Despite the call from the International Energy Agency (IEA) that no new funding for fossil fuels is necessary if the world wants to get on the net-zero 2050 pathway, Asia is the region where investments in gas are necessary to cut its reliance on the more polluting coal, Wood Mackenzie said on Thursday.
"With coal still accounting for around two-thirds of China's primary energy mix and coal demand continuing to rise across many other markets, switching to natural gas is seen as critical to emission reduction goals," Gavin Thompson, Vice Chairman, Energy - Asia Pacific at WoodMac, wrote in an analysis.
Last week, the International Energy Agency (IEA) shocked all stakeholders in the energy industry with its suggestion that the world doesn't need any new investments in oil, gas, and coal beyond what is already approved if it hopes to achieve net-zero emissions by 2050.
Asia is probably the poster child of the issue with the idea of 'no investments in fossil fuels ever again.' Until renewables rise so much as to meet most of the power demand in the region, Asia will need much more natural gas to replace coal-fired generation capacity, which is still high in many countries, including in the major developing economies such as China and India.
"In fact, in some countries in Asia, we expect that faster decarbonisation is most likely to be achieved through an even greater role for gas to more aggressively displace coal while investment in renewables starts to ramp up," WoodMac's Thompson said.
Under the base case outlook, Asian gas demand is set to grow by over 70 percent by 2050 from current levels, according to WoodMac. But in the accelerated energy transition scenario, gas demand remains strong because of the more aggressive coal-to-gas-switch. Gas demand in India and some countries in Southeast Asia would even rise more in the accelerated energy transition scenario because of the faster coal displacement.
Of course, natural gas suppliers cannot rely on 'business as usual' and must account for emissions in the gas value chain, Thompson said, but added that "For much of developing Asia, gas is critical to combating air pollution and supporting the journey towards net zero."
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More