly 10 Gt of CO2 emissions – around one-third coal-related emissions compared to today’s levels.
of global energy sector emissions – comes from coal-
fired power generation, making this by far the largest
single category of emissions.
Coal’s shift to Asia continued in 2018. The growth in

demand for coal took place in only some countries in
Asia – China, India, and a few other countries in South
and Southeast Asia – primarily because of the increased
demand for electricity in these countries. Southeast Asia
was the only region where the share of coal-fired
generation in the power mix increased in 2018: coal use
in Indonesia, Viet Nam, the Philippines, and Malaysia
increased significantly.
Indirect emissions along the gas supply chain are dominated by methane …
Indirect GHG emissions intensity from global gas production, processing, and transport in 2017
500
Methane
kgCO2-eq/MWh
450
400
LNG and pipeline
350
300
Extraction, processing
250 and venting CO₂
200
150
100
50
0
0 500 1 000 1 500 2 000 2 500 3 000
mtoe
Notes: Extraction, processing, and venting CO2 includes emissions from the energy used to power the drilling equipment, maintain pressure in the reservoir, power auxiliary
services, and process the natural gas, and emissions of any naturally-occurring CO2 that is vented to the atmosphere. LNG and pipeline includes emissions that occur
during the liquefaction, shipping, and regasification of LNG or emissions from pipeline compressor stations. Methane includes both upstream and downstream emissions;
one tonne of methane is assumed to be equal to 30 tonnes of CO₂-equivalent (the 100-year global warming potential).
… which is an increasing focus for both industry and policy makers
The environmental impact of coal-to-gas switching These emissions dominate the indirect emissions
needs to consider all sources of emissions that occur, intensity of gas supply, and minimising methane is the
including those prior to consumption: CO2 and methane key mechanism for reducing the environmental impact
are released during producing, transporting, and of gas supply.
processing gas and coal (these are known as “indirect
emissions”). A number of policy and industry initiatives are underway
to improve the understanding of methane emissions
For this study, we conducted a new comprehensive from oil and gas operations and to reduce these
global assessment of the emissions arising from coal emissions. Canada has a target to reduce oil and gas
supply, complementing our earlier analysis (in the World methane emissions by 40-45% below the 2012 level by
Energy Outlook 2017 and 2018 editions) of emissions 2025. The Oil and Gas Climate Initiative aims to improve
along the gas value chain. This analysis takes into methane data collection, develop and deploy cost-
account how gas and coal are produced, processed, effective methane management technologies, and
transported, and ultimately consumed across different reduce emissions by one-third by 2025.
regions.
Methane emissions from gas operations can occur both

from unintended leakages and intentional releases (e.g.
for safety reasons). Emissions are highly variable across
regions, supply chain routes, processes, and equipment.
While there is a high degree of uncertainty surrounding
the level of emissions today, we estimate that natural gas
operations result in around 40 Mt of methane globally
today.
Indirect emissions from coal are lower than gas but display an even broader range
Indirect GHG emission intensity from global coal supply, 2018
500
kgCO2-eq/MWh
Methane
450
400
Transport
350
300 Extraction and

processing
250
200
150
100
50
0
0 500 1 000 1 500 2 000 2 500 3 000 3 500
mtoe
Notes: GHG = greenhouse gas. Extraction and processing includes emissions from the energy used to power the mining equipment, coal washing, and auxiliary services.
Transport includes emissions that occur during shipping or rail transport. Methane includes emissions from active surface and underground mines; one tonne of methane
is assumed to be equal to 30 tonnes of CO₂-equivalent (the 100-year global warming potential).
Source: IEA analysis based on data from CRU group.
Gas is nearly always better than coal on a lifecycle basis
There are also major indirect emissions from coal Coal mining also requires energy to extract, process, and
production. For this report, we developed new estimates transport the coal. On average, coal supply results in
of the CO2 and methane emissions that occur in the around 120 kg CO2-eq/MWh coal delivered to consumers.
global coal supply chain. There is a very wide variation in the full indirect emissions
intensity of different sources of coal: the highest 10%
Methane can be released in various ways during coal emissions-intensive coal results in five times more indirect
mining, including from the degasification and ventilation emissions than the lowest 10%. Indirect emissions from
systems in underground coal mines, exposed coal gas are greater at 170 kg CO2-eq/MWh, reflecting the
seams in surface mines, abandoned mines, and post- additional processing required for gas and the difficulty in
mining activities, such as storage and transport. The type transporting gas over long distances.
of coal and geological conditions at the time of
formation and burial affect how much methane is Coal combustion, however, results in much higher
present in coal seams. emissions than natural gas. On a full lifecycle basis,
comparing coal and gas used for power generation or
Globally, we estimate that there is close to 40 Mt of for heat, we find that 98% of gas consumed today has a
methane emitted as a result of coal supply. Underground lower emissions intensity than coal.
coal mines contain greater volumes of methane than
surface mines, but emissions can often be captured The lifecycle emissions intensity of gas and coal is
more easily since the concentration of methane in the subject to a high degree of uncertainty. Harmonised
emitted air is greater. Coal mine methane can be used as approaches to measurement as well as verification
a fuel at the mine site or sold, making an economic case procedures are required to reconcile wide disparities in
for investing in methane recovery systems. top-down and bottom-up estimates.
But “beating coal” is not enough to make a case for gas
The emissions reductions from coal-to-gas switching are Where new gas infrastructure is required, the situation is
significant, but beating the most carbon-intensive fuel is more complex. If new gas infrastructure prevents the
not in itself a persuasive case for gas if there are lower- combustion of more polluting fuels, this can increase
emissions and lower-cost alternatives to both fuels. The absolute emissions but reduce them relative to what
falling cost of renewable technologies in the power they would have been. In some instances, new gas
sector is the clearest case in point. In many markets, infrastructure may also deliver services that cannot be
wind and solar PV are already among the cheapest cost-effectively provided by low-carbon alternatives, e.g.
options for new generation. peak winter heating, seasonal storage, or high-
temperature heat for industry.
Moreover, the increased combustion of natural gas does
not provide a long-term pathway to global climate From a policy perspective, a key comparison is between
objectives, so policy makers need to be wary about the costs and feasibility of expanding the electricity grid
locking in gas-related emissions even as they reduce versus the expansion of a gas grid that could eventually
emissions from coal. also deliver decarbonised gases (renewable methane or
hydrogen) as well as providing important energy
The discussion about coal-to-gas switching has to be security benefits.
framed carefully, and we consider the different aspects
of this in the case studies below. The clearest case is
when there is the potential to switch to gas using the
existing infrastructure. This opens up the possibility of
quick wins for emissions reductions, which is particularly
important given the cumulative nature of carbon budgets.
LNG is playing an increasingly important role in global trade in gas
Final investment decisions in new LNG liquefaction capacity
60
bcm per year
50
40
30
20
10
0
2014
2013
2010
2011
2012
2015
2018
2016
2017
2019H1
Australia Russia United States Canada Others
Best practices all along the gas supply value chain can enhance the climate gains
from switching
Average lifecycle GHG emissions for coal and sources of natural gas for China in 2025
500
kg CO2-eq/MWh
Methane
400
Indirect CO₂
Combustion CO₂
300
200
100
0
Coal Pipeline gas Domestic LNG imports "Clean" LNG
production imports
Note: Indirect emissions are any CO2 emissions that occur during the production, processing, and transport of the coal or gas. Methane includes both upstream and
downstream emissions; one tonne of methane is assumed to be equal to 30 tonnes of CO₂-equivalent (the 100-year global warming potential). Clean LNG assumes that
methane emissions from upstream operations and transmission are eliminated and that the LNG liquefaction process is powered by zero-carbon electricity.
Suppliers can shape the environmental case for gas
A key factor in the emissions spectrum is the delivery There are promising avenues to further reducing the
method for natural gas. In the New Policies Scenario, emissions arising from LNG imports, including
over 80% of the growth in global gas trade to 2040 minimising methane emissions and electrifying the
comes in the form of LNG, with the majority making its liquefaction process using low-carbon electricity (which
way to Asia. The total spectrum of emissions arising from can eliminate nearly all of the emissions associated with
the production, transport, and delivery of LNG from the LNG process). There is one electric LNG plant
around the world to Asia is, therefore, an important part currently in operation (the Snøhvit facility), and others
of the environmental calculation for coal-to-gas switching. are under construction or under consideration (Freeport
LNG in Texas, as well as a number of projects in Canada,
The liquefaction process for LNG is energy intensive and such as LNG Canada, Woodfibre, and Kitimat).
often emissions intensive (since gas is itself usually used
to provide this energy). Pipeline transport also results in This “cleaner” LNG would provide a 40% reduction in
emissions (gas is used in compressor stations along the GHG emissions from coal-to-gas switching (for
pipeline), but LNG transport is, in general, more production of heat), compared with a 30% reduction if
emissions intensive than pipeline transport. these mitigation strategies were not in place.
In our estimates, LNG imports to China result in fewer

emissions than pipeline imports, given the methane
emissions that occur along the value chains (this is not
always the case, and in Europe, for example, the emissions
intensity of pipeline gas today is lower than LNG).
Case study:
United States
Case study: United States
Coal-to-gas switching has been responsible for nearly one-fifth of total

