In response to Environmental, Social, and Governance (ESG) pressures, Liquefied Natural Gas (LNG) producers are starting to look for ways to reduce their carbon footprint. Green LNG may be the answer to those claims.
Conventional wisdom inside the energy sector has stated for many years that natural gas is a “bridge fuel” to address a low-carbon future. However, this mindset is now being challenged by several industry people and policymakers.
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Some industry people are questioning whether natural gas liquefaction constitutes a friendlier and cleaner alternative, environmentally speaking. Also, activists doubt LNG can be a long-term sustainable substitute for carbon-intensive fuels.
Green LNG: An alternative?
Green LNG refers to a particular LNG type that reduces or offsets greenhouse gas emissions (GHG) across its entire value chain. In that sense, producers intend this specific type of natural gas to be cleaner in production, transportation, liquefaction, regasification, exportation, and downstream use.
There are many ways in which companies can reduce their GHG through green LNG. For instance, they can use renewable energy and carbon capture, utilization, and storage technologies (CCUS) in their power liquefaction facilities.
Another measure companies can take, is to engage actively in afforestation or reforestation activities, along with investment efforts in renewable energy.
Although implementing those strategies seems straightforward, many U.S. LNG sellers do not control the entire supply chain. As a result, reducing emissions will require an integrated commitment from all the chain value actors.
One tool sellers can use to verify their suppliers are achieving lower GHG levels could be through the Certified Emissions Reductions (CERs) certification. Under the Kyoto Protocol legal framework, these are credits that can reward companies for reducing their carbon footprints.
Green LNG producers now expect their product to be differentiated in price from traditional products. However, this market is still in its infancy, and only a limited number of transactions have been done.
Key questions
Whether to storage or to certify, LNG producers must address an environmentally committed approach with ESG criteria. This change in attitude can directly affect the future commodity’s tradeable status.
Also, companies should identify which parts of their supply chain pollute the most and act in consequence. According to GIIGNL data, approximately 75% of LNG’s GHG emissions come from its consumption.
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Finally, another question is which measurement companies should select to follow-up their environmental impact?
Some industries are aligning to international measurement services such as the Measurement, Reporting, and Verification mechanism. However, it may be better for some companies to first engage in internal verification processes because every case is different.
