G7 climate ministers consider endorsing new gas investments

(Reuters) - Climate ministers of the Group of Seven countries may make the case for new investments in natural gas supply, despite assessments that such investments would thwart globally agreed climate change goals, according to a document seen by Reuters.

Climate change and energy ministers from G7 countries will meet on April 15-16 in Sapporo, Japan, to discuss efforts to address climate change, now under pressure from turmoil in global energy markets following Russia's invasion of Ukraine.

A draft of the G7 statement said ministers would agree that new upstream investments in gas were needed, because of the energy fallout from Russia's invasion. Russia slashed gas deliveries to Europe last year, causing a global supply squeeze and soaring prices in global markets.

"In this context, in this particular contingency, we recognize the need for necessary upstream investments in LNG (liquefied natural gas) and natural gas in line with our climate objectives and commitments," the draft statement said.

The draft is still being negotiated by the G7 countries and may change significantly before it is adopted.

Commitment on LNG investments, if kept in the final communique, would be a win for the G7 meeting's host Japan, which calls LNG a 'transitional fuel' to cleaner energy that it says could be needed for at least 10-15 years.

But such investments would run counter to assessments by global energy watchdog the International Energy Agency, which has said no new investments in fossil fuel supply can be made if the world is to stop global warming exceeding 1.5 degrees Celsius - the limit that would avoid its most severe impacts.

The world must substantially reduce fossil fuel energy use this decade to avoid the most devastating impacts of climate change, the U.N.'s IPCC climate science panel has said. Projected CO2 emissions from existing fossil fuel projects would blow the remaining carbon budget to meet the 1.5C goal, according to the IPCC.

G7 climate ministers had said at a meeting last year that investment in the LNG sector was needed to respond to the energy crisis, but they had not explicitly endorsed upstream investments in gas supply.

The G7 had previously pledged to end public support for overseas fossil fuel projects by the end of 2022.

The draft statement said the countries expect demand for LNG to "continue to grow" in countries that can afford to later replace gas with net zero emissions energy sources.

The document revealed pushback from some countries, including the European Union, which opposed the statement that LNG demand will increase. The 27-country EU attends G7 meetings.

Once major buyers of Russian pipeline gas, European countries are racing to diversify