US emissions savings since 2010
Breakdown of cumulative emissions reductions in the United States versus baseline projection since 2010
2010 2011 2012 2013 2014 2015 2016 2017 2018

0 Nuclear
Mt CO₂
Renewables
- 500
Coal-to-gas switching
Structural economic
changes and
efficiency
-1 000
-1 500
Note: Chart shows emissions reductions compared to a baseline in which there are no improvements in energy intensity.
The power sector has been the key arena for coal-to-gas switching
Share of coal and gas in total electricity generation Generation capacity changes, 2004-18
100% 50
GW
80% 25
60% 0
40% - 25
20% - 50
0% - 75
2004 2006 2008 2010 2012 2014 2016 2018 2004-08 2009-13 2014-18
Coal Natural gas
Increased natural gas use has made a visible impact on US CO2 emissions
The environmental benefits of using natural gas in The result has been a 70% increase in natural gas-fired
power generation depends on whether it is displacing power generation since 2005, with gas now responsible
more polluting fuels, i.e. coal and oil, or whether it is for a third of total US electricity generation. There has
satisfying incremental demand that could be met by been a corresponding decline in the share of coal-based
lower-carbon sources. generation from 50% to 30% today. Alongside growth in
renewables and advances in efficiency, coal-to-gas
In the case of the United States, coal-to-gas switching switching has contributed to the 21% drop in US power
has been responsible for around 18% of carbon emission sector emissions intensity since 2010.
savings since 2010, with the remaining reductions mainly
attributable to structural economic changes, energy In 2018, however, emissions from natural gas grew by
efficiency, and renewables. 10%, contributing to the year-on-year increase in overall
energy-related emissions of nearly 3%. This highlights
The increase in natural gas use in power generation has that increased reliance on gas, on its own, does not
been a market-driven phenomenon, underpinned by provide a pathway to lower emissions.
ample supplies of low-cost natural gas, significant spare
capacity, and the relatively low costs of adding
incremental gas capacity. Within an established
liberalised power market, in which different sources of
power compete on a marginal cost basis, lower gas
prices have fed through smoothly to changes in the
power mix.
Existing infrastructure offers significant potential for further coal-to-gas switching…
Cost of potential emissions abated from coal-to-gas switching in the United States in 2020
60 ISO region:
$/t CO₂
Southwest
50
Southeast
40
Northwest
30
New England ISO
20 Midwest
10 Mid-Atlantic
ERCOT
0
Central
- 10
Other
- 20
0 50 100 150 200 250 300 350
Mt CO₂
Note: ERCOT = Electricity Reliability Council of Texas; ISO = independent system operator. The values refer to the average CO₂ price needed for spare available natural gas-
fired power generation capacity to be used to displace coal in 2020. Savings are calculated by taking plant-level generation and emissions from existing coal and gas
plants in 2017 as a baseline, applying net capacity changes by 2020 and calculating switching costs using regional commodity prices for 2018.
… but this is very sensitive to natural gas prices
Coal and gas power plant cost curve at different gas prices
Henry Hub = USD 3/MBtu Henry Hub = USD 5/MBtu
60 60
USD/MWh
Natural gas
50 50
Coal
40 40
30 30
20 20
10 10
0 0
0 100 200 300 400 500 600 700 0 100 200 300 400 500 600 700
GW GW
What is the potential for further coal-gas switching in the US power sector?
Coal-to-gas switching avoided 200 Mt CO2 in emissions However, a carbon price above USD 35/t would also
in 2017 compared to 2010. This was below the favour alternatives to gas, such as solar PV and onshore
reductions that could be possible using existing gas wind. The costs of these technologies are falling,
plants. Technically, almost 400 Mt CO2, or 20% of total bolstering the economic case to switch from coal
US power sector emissions, could be avoided in a single directly to renewable energy.
year if the spare available gas capacity were used to
replace the output from coal-fired power. Much depends on the price level at which gas is available
in different parts of the United States. On the one hand, a
With the load factors for the gas fleet averaging 32% significant rise in Henry Hub prices, for example, would
over the past five years, unlocking further switching shift the majority of coal-fired power capacity back to the
potential relies on supportive economics. However, the bottom of the merit order. On the other, persistently low
relative costs of switching differ across the electricity gas prices may accelerate the retirement of coal-fired
balancing regions of the United States, depending on capacity: a large proportion of the US coal fleet is facing
the composition, age, and operating costs of their the need for significant near-term investment in order to
respective coal and gas fleets. continue operations, and anticipation of low natural gas
prices may deter operators of coal-fired capacity from
In states with ample CCGT capacity and access to a committing to this expenditure.
low-cost gas supply, up to 100 Mt CO2 can be saved
from switching at little to no net cost, whereas
switching in major coal-producing states would require
a further swing in relative prices in favour of natural gas
(or, alternatively, a carbon price in a range of USD 40/t
CO2 to USD 55/t CO2).
Anticipated cost reductions in renewables narrow the opportunity for gas to aid
emissions reductions …
Capacity receiving final investment decision Value-adjusted levelised cost of generation in 2020
20 200
USD/MWh
GW
15 150
10 100
5 50
0 0
2010 2012 2014 2016 2018 Wind Nuclear Solar PV Coal Wind Gas
offshore onshore CCGT
Natural gas Solar PV
Note: The value-adjusted levelised costs of generation (VALCOE) combine the projected levelised costs of electricity with the simulated energy value, flexibility value, and
capacity value by technology (but excluding network integration costs).
… and renewables are changing the role of gas in some US states
Daily electricity generation profiles in California
10 April 2018 10 December 2018 10 April 2019
20
GW
15
10
0
00:00 06:00 12:00 18:00 00:00 00:00 06:00 12:00 18:00 00:00 00:00 06:00 12:00 18:00 00:00
-5
Renewables and hydro Natural gas Net trade Nuclear and others
Source: IEA analysis based on data from California Independent System Operator (CAISO).
Switching provides a significant contribution to additional emissions reductions in

the United States in the Sustainable Development Scenario
The contribution of coal-to-gas switching to US emissions reductions in the Sustainable Development Scenario
5
GtCO₂
4 Other
0
Emissions NPS Reductions SDS
2018 2025
Note: NPS = New Policies Scenario; SDS = Sustainable Development Scenario.
Renewables and storage can potentially displace gas in some states, but the case for
quick wins through coal-to-gas substitution remains strong
Year-on-year declines in investment in gas-fired gas power plants (reflected in the IEA’s value-adjusted
generating capacity since 2014, and the falling costs of levelised cost of electricity generation), it does not
renewables and battery storage technologies are clear automatically translate into increased natural gas use
signs of the competitive pressures on natural gas. in power generation.
Some US states are already moving beyond coal-gas In the Sustainable Development Scenario, switching
switching. California is one of the few states that has from coal to natural gas saves a further 160 Mt CO2 in
seen reductions in natural gas-fired power generation, as 2025, equal to nearly a quarter of the required
ambitious decarbonisation targets are translating into emissions reductions. Beyond this period, conventional
the rapid deployment of renewables. gas power plants play an increasingly important role in
providing system flexibility, while baseload generation is
As the case of California demonstrates, the daily met by plants fitted with carbon capture, storage and
generation profile of natural gas (and electricity trade utilisation technology.
with neighbouring states) is being reshaped by
renewables. Depending on the renewables output, which
varies on both a daily and seasonal basis, gas is variably
required to step in to provide baseload, peak, or back-up
capacity to balance the electricity grid.
Even with falling battery costs, natural gas is currently

the most viable near-term option in most parts of the
United States for balancing variable renewable energy
at scale and providing essential load-following
services. While this raises the capacity value of natural
Case study:
European Union
Case study: Europe
Since 2010, high natural gas prices and low CO₂ prices have ruled out significant
coal-to-gas switching in most European Union countries …
Breakdown of cumulative emissions reductions in the European Union versus the baseline projection since 2010
2010 2011 2012 2013 2014 2015 2016 2017 2018

