Reading the COP28 Tea Leaves on Gas

You’ve seen the headlines: the final agreement from COP28 includes some long-overdue if limited commitments to move away from fossil fuels. But then there is this sentence, tucked away in paragraph 29: “Transitional fuels can play a role in facilitating the energy transition while ensuring energy security.” It reads almost like a throwaway line, yet some commentators and state parties see it as the biggest of a “litany of loopholes” that could entrench fossil fuel use for decades.

What exactly is a “transitional fuel”? The agreement doesn’t say, but the term has been used in the past to refer to fossil gas. Fossil fuel lobbyists were out in force in Dubai, as were climate negotiators from some of the world’s biggest, wealthiest and most influential gas exporters like the U.S., Australia and Qatar.

This comes as less wealthy governments across Africa, Asia and Latin America are making plans to produce and burn more gas in the name of energy security. The list includes Colombia, Ghana, Lebanon, Mexico, Nigeria and Senegal. Their leaders argue that this will give them sufficient, uninterrupted electricity service; lower, more stable energy costs and prices; and the ability to make decisions about energy free from foreign interests, rules and norms.

Some of these countries will need gas to achieve these goals, at least for a while. But perversely, depending too much on gas for energy security can make economies and energy systems—and ultimately, the lives of people—less stable. 

The challenges start with predicting how much gas a country will need for its own energy. It is simply hard to know how many new users of gas a country will have, how long it will take to build new gas infrastructure, or how quickly the country will transition to cleaner energy sources. The costs of a bad guess can be high, from electricity shortages to wasted public revenues, as countries like Ghana, Thailand or Egypt have learned.  

And governments of some lower- and middle-income countries aren’t being realistic about where future gas supplies will come from, rolling out big plans that will not materialize for several reasons. The extraction of gas for domestic use rather than exports is becoming especially tough to finance: investors see it as not only bad for the climate but also unprofitable. If a country’s remaining gas reserves cost too much to produce, the state will probably have to spend more on subsidies or make consumers pay higher prices for electricity and other goods and services made with gas. 

And what happens when a country cannot extract enough of its own gas to fuel the power plants and other domestic gas infrastructure it has built? Its main choice will be to buy imported gas, either through pipelines or aboard ships, as liquified natural gas (LNG). Deals to import gas can play a role in boosting energy security, yet governments should approach them with caution. They can tie a country’s energy system to many forces and events outside its control, sometimes with disastrous results. 

In the worst cases, dependence on imported LNG can send shock waves through an economy, as middle-income South Asian gas producers like Pakistan and Bangladesh learned after Russia invaded Ukraine in 2022. Sudden LNG shortages and record prices led to closed power plants and factories; skyrocketing electricity costs; weaker local currencies and foreign exchange shortages; costly public debt; high inflation; millions of lost jobs; and a return to even dirtier, dangerous fuel sources like coal and private generators.  

Faced with such risks, governments need to find right-sized, time-bound roles for gas. Otherwise, they could lock their people into using an unsustainable, expensive, polluting fuel with a very uncertain future. They also need to fully consider renewables as an alternative to gas.

Gas advocates rightly claim that solar and wind power cannot yet provide everything gas can: they are not ingredients in fertilizer or plastics, for instance, nor can they make heat for manufacturing cement, steel or other metals that countries need. Renewables also come with their own challenges, like intermittent power supply and high up-front costs, which can make them a tough choice for lower-income countries. Compared to gas power plants, though, solar and wind farms can be easier to plan for, quicker to build, less dependent on foreign energy prices and market trends, and more attractive to a wider pool of investors. All these advantages are likely to increase with time.

As part of NRGI’s work on domestic energy transition, we aim to help decisionmakers and oversight actors in the countries where we work, from Senegal and Nigeria to Mexico and Colombia, interrogate whether further investments in gas truly will make them more secure. The second part of our gas-to-power framework, coming in January, will focus on this question. The framework helps non-experts in government, civil society, research and the media weigh the competing claims around gas, laying out the latest thinking in a balanced way.

In the current debate around gas extraction and use, buzzwords like energy security can obscure the risks countries can face if they invest too much in gas, as well as the challenges of leaving fossil fuels behind. A different kind of debate is needed, one that focuses more on which energy sources can best meet a country’s needs at the least cost to its economy, people’s lives and the planet. COP28’s nebulous nod to “transitional fuels” shows there is still work to be done.