Wooden MacKenzie: World LNG market might break up if carbon tax imposed on imports

“If the EU decides to use these levies, then it will push European gasoline costs up but in addition bifurcate the worldwide LNG market, making a two-tier LNG market,” mentioned Massimo Di Odoardo, Vice President of Fuel & LNG Analysis at Wooden Mackenzie. “If taxes have been restricted to the EU, and even prolonged to Japan and South Korea, commerce flows would possible be optimised elsewhere to mitigate the influence.”

LNG emissions underneath the microscope

The report states that the environmental credentials of LNG are underneath growing scrutiny. Regardless of emitting about half the carbon dioxide (CO₂) of coal when combusted, the LNG worth chain stays extremely carbon intensive and suffering from methane losses.

Nonetheless, it provides that whereas LNG gamers are actively working to cut back the greenhouse gasoline (GHG) footprint of their tasks, the reluctance from patrons to pay a premium for lower-emission LNG has thus far curbed sellers’ urge for food to decide to main funding to cut back carbon depth.

US LNG considered one of worst performers

The report provides that not all LNG tasks are equal. Measured in kilograms of carbon dioxide equal (kg/CO₂e), methane accounts for five% to fifteen% of total carbon depth in LNG tasks exterior the US. However for LNG tasks within the US, methane can account for as a lot as 25% to 40%. This largely as a result of greater ranges of methane losses attributable to in depth use of pneumatic units and compressors related to shale gasoline manufacturing.

“With a spread of 800 to 1400 kg CO₂ equal per tonne (CO₂e/t) of LNG, the US has a few of the world’s highest-emitting tasks, with upstream reservoir kind and pipeline distance to LNG crops including to their excessive methane depth,” Di Odoardo continued.

He added that’s tasks with the bottom carbon emissions will acquire from an import tax on emissions and concentrating on premium markets will increase buying and selling profitability. Nonetheless, proximity to premium markets will probably be key, with Qatar and Mozambique requiring excessive carbon costs to be lured away from proximate markets in rising Asia, that are unlikely to introduce an import tax on emissions.

Excessive carbon taxes wanted to decarbonise LNG

The report‘s evaluation concludes {that a} tax on methane emissions of US$2800 per tonne (t/CH₄), equal to US$100/t CO₂e, will probably be efficient in reaching its objective. Methane discount stays the low-hanging fruit in emissions, with progress being made in several nations, supported by tightening home methane laws.

“A methane import tax will assist present further financial incentives whereas limiting LNG worth upside. On this state of affairs, exporting nations may even be inspired to introduce home levies and retain taxed revenues,” continued added Di Odoardo.

Nonetheless, Wooden Mackenzie concludes that in the case of total carbon emissions, taxes imposed solely in Europe is not going to obtain the required objective of large-scale decarbonisation of LNG tasks globally and a bifurcate LNG market can be as an alternative the almost certainly end result.

“If there’s to be any materials influence, a carbon worth nearer to US$200/t CO₂e will probably be required for LNG imports,” concluded Di Odoardo. “Moreover, this must be launched on a world degree for it to be actually efficient in decreasing carbon depth and that’s unlikely to occur. For now, all eyes will probably be on Europe to see what it does subsequent.”

Learn the article on-line at: https://www.lngindustry.com/special-reports/21032024/wood-mackenzie-global-lng-market-could-split-if-carbon-tax-imposed-on-imports/