Mt CO₂
0
Nuclear
Renewables
- 500 Coal-to-gas switching
Structural economic
changes and efficiency
-1 000
-1 500
Case study: Europe
… but switching to gas has a longer history in Europe
Total gas and coal consumption in the Changes in sectoral consumption,

European Union 2018 compared to 1980
800 100
mtoe
mtoe
600 50
400 0
200 - 50
0 - 100
1980 2018
Power Residential Industry
Natural gas Coal
Note: European Union grouping consists of all 28 member states in 1980.
Case study: Europe
The residential sector was the first to move in many countries
Residential gas and coal use in the Residential gas and coal use in Germany, 1985-95
United Kingdom, 1970-80
25 25
mtoe
20 20
15 15
10 10
5 5
0 0
1970 1972 1974 1976 1978 1980 1985 1987 1989 1991 1993 1995
Natural gas Coal
Case study: Europe
Divergent pathways for coal and gas in the European Union
The combined share of gas and coal in the EU energy mix Due to muted electricity demand growth and large
has stayed relatively stable since 1980. However, the roles investments made in the early part of the century, the
of the two fuels have swapped: gas use has grown from European Union has significant gas-fired generation
11% of the European Union energy mix in 1980 to around a capacity. This makes gas a candidate for stepping in to
quarter today, while there has been a corresponding replace the gap left by declining coal (as well as nuclear)
decline in coal, with its share halving to 15%. baseload power.
Switching was underpinned by both demand- and However, for most of the 2010s, high gas prices and low
supply-side developments. The discoveries of large gas carbon prices have prevented gas from challenging
resources in the United Kingdom and the Netherlands coal-fired power plants in providing thermal baseload
provided the catalyst for the expanded use of gas in the electricity. Coupled with the strong growth in
1960s and 1970s, which largely replaced coal as well as renewables, this has left gas plants struggling to find a
gasoil. In Germany, household gas use further place in the merit order in parts of continental Europe.
expanded following structural changes in the economy
after reunification in 1990.
Today, 75% of the coal remaining in the European Union

is consumed in the power sector, with most of the
remainder used in energy-intensive industries. Around a
quarter of coal-based electricity generation comes from
lignite, which has higher combustion emissions but is
typically priced at a level much lower than hard coal.
Case study: Europe
The United Kingdom’s carbon price floor accelerated the phase-out of coal-fired
power
UK electricity generation from coal and gas
Carbon price floor introduced

20 500
g CO₂/kWh
TWh
CO₂ intensity of
power generation
(right axis)
16 400
Coal
12 300
Natural gas
8 200
4 100
0 0
2013 2014 2015 2016 2017 2018 2019
Source: IEA analysis based on Balancing Mechanism Reporting Service (BMRS) data © ELEXON Limited.
Case study: Europe
With higher CO₂ prices, the economics of coal-to-gas switching in the EU power
sector are becoming more favourable …
Historic gas, coal, and CO₂ prices in the European Union and gas price economics that would stimulate coal-to-gas switching
40 40
EUR/MWh or EUR/t CO₂
Gas price (EUR/MWh)

30 30
20 20
10 10
0 0
0 10 20 30
2014 2015 2016 2017 2018
CO2 price (EUR/t CO2)
Switching range Natural gas
Coal price (EUR/MWh) 6 8 10 12
Hard coal CO₂
Note: The “switching range” in the left-hand chart is the level below which gas prices need to lie to encourage coal-to-gas switching; the range indicates the price levels in
which most of this switching would occur across the European Union’s power fleet. The lines on the right-hand chart show the level below which gas prices need to fall for
a 55% efficiency gas plant to replace a 38% efficiency coal plant in the merit order (efficiencies represent weighted averages for the European fleet).
Source: IEA analysis based on Bloomberg data.
Case study: Europe
… and the phaseout of coal could provide additional short-term opportunities for gas
Coal generation capacity in the European Union in Announced coal phase-out plans
the New Policies Scenario
200 100
UK
GW
GW
Italy
Netherlands
100 75
France
Finland
Denmark
0 50 Portugal
Ireland
Austria
- 100 25 Sweden
Germany
- 200 0
2018 2025 2030 2040
36
34
30
8
38
32
40
26
24
20
28
22
1
20
20
20
20
20
20
20
20
20
20
20
20
Remaining coal Policy-driven Retirements
Note: Policy-driven refers to coal-fired capacity in countries that have announced coal phase-out plans; Germany is still consulting on its coal phase-out plan. Other
retirements refer to assumed capacity retired in the New Policies Scenario in other countries (due to factors such as economics and plant age); by 2040, most of the
remaining coal lies in European Union member countries that currently have no coal phase-out policies (i.e. Bulgaria, Croatia, Czech Republic, Greece, Poland, Romania and
Slovak Republic).
Case study: Europe
The power sector is the final frontier for coal-to-gas switching in the European Union
In the United Kingdom, coal-gas switching has equivalent to 20% of the European Union’s power sector
contributed to a drop of 50% in the emissions intensity emissions (or 6% of its annual energy-related CO2
of power generation since 2010. Changes in the United emissions). Some lignite plants and coal-based
Kingdom’s power mix preceded those in much of combined heat and power (CHP) units, however, would
continental Europe; one of the key reasons was the require far higher CO2 prices to eventually lose their
introduction of a carbon price floor in 2013, which place in the merit order.
imposed a minimum cost to generators of GBP 9/t CO2.
This was doubled in 2015. Coal phase-out policies also provide an opening for
natural gas, along with renewables, to replace the retiring
A reform of the EU Emissions Trading Scheme (which will coal capacity. Sixteen European countries are part of the
place surplus carbon allowances in a Market Stability Powering Past Coal Alliance, which is pushing for the
Reserve from 2021) has raised the generating costs for closure of existing coal-fired power plants over the
fossil fuel plants, particularly coal. The favourable coming decades. In the New Policies Scenario, these
combination of low gas prices and high coal and carbon plans lead to the retirement of over 80 GW (or half of the
prices has recently put a large portion of Europe’s gas total coal capacity) by 2040, with the remainder subject
fleet within a switching range. However, the switch has to strong competitive pressures due to higher CO2 prices.
also provoked a drop in coal prices, making the range a
moving target.
With gas, coal, and CO₂ prices lying in respective ranges

of EUR 15-20/MWh, EUR 6-10/MWh, and
EUR 20-25/t CO2, existing gas capacity could step in to
replace up to half of the European Union’s
coal-fired power. This would save around 220 Mt CO2,
Case study: Europe
While existing gas can provide “quick wins” for emissions, the case for building new
baseload gas capacity is challenged by renewables
Indicative emissions savings over a 20-year period when spending EUR 5 billion on a European power project
40
CO₂ abated (Mt)
35
30
25
20
15
10
0
Year 5 Year 10 Year 15 Year 20
New CCGT Existing CCGT Onshore wind
Notes: Assumes each technology’s total electricity output (Existing CCGT = 50 terawatt hours [TWh], Onshore wind = 41 TWh, New CCGT = 39 TWh) replaces the equivalent
output of a supercritical coal plant with 42% efficiency. Existing CCGT efficiency = 55%. New CCGT efficiency = 62%. Investment costs in new capacity are those borne by
plant owners and do not take into account integration costs or revenue from non-energy markets. Commodity prices, capital costs, and financial and operational
assumptions, including construction lead times, are derived from WEO 2018.
Case study: Europe
How wide is the switching window?
There is around 220 GW of installed gas capacity in the As in the United States, the role of switching in Europe is
European Union, with utilisation rates over the past five therefore time-limited. The retirements in coal capacity
years averaging 28%. do not translate automatically into increased gas use: the
combination of government support and higher carbon
Compared with building new renewables, switching to prices provides strong incentives for an increased
existing gas plants can provide faster emissions market share for renewables.
reductions. This can be an important consideration for a
European energy system focused on delivering a rapid The business case for new gas-fired capacity to reduce
turnaround in emissions. For example, replacing a emissions is also challenging. Weak wholesale power
supercritical coal plant with an existing 400 MW prices in renewables-rich systems are not incentivising
combined cycle gas power plant could provide a slightly investments in new thermal capacity; over half of the
higher level of CO2 savings in the first five years of revenue from a new combined cycle gas turbine would,
operation than a new onshore wind project (given the therefore, need to come from sources other than
time needed to commission new renewable capacity). wholesale power prices. As a result, gas plants may
largely remain on standby and recover their costs by
However, the costs of renewables are falling rapidly, fulfilling balancing functions, rather than providing
making several mature technologies, such as onshore significant quantities of baseload power.
wind and solar PV, very competitive with the costs of
generating electricity from existing gas-fired power
plants. By extending the timeline in the example above
to 20 years, a new onshore wind project would
ultimately provide 30% more CO2 savings than the
existing gas plant (even when accounting for
construction times and lower power output).
Case study: Europe
Gas infrastructure is sized to meet significant peaks in Europe’s energy service

demand
Comparing the monthly consumption of electricity and gas in the European Union
700
TWh
Electricity
600
Natural gas
500
400
300
200
100
2015 2016 2017 2018
Case study: Europe
… meaning gas fulfils security and seasonal balancing functions that are not
easily replicated by a renewables-based power system
Europe’s gas infrastructure comprises an annual energy definitive; demand-side response, for example, can
delivery capacity of nearly 1 000 bcm – nearly twice that reduce peak loads in Europe by up to 25% by 2040,
of the electricity grid on an energy-equivalent basis. while cheaper battery storage could obviate the need for
a further 5 GW of peaking gas plant capacity (or around
Significant demand for heat in buildings means gas plays 10% of the fleet).
a crucial seasonal balancing role that is difficult to
replicate using electricity. While seasonal peaks gradually The future for gas in Europe’s electricity market
reduce over time thanks to ambitious efficiency policies, depends, in particular, on how services such as flexibility
the European Union in aggregate still requires a gas and capacity provision are remunerated and incentivised
delivery capacity of at least 60 bcm per month in 2040 in a system with increasingly variable power delivery,
to meet normal peak winter load. and how quickly renewables can be added. There
remain, however, fewer low-carbon alternatives to gas in
Short-term peaks in the demand for gas in the power meeting seasonal heat demand, a consideration that is
sector are set to rise in order to help integrate larger spurring interest in the costs and supply potentials for
shares of renewables. There is, therefore, a strong case low- or zero-carbon gases (a topic that we will take up in
for gas-based infrastructure for the flexibility and back- the 2019 edition of the World Energy Outlook).
up capabilities it provides for power systems with high
levels of intermittent renewable energy, such as solar
and wind.
This case is being challenged, in some respects, by

increasing investments in battery storage and grid
management capabilities, which – if brought to scale –
could fulfil the same short-term flexibility functions as
gas. The technological potential is promising but not yet
Case study: Europe
Minimising indirect emissions is critical to the environmental case for natural gas in
the European Union
Indirect GHG emission intensity from the production, processing, and transport of gas consumed in the European
Union, 2018
250
Downstream methane
kgCO₂-eq/boe
Upstream methane
200 LNG
Pipeline
150 Vented CO₂

Energy
100
50
0
0 50 100 150 200 250 300 350 400 450
bcm
Note: boe = barrel of oil equivalent. One tonne of methane is assumed to be equal to 30 tonnes of CO₂-equivalent (the 100-year global warming potential).
Case study: Europe
Gas supply and infrastructure need to adapt to the demands of decarbonisation
The European Union is currently examining the pathways The need to ensure that conventional gas is as “clean” as
to reach a CO2 neutral energy system by 2050, exploring possible is also receiving an increasing amount of
options to decarbonise gas as well as repurpose gas- attention. There is a wide range in the emissions intensity
based infrastructure – which represents a large sunk of natural gas consumed in Europe today, with
cost – to support other low-carbon options for providing estimated methane leaks along the value chain the most
heat and mobility. The debate is also moving ahead on important factor in the ranking of domestic production
how and where in the supply chain carbon can be and imports. Differentiating sources of gas by their
captured and then either utilised or stored. emissions intensities would be a powerful tool to
encourage gas suppliers to improve the environmental
Recent research and development (R&D) efforts, performance of operations.
particularly in northwest Europe, have focused on the
potential to blend hydrogen in the existing network, While switching from coal to gas provides immediate
though the higher the percentage the more substantive emissions reductions, and existing infrastructure can
are the changes required along the supply chain. support wider decarbonisation efforts, the case for new
gas infrastructure needs careful evaluation. New projects
There is also increasing interest in the possibility to can contribute to Europe’s gas security and a well-
expand use of biomethane, a pure source of methane functioning single market, but also need to find a place
mainly upgraded from biogas. While the current in Europe’s clean energy transitions.
production of biomethane is only around
2 bcm (or 0.4% of EU gas demand), several European
countries are exploring ways to scale-up biomethane
production as a means to decarbonise the gas supply
while retaining the use of well-established gas networks.
Case study:
People’s Republic of China
Case study: China
Coal-to-gas switching in China is aimed at improving air quality, but has also helped
to limit the growth in CO₂ emissions
Breakdown of cumulative emissions reductions in China vs baseline projection since 2010
2010 2011 2012 2013 2014 2015 2016 2017 2018

Mt CO₂
0 Nuclear
Renewables
-1 000
-2 000 Structural economic

changes & efficiency
-3 000
-4 000
Case study: China
Gas has been a key ally in China’s war on pollution
A strong policy push to improve air quality is the main The BTH areas were since expanded to cover the “2+26”
factor behind the strong growth in demand for natural cities (Beijing and Tianjin, plus an additional
gas in China in recent years. Air quality concerns have 26 cities in the surrounding provinces of Hebei, Henan,
been high on the political agenda since 2013, when the Shanxi, and Shandong) in an accelerated effort to
Air Pollution Action Plan kick-started a period of improve air quality.
progressively more stringent restrictions on coal use in
certain areas, tied to measurable targets for air quality Under the Clean Winter Heating Plan, almost 2 billion
improvements. square metres of floor area within the “2+26” cities is
intended to be heated using natural gas. Provincial and
Early efforts imposed restrictions on small coal-fired municipal government subsidies have been made
boilers in urban areas, particularly in the Beijing-Tianjin- available for installing natural gas boilers; up to half the
Hebei (BTH) areas, with a corresponding emphasis on costs of grid connection and appliance installation are
the expansion of city gas use. The 2014 Strategic Action subsidised, with additional support covering a portion of
Plan for Energy Development set the target of increasing household gas bills.
the share of natural gas in China’s energy mix from 6% to
10% by 2020.
Policies and enforcement measures have become tighter.

Current efforts under the Clean Winter Heating and Blue
Sky action plans set specific goals for the expansion of
natural gas, as well as for electricity, geothermal, and
“clean coal” technologies, to replace coal use for heat
demand; this is intended to combat peaks in air pollutant
emissions during the winter heating season.
Case study: China
Access to natural gas in China has greatly increased in recent years
Percentage of the population with access to natural gas
2005 2017
% of population with gas access
These maps are without prejudice to the status of or sovereignty over any territory, to the definition of international frontiers and boundaries and to the name of any territory, city, or area.
Source: IEA analysis based on data from National Bureau of Statistics of China.
Case study: China
Household coal-to-gas switching has taken place mainly in urban areas, while rural
coal use continues to increase
Rural and urban coal and urban gas use in China
60
mtoe
Rural coal
Urban natural gas

50
Urban coal
40
30
20
10
0
2000 2002 2004 2006 2008 2010 2012 2014 2016
Note: In 2016, there was less than 0.1 Mtoe of rural natural gas use in China.
Case study: China
Policies have underpinned substantial household switching
Access to natural gas in the residential sector expanded Rural residential coal contains higher quantities of
fivefold during 2005-16, connecting an additional 27 sulphur, nitrogen, and ash than the more refined coal
million households. Since then, air pollution measures available to large-scale industrial users, which also
have resulted in nearly 7 million additional households have air quality control systems. Although this lower
switching from coal to natural gas or electricity for quality coal accounts for only 10% of total coal
heating in 2017/18, with a further 3 million conversions consumption in the 2+26 cities, it is responsible for half
planned to be completed by 2021. of air pollutant emissions. This implies greater air
pollution reduction benefits from effecting a switch
China’s efforts to expand gas use have helped to bring away from coal in rural areas.
PM2.5 concentrations in the 2+26 cities down from the
significant peaks seen during the winter of 2016/17, but China’s National Energy Administration is seeking to
they still lie largely above China’s national air quality expand biogas production to promote rural coal-to-gas
standards, which cannot exceed 35 μg/m³ on an annual switching, with plans to reach a level of 30 bcm by 2030
basis (or up to 75 μg/m³ daily). (from less than 10 bcm today). Liquids such as fuel oil or
propane, or electricity, also represent viable alternatives
On a provincial level, most of the increase in gasification to gas in rural households.
has occurred in provinces near to where gas is produced
(Sichuan, Chongqing, Qinghai, and Xinjiang), as well as
large urban centres, such as Beijing and Shanghai.
Several northern provinces targeted for clean heating
have also seen significant increases. Much of the
switching to date has occurred in urban areas as the
costs and the long-term business case for connecting
rural customers are more challenging.
Case study: China
There is significant further potential for switching in the residential sector …
Percent of residential demand met by coal and gas in 2016
Coal Natural gas

60%
40%
20%
0%
Hubei
Guangxi
Yunnan
Jilin
Jiangxi
Liaoning
Heilongjiang
Ningxia
Hainan
Sichuan
Shandong
Henan
Zhejiang
Fujian
Xinjiang
Beijing
Guizhou
Hunan
Anhui
Chongqing
Shanxi
Shanghai
Jiangsu
Qinghai
Inner Mongolia
Hebei
Tianjin
Gansu
Shaanxi
Guangdong
Total 20-30 10-20 Mtoe 1-10 Mtoe

residential Mtoe
demand:
Notes: Coal refers to direct use; some provinces, particularly in Northern China, rely on district heating which comes primarily from coal-based co-generation.
Co-generation refers to the combined production of heat and power.
Case study: China
… even though gas is not the only game in town
Range of costs for low versus high annual household Emissions intensity of household heating options in the
heating requirements, 2020 New Policies Scenario, 2020 versus 2040
3 000 700
USD/Household
2020
gCO₂/Kwh
2040
600
2 500
500
2 000
400
1 500
300
1 000
200
500 100
0 0
1500 - 3000 8000 - 12000

KWh
District heat Coal boilers Gas condensing boiler Electric heater Air source heat pump
Note: KWh = kilowatt hour. The values in the left-hand chart refer to the capital costs of each heating technology, excluding the associated costs of infrastructure (e.g. new
gas distribution or electricity networks) as well as operation and maintenance costs. Any applicable subsidies are excluded from this figure. Currently, over 90% of district
heating is provided by coal combustion.
Case study: China
Overall, there is the prospect for a significant near-term boost to gas use in China’s
buildings sector…
Chinese space heating demand for buildings in the New Policies Scenario
2017 2025
160 Mtoe 175 Mtoe
6%
11%
13% 23%
11%
43%
13%
18%
19%
8%
17% 18%
Coal District heating Gas Electricity Oil Other
Note: Excludes bioenergy.
Case study: China
… as gas appears well placed to see off heated competition
China’s air quality efforts are not only focused on gas. Because of greater efficiency, air source heat pumps
There are also efforts to promote “clean coal” have a similar emissions intensity to gas boilers, but they
technologies by replacing small coal-fired boilers with represent a higher cost option whose uptake depends
both centralised and decentralised co-generation on stronger government subsidies.
systems (combined heat and power, or CHP), most of
which currently run on coal. The momentum behind gas remains strong: the total
number of new gas users in 2018 was twice as high as
Some provinces have supported heat pumps and those opting for electric heating, suggesting that
electric heaters. In places such as Beijing, Shandong, and provincial governments are continuing to support the
Shaanxi, the majority of new customers opted for expansion of natural gas networks, despite recent
electricity over gas in 2018. In some cases, electric space difficulties caused by winter supply shortages
heaters are able to compete with gas for households (discussed below).
with lower heating requirements, i.e. in southern areas of
China. For households in the north with greater space Over the period to 2025, gas more than doubles its
heating needs, gas has a competitive advantage against market share in the heating demand for buildings from
electricity-based options. 8% to 20%, while coal (including for CHP) drops from
60% to 42%. Electricity use also sees modest growth,
Since the majority of electricity comes from coal, there claiming nearly a fifth of the total. China’s district heat
are currently fewer environmental advantages of using network – the world’s largest – remains dominated by
electric heaters; the average CO2 intensity of gas boilers coal but sees growing levels of switching toward natural
(250 grammes of CO2/kWh) is less than half that of gas.
electric heaters today, and this sizeable gap narrows only
slightly in the New Policies Scenario by 2040.
Case study: China
In industry, the possibilities for gas vary by subsector
Gas and coal usage and energy costs in China’s industrial subsectors in 2016
15%
Gas share of energy use
Coal consumption
(10 mtoe)
12%
Finished metal
Machinery
Fuel processing
Foods
9%
Beverages
Chemicals
6%
Medicine Textiles Iron & steel Metals
Agricultural foods
Rubber and Plastics
3%
Coal mining
Non-metallic minerals
0%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
Energy cost as % of principal business expenditure
Note: Projections based on the New Policies Scenario. Principal business expenditure refers to the total costs incurred by the main business activity as reported to China’s
National Bureau of Statistics.
Source: IEA analysis based on National Bureau of Statistics of China.
Case study: China
Gas stands to benefit from changes in China’s industrial heat demand
Changes in Chinese industrial heat demand in the New Changes in gas and coal consumption in the
Policies Scenario, 2017 versus 2040 New Policies Scenario, 2017 versus 2040
200 200
mtoe
mtoe
100 100
0 0
-100 - 100
-200 - 200
Low Medium (100- High Natural gas Coal
(<100 °C) 400 °C) (>400 °C)
Iron and steel Cement Chemicals Other industries
Note: Projections based on the New Policies Scenario.
Case study: China
Can China provoke an industrial switch?
Natural gas use makes up only 5% of total industrial On a fuel cost basis, the prospects for gas are better for
energy demand, compared with a global average of 22%. lighter industries, such as manufacturing, textiles, or
There is significant potential for gas to make inroads into ceramics. For these consumers, gas has other
coal’s market share, which is currently over half of total advantages, such as greater efficiency, reduced energy
industrial energy demand. storage costs, lower air pollutants, and more flexibility.
The majority of coal use in industry is used in iron and In the New Policies Scenario, declines in industrial coal
steel, petrochemicals, and cement. The prospects for demand to 2040 are driven by reductions in the high
switching in these subsectors are more challenging, as a temperature segment – mainly iron & steel and cement,
significant portion of coal is used for non-combustion as China’s economy undergoes structural change. Gas
processes, and their emissions therefore cannot be increases its overall share in industrial energy demand to
easily avoided by a switch to alternative fuels. Carbon almost 20%.
capture, storage and utilization technology is a critical
route to reduce emissions in these subsectors. Natural gas performs equally well in the Sustainable
Development Scenario; gas replaces a greater share of
Where fuel costs form a significant part of the operating coal in energy-intensive processes (particularly China’s
expenditure, replacing coal with gas also depends on methanol and ammonia production, which uniquely rely
government policy choices for limiting pollutants, on coal for feedstock). This offsets declines elsewhere in
including the extent to which smaller-scale coal boilers gas use that arise from greater efficiency and from
can be made to install anti-pollution equipment. The electricity, which captures a greater share of the
need to modernise and upgrade energy-consuming demand for low-temperature heat.
industrial equipment can also be a key factor
underpinning the decision to switch fuels.
Case study: China
China’s coal-fired power plants are modern and subject to strict controls on
pollutant emissions
Share of coal plants in Chinese emissions Emissions intensity by pollutant
100% 1
kt/TWh
80% 0,8
60% 0,6
40% 0,4
20% 0,2
0% 0
Carbon Sulphur Nitrogen Particulate Sulphur dioxide Nitrogen oxides Particulate matter
dioxide dioxide oxides matter
Coal-fired plants Others China Global average
Note: kt/TWh = kilotonnes per terawatt hour.

Source: IEA analysis based on data from IIASA.
Case study: China
Over half of the projected growth in gas-fired power generation to 2040 serves to
displace coal
Contribution of switching to natural gas-fired power generation in the New Policies Scenario
1 000
TWh
750
500
250
0
2017 More power demand Coal-to-gas switching 2040
Notes: Carbon and commodity prices derived from WEO 2018.
Case study: China
Does the electricity sector have the power to switch?
China’s coal-fired power capacity is six times larger than a CO2 price in the range between USD 60/t CO2 and USD
that of the whole of the European Union. The significant 85/t CO2 would be needed to provide enough support for
use of coal in power generation would appear an gas. Moreover, the rise of renewables (solar PV and
attractive switching target. However, China’s coal fleet is onshore wind are already cheaper than new CCGTs),
also among the most efficient in the world. The share of planned increases in nuclear power and the possibility for
super-critical and ultra-supercritical coal plants in the coal plants to be fitted with carbon capture and storage
fleet has risen from 3% in 2005 to almost 40% in 2017. technology present alternative longer-term solutions to
Power plants have modernised quickly, adapting to using gas to reduce emissions in the power sector.
stricter regulations governing air pollutant emissions.
Gas generation is growing, however. For the first time, in
The gas fleet is less than one-tenth the size of coal, 2018, China invested more in CCGTs than in coal-based
meaning the current savings potential from switching power generation, suggesting that the relatively rapid
(around 100 Mt CO2) is small relative to China’s overall build out of gas infrastructure for industry and buildings is
power sector emissions (4 500 Mt CO2). The switching having positive knock-on effects for gas-based power
potential increases as China adds more CCGTs to the fleet, generation.
but gas prices would need to fall below USD 4/MBtu in
most cases to provoke any meaningful market-based Looking ahead, the share of gas in China’s power mix
switching. rises to nearly 10% by 2040 in the New Policies Scenario,
with more than two-thirds of the growth attributable to
China’s emerging carbon market may offer an opening coal-to-gas switching, leading to an emissions saving of
for natural gas to gain market share against coal. 250 Mt CO2.
However, with a cost gap between coal and gas-fired
power generation of USD 30/MWh to USD 40/MWh,
Case study: China
The recent surge in gas consumption has run well ahead of

domestic supply
Gas consumption, production, and imports in China since 2000
300
bcm
250
200
150
100
50
0
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Net imports Consumption Production
Case study: China
How can gas supply keep pace with the demand for switching?
Although domestic production has grown at an The prospects for gas supply and demand in China will
impressive annual average rate of 10% since 2000, it has also be shaped by an ongoing process of gas market
been unable to keep pace with the tripling of demand and pricing reforms, and the need to encourage
over the last decade. Imported gas – particularly LNG – investment in domestic production, storage, and import
has grown more quickly in percentage terms than infrastructure while keeping gas affordable to end users.
natural gas demand as a whole.
Progress has been made in recent years. Industrial prices
Higher-than-expected growth in new gas connections have been deregulated since 2015 and, as of mid-2018,
led to supply shortages in the winter of 2017/18, city-gate tariffs for residential users are no longer set by
particularly in the northern parts of China, which were the government, allowing the prices paid by households
compounded by insufficient storage and LNG to gradually rise to reflect the cost of supply of imported
regasification capacity, shortfalls in piped imports, and and domestically produced gas, as well as seasonal
internal south-north infrastructure bottlenecks. increases in demand. However, the persistence of
upstream market concentration remains a barrier to
Deregulated LNG prices rose sharply as provincial unlocking the benefits of downstream price liberalisation.
governments resorted to measures such as trucking
LNG and reducing supplies to power plants and
industrial customers, many of whom had recently
completed a coal-to-gas switch. These shortages led to
rapid investment in pipeline infrastructure and significant
pre-seasonal procurement by Chinese buyers in the
winter of 2018/19.
Case study: China
Coal gasification is an option to increase domestic supply and reduce air pollution,
but could also lead to a large increase in CO₂ emissions
CO2 and air pollutant (NOX, SO2 and PM2.5) emissions intensities of coal, synthetic natural gas produced from coal,
and natural gas in the residential sector in China
10 000 5 50 25
kt/Mtoe
8 000 4 40 20
6 000 3 30 15
4 000 2 20 10
2 000 1 10 5
0 0 0 0
Carbon dioxide Nitrogen oxides Sulfur dioxide Particulate matter
Coal Synthetic natural gas Natural gas
Case study: China
China’s supply options come with different environmental credentials
To supplement conventional domestic production and The environmental footprints of China’s imported and
imports, China has been investing in coal gasification domestic natural gas are also increasingly relevant as gas
technology, which produces synthetic natural gas (SNG) expands its market share. As noted in the overview, there
by way of a process of methanation. This process is the potential for suppliers of LNG to bring down their
requires large amounts of low-grade coal as well as upstream emissions intensity to a level similar to that of
water resources. domestically produced gas, bolstering the environmental
case for switching from coal to natural gas.
The use of SNG provides an example of a trade-off
between climate change and air quality goals. The Overall, China’s efforts to improve air quality by
conversion of coal to gas is done at a 50% rate of choosing gas provide important indirect benefits for
efficiency, meaning two units of coal are required to carbon emissions. By 2040, coal-to-gas switching abates
produce one unit of natural gas. Although burning SNG nearly 1 Gt CO2, providing 15% of the additional savings
provides the same relatively low level of air pollutants as required in the Sustainable Development Scenario.
conventional gas, the supply chain used to produce it
generates almost four times as much CO2– double the
amount from direct coal use.
China’s ambitions for SNG, with targets of up to 57 bcm

of capacity by 2020, have not yet come to fruition,
largely owing to the high costs and logistical hurdles
(most of the planned facilities are in the more remote
northwestern regions of Xinjiang and Inner Mongolia).
Current production of SNG today is 5 bcm; however, this
increases to 45 bcm by 2040 in the New Policies
Scenario, resulting in 110 Mt of CO2 emissions.
Case study:
India
Case study: India
Emissions savings from coal-to-gas switching in India were visible in the early 2010s,
but did not pick up
Breakdown of cumulative emissions reductions in India versus baseline projection since 2010
2010 2011 2012 2013 2014 2015 2016 2017 2018

0
Mt CO₂
- 200
- 400
- 600
Nuclear Renewables Coal-to-gas switching Structural economic changes and efficiency
Case study: India
High hopes for domestic gas production in the early 2010s did not materialise
Gas consumption, production, and imports in India since 2000
80 8%
bcm
Net imports
60 6%
Consumption
40 4% Production
Share of gas in the

20 2% energy mix (right
axis)
0 0%
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Case study: India
An uphill struggle for gas in India?
Coal is by far the largest element in India’s energy mix, Godavari Basin off India’s east coast started in 2009 but
accounting for 74% of electricity generation and 45% of did not match expectations and fell away quickly. Gas
primary energy demand. High coal use, combined with consumers seeking cheaper domestic supply were left
growing oil use for transport and continued reliance on short of gas or became reliant on more expensive LNG.
solid biomass as a cooking fuel, means that India’s air
pollutant emissions are very high. In the latest World Investment is now picking up in India’s domestic gas
Health Organization air quality database, nine out of the supply, with activity focused again on the Krishna
ten cities with the highest measured concentrations of Godavari Basin. There are also new domestic pipeline
fine particulate matter (PM2.5) are in India. connections and LNG import projects that should
enter into operation in the coming years (the latest
These factors would appear to provide an opening for addition being the 5 million tonnes per annum Ennore
natural gas. Successive policy documents have targeted LNG terminal, the first on India’s east coast). But
a more prominent role for gas in the energy mix, and the pricing policies, regulation, and affordability remain
aspiration at present is to reach a 15% share for gas in key constraints, especially now that falling costs have
primary demand by 2030. But in practice, the share of made solar PV the main vector to challenge coal in the
gas has actually declined in recent years, from 10% in power sector.
2010 to 6% in 2017; coal-to-gas switching has
contributed to a modest reduction in CO₂ emissions of
around 30 Mt since 2010.
Offshore gas discoveries in the early 2000s fueled a

period of optimism about domestic supply and
prompted a build-out of gas infrastructure. Production
from the much-awaited KG-D6 field in the Krishna
Case study: India
Gujarat shows that gas can work …
Per capita gas consumption by region in India, 2017
600
m³ per capita
500
Residential
heating use
400
300
200
100
0
Gujarat Maharashtra North South Rest of India World
Case study: India
… if supply is close by and infrastructure gets built
The perception that gas is not a good fit for India is Access to a balance of domestic and international
countered by the example of Gujarat, one of India’s sources of gas have underpinned gas use in Gujarat –
most industrialised states that is situated on the west and, to an extent, in neighbouring Maharashtra, which,
coast adjacent to Pakistan. Natural gas accounts for up since 2013, has also had its LNG import terminal at
to one-quarter of the state’s energy mix, well above the Dabhol (where import capacity is being expanded to 10
national average. Mt). This area is by far the densest in terms of pipeline
infrastructure – Gujarat is set to become the first Indian
Gujarat has around 5% of India’s population but state to be completely covered by a piped gas
accounts for 60% of the country’s industrial gas distribution network.
consumers (4 551 out of 7 601, as of 2018) and nearly
70% of the commercial consumers. It was one of the Gas infrastructure build-out in many other parts of India
earliest gas-producing regions in the country and has faced persistent problems with financing and delays.
remains the second-largest onshore producing state India’s fourth LNG terminal – at Kochi in the southern
(after Assam), with proximity also to the Oil and Natural state of Kerala – has been operating at well under 10%
Gas Corporation’s (ONGC) western offshore fields. capacity because of a lack of pipeline connections inland.
Gujarat is relatively far from India’s main coal-producing

regions, and it hosts the main LNG import terminals in
Dahej (since 2004, import capacity of 15 Mt of LNG per
year) and Hazira (2005, capacity of 5 Mt), which still
account for the vast majority of the country’s LNG
imports, primarily from Qatar.
Case study: India
India has spare gas-fired power capacity, but is constrained by a lack of available
gas supply
Average power plant utilisation Gas allocated versus actually supplied to gas-fired
by fuel, 2013-18 power plants
100% 50
bcm
80% 40
60% 30
65% of average
shortfall
40% 20
20% 10
0% 0
Nuclear Coal Oil Hydro Gas 2014 2015 2016 2017 2018 2019e
LNG consumed
Actual delivery of domestic gas
Planned allocation of domestic gas
Source: IEA analysis based on 2019 data from Indian Ministry of Power.
Case study: India
Gas for power is being squeezed hard by coal and renewables
Capacity receiving final investment decision Value-adjusted levelised cost of generation in 2020
12 160
GW
USD/MWh
10
120
8
6 80
4
40
2
0 0
2012 2014 2016 2018 Wind Gas Nuclear Solar PV Wind Coal
offshore CCGT onshore
Natural gas Solar PV Coal
Note: The values for solar PV represent overnight investment in capacity in the respective year.
Case study: India
Without cheaper domestic supply, gas is being priced out of power
India fulfils one of the key conditions for coal-to-gas Various options are being considered to throw a lifeline
switching in the power sector – it has significant under- to this sector, at least until domestic gas supply picks up
utilised gas capacity. In recent years, the country’s gas- again in the early 2020s. However, the falling costs of
fired plants have been in operation only around 30% of solar and wind anticipated in the New Policies Scenario
the time; if they were to run at 80% and displace the mean that renewables – not gas – are widely seen as the
equivalent output from coal, they could bring an main “cleaner” alternatives to coal for electricity
annual CO₂ saving of over 60 Mt. But this outcome generation in India.
appears unlikely.
Against this backdrop, the more likely perspective for
India has 29 GW of gas-fired capacity, of which around gas-fired power is its deployment in a balancing role in
half are in dire financial straits. Most of the latter plants an increasingly solar-rich mix. This provides a valuable
were built by the private sector in anticipation of rising service to the system and – indirectly – helps solar to
volumes of relatively cheap domestic gas, notably from displace coal from the power mix but leaves little scope
the KG-D6 field. Domestic gas is priced and allocated by for direct coal-to-gas switching.
the government, but it has had to be rationed in practice
because of the shortage of domestic gas output.
Domestic gas supply to the power sector has reached

only around 25% of its planned allocation since 2013.
LNG has filled part of the gap, but LNG is too expensive
to produce power competitively. The circumstances
vary by region, but we estimate that gas needs to be
available to power generators at less than USD 3/MBtu
for gas-fired power to find a place in the merit order.
Case study: India
Who, if not power, can afford higher-priced imported gas?
Users of domestic gas versus LNG, by gas-consuming sector in India, average of FY 2015-18
Domestic gas LNG
Fertiliser
Power
City gas
Others
0 5 10 15 20
bcm
Note: Others include large industrial users. City gas refers to demand connected to the gas distribution grid, such as buildings and enterprises.
Source: IEA analysis based on data from the Ministry of Power (2019).
Case study: India
Urban consumers could offer an upside for gas
Outside the power sector, gas is an option for industrial The scale of the ninth (in 2018) and tenth (in 2019)
consumers in India (including fertiliser production, which bidding rounds for city gas distribution licences
is already a major gas user), the residential sector and underlined India’s ambitions to extend the gas grid,
transport. Based on data for 2015-18, these sectors although a host of permitting and financing challenges
appear better able than gas-fired power plants to absorb remain before these plans can be realised.
higher-priced gas.
The absence of a winter heating load means that
The potential for industrial gas growth is heightened by residential demand is limited to water heating and
the “Make in India” target to increase the share of cooking, and compressed natural gas for transport, but
manufacturing in India’s GDP. For the moment, this also means that consumption is less variable over
industrial energy use in India is weighted heavily the course of the year.
towards coal, with a 44% share in industry that is well
above the 28% global average.
The example of China suggests that urban air quality

concerns and a shift towards lighter industrial sectors
could push industrial consumption towards gas, but also
shows that this requires a concerted policy push to build
out gas infrastructure and encourage a shift away from
industrial coal boilers.
Case study: India
If the upfront costs and infrastructure issues are addressed, gas use in urban areas
has the potential to free up liquefied petroleum gas (LPG) for use in the countryside
Fuel cost comparison between LPG and natural gas in Delhi at different delivered gas prices (to meet energy demand
equivalent to 1 LPG cylinder, 14.2 kg)
12
USD (2017)
10
subsidy
8
0
LPG $4/MBtu
USD 4/MBtu $5.5/Mbtu
USD 5.5/MBtu $10/MBtu
USD 10/MBtu $12/MBtu
USD 12/MBtu
Price range of domestic gas Price range of LNG
Note: Based on 2019 January LPG prices. The values do not include costs for equipment and infrastructure construction.
Case study: India
Infrastructure is the missing link for gas in India
In the urban residential, and transport sectors, gas would Aside from infrastructure, there are also policy and
displace LPG for cooking (freeing up LPG for clean regulatory measures that could narrow the price gap
cooking in the countryside) and liquid fuels from the between gas and competing fuels. At present, for
transport sector. Displacing higher-priced liquid fuels is a example, coal is subject to the 2017 Goods and Services
manageable economic task for gas. Tax (GST) and therefore taxed at 5%, while natural gas is
outside the purview of the GST and typically taxed at a
As of 2018, there were already some 4.3 million higher rate.
residential households connected to the gas grid (and an
ambitious target for 10 million connections by 2020),
and 1 500 CNG filling stations servicing a fleet of around
3 million natural gas vehicles. An open question for India
is how the build-up of CNG infrastructure can co-exist
with initiatives to promote electric mobility; whether gas
is a stop-gap until affordable electric vehicles are widely
available or a lasting vector in India’s transport policy.
The major variables here are the speed and extent to

which infrastructure is built out. Some major pipeline
projects are planned or under construction, such as the
Urja Ganga pipeline that is designed to bring gas into
some of India’s most populous states (West Bengal,
Bihar, and Uttar Pradesh), and the first phase of this
project was inaugurated in early 2019.
Annex
Annex
Acknowledgements
This report was prepared by the Energy Supply and Thanks also go to Astrid Dumond, Christopher Gully,
Investment Outlook (ESIO) Division of the Directorate of Robert Stone, Sabrina Tan and Therese Walsh of the
Sustainability, Technology and Outlooks (STO). The Communications and Digital Office, as well as the Energy
principal author was Peter Zeniewski, with major Data Centre. Adam Majoe edited the manuscript.
contributions from Christophe McGlade, Tae-Yoon Kim
and Tim Gould (Head of Division), who designed and The work could not have been achieved without the
directed the analysis. Other key contributors from the support provided by the Norwegian Ministry of
World Energy Outlook/World Energy Investment team Petroleum and Energy and Natural Resources Canada.
were Yasmine Arsalane, Stéphanie Bouckaert, Olivia
Chen, Davide d’Ambrosio, Timothy Goodson, Yoko Many experts from outside of the IEA provided input,
Nobuoka, and Andreas Schroeder. commented on the underlying analytical work, and
reviewed the report. Their comments and suggestions
The report benefited from contributions from other were of great value. They include:
experts within the IEA: Raimund Malischek, Christina
Morillas, Peter Levi, and Jing Wang for useful data
assistance.
Internal feedback and peer-review provided by: Carlos

Fernandez Alvarez, Alessandro Blasi, Araceli Fernandez-
Pales, Peter Fraser, Gergely Molnar, Bruce Murphy, Alan
Searl, Tristan Stanley and Laszlo Varro.
Annex
Acknowledgements
Jørgen Bækken The Permanent Norwegian Jonathan Stern Oxford Institute for Energy
Delegation to the OECD Studies
and UNESCO Joseph Tortorelli Natural Resources Canada
Christian Besson Independent consultant Johannes Trueby Deloitte
Xavier Chen ENN Nikos Tsafos Centre for Strategic and
Vidar Christensen Norwegian Ministry of International Studies
Petroleum and Energy Tomasz Wroblewicz Shell
Scott Clausen Natural Resources Canada
Ralf Dickel Oxford Institute for Energy
Studies
Daniel Dorner United Kingdom Department
for Business, Energy
& Industrial Strategy
Francesco Ferioli European Commission
Mike Fulwood Nexant
Jean-Francois Gagne Natural Resources Canada
Fiji George Cheniere Energy, Inc.
David Goldwyn Atlantic Council
James Henderson Oxford Institute for Energy
Studies
Masazumi Hirono Tokyo Gas
Bai Jun Beijing Gas Group
Isabel Murray Natural Resources Canada
Sanjoy Rajan European Investment Bank
Robert Schwiers Chevron
Annex
References
Bloomberg (2019), Bloomberg Terminal IEA data sources for underlying analysis in this report
(accessed 1 April 2019). include but are not limited to:
California Independent System Operator (2019), IEA (2019), World Energy Statistics and Balances
webpage, www.caiso.com/ (accessed 21 April 2019). (database), https://doi.org/10.1787/data-00510-en.
CRU Group (2019), Global coal mine model (commercial IEA (2019), CO2 Emissions from Fuel Combustion
database), (accessed 12 March 2019) Statistics (database), https://doi.org/10.1787/data-
00430-en.
Elexon, Balancing Mechanism reporting Service (BMRS),
webpage, https://www2.bmreports.com, IEA (2019), Monthly Gas Data Service (MGDS), April 2019,
(accessed 20 April 2019). www.iea.org/classicstats/relateddatabases/monthlygasd
ataservice/.
Ministry of Ecology and Environment of the People’s
Republic of China (2019), webpage, IEA (2018), World Energy Outlook 2018, IEA, Paris,
http://english.mee.gov.cn/, (accessed 9 April 2019). https://webstore.iea.org/world-energy-outlook-2018.
Ministry of Power of India (2019), webpage, IEA (2011), Are We Entering a Golden Age of Gas? World
https://powermin.nic.in/ (accessed 23 April 2019). Energy Outlook Special Report, IEA, Paris,
https://webstore.iea.org/weo-2011-special-report-are-
National Bureau of Statistics, China (2019), webpage, we-entering-a-golden-age.
www.stats.gov.cn (accessed 19 April 2019).
JODI (Joint Organisations Data Initiative) (2019), JODI Gas
World Database, www.jodidata.org/gas/.
Annex
A brief note on methods
In this study, emission reductions from coal-to-gas The potential for coal-to-gas switching is calculated as
switching are decomposed based on changes in fuel the additional amount of gas that can replace coal after
market shares. For example, switching occurs when the accounting for the estimated gas demand in a given
market share of coal decreases and the market share of year in a given scenario. In most cases, realising the
gas increases in a given region over a given year. If this is additional potential involves additional costs, but there
not the case, there is no emissions saving from are also cases where switching entails a net negative
switching. Increases in natural gas consumption can cost (e.g. when, on a short-run basis, gas appears able to
either arise from a “structure” effect (e.g. gas increases displace what may be system-relevant or must-run coal
or decreases its market share in a given subsector) or an plants in the power sector).
“activity” effect (e.g. gas demand increases because
overall energy demand increases). Only structure effects Throughout the study, we make use of scenario analyses
are considered as coal-to-gas switching. to explore the contribution of coal-to-gas switching
using the World Energy Outlook’s central New Policies
The conversion efficiency of gas power plants is typically Scenario as well as the Sustainable Development
higher than that of coal plants, leading to an energy Scenario. A description of these scenarios is available at
efficiency improvement and a reduction in the emissions www.iea.org/weo2018/scenarios/.
intensity of power generation. Given the decomposition
method used, emissions savings from the latter are
attributed to coal-to-gas switching, and savings from the
former to “structural economic changes and efficiency”.
Historical emissions savings are calculated assuming

there were no further improvements in the energy- and
CO₂-intensities of gross domestic product since the base
year.
Annex
This publication reflects the views of the IEA Secretariat

but does not necessarily reflect those of individual IEA
member countries. The IEA makes no representation or
warranty, express or implied, in respect of the
publication’s contents (including its completeness or
accuracy) and shall not be responsible for any use of, or
reliance on, the publication.
Unless otherwise indicated, all material presented in

figures and tables is derived from IEA data and analysis.
This publication and any map/figure/table included
herein are without prejudice to the status of or
sovereignty over any territory, to the delimitation of
international frontiers and boundaries and to the name
of any territory, city or area. Please note that this
publication is subject to specific restrictions that limit its
use and distribution. The terms and conditions are
available online at iea.org/t&c
IEA. All rights reserved.

IEA Publications
International Energy Agency
Website: iea.org
Contact information: iea.org/about/contact
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IEA: The Role of Gas

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The Role of Gas in

Natural gas and its competitors.………………………..………………………….……………………..………………………….………………………….……….. 20

The environmental case for switching.……..….………………………….…………….………………….…….….…………….………………….…………….. 32

European Union ….….…………..………….………………..………………..….………….…………..….………………..………………..….……………………………… 57

People’s Republic of China..….....…………………………….………………………………………………………...………………………………………..…………. 72

CO2 savings from coal-to-gas switching by region compared with 2010

2011 2012 2013 2014 2015 2016 2017 2018

… mainly in the United States and China

The largest emissions savings from coal-to-gas switching

Europe has the largest immediate gas switching opportunity with

If all of this were to be utilised, it would reduce global

Most of these potential savings lie in mature energy

Share of coal-fired plants in selected countries/regions by age

0% 20% 40% 60% 80% 100%

Relative prices make switching challenging, even with

In China, coal-to-gas switching is underway in industry and in the residential sector

200 20 Monthly natural

2015 2016 2017 2018

Electricity provides the main alternative route away from

Coal Natural gas

There is significant scope to further measure and

400 New Policies

China India United States European Union

Overall, coal-to-gas switching provides around 8% of the emissions reductions

Gas has had a golden run

The rise of natural gas has been accompanied by a

… but global CO₂ emissions have yet to turn a corner

Change in global energy-related CO2 emissions by year

Is gas part of the solution, or part of the problem?

But this does not preclude a role for gas in the

0% 5% 10% 15% 20% 25% 30% 35%

Share of gas in primary energy

… but the economic case for gas varies widely by region

In regions and countries that import gas over long

Gas is going head-to-head with coal in power and industry…

Change in capital costs of selected fuels and energy technologies

The competitive landscape for gas therefore varies substantially by sector

The majority of gas used in buildings today is for space

Gas makes a relatively small contribution to today’s emissions…

Nitrogen oxides 108 Mt

20% 40% 60% 80% 100%

Gas Coal Oil Bioenergy Non-combustion

Premature deaths attributable to household and outdoor air pollution, 2015

Household: 2.6 million Outdoor: 2.9 million

The controlled burning of natural gas releases very few

Coal-fired power is by far the largest component of today’s CO₂ emissions

Global energy-related CO2 emissions

25 Other coal use

Coal’s shift to Asia continued in 2018. The growth in

… which is an increasing focus for both industry and policy makers

Methane emissions from gas operations can occur both

Indirect GHG emission intensity from global coal supply, 2018

300 Extraction and

Gas is nearly always better than coal on a lifecycle basis

But “beating coal” is not enough to make a case for gas

LNG is playing an increasingly important role in global trade in gas

Final investment decisions in new LNG liquefaction capacity

Suppliers can shape the environmental case for gas

In our estimates, LNG imports to China result in fewer

Coal-to-gas switching has been responsible for nearly one-fifth of total

2010 2011 2012 2013 2014 2015 2016 2017 2018

Coal Natural gas

Existing infrastructure offers significant potential for further coal-to-gas switching…

… but this is very sensitive to natural gas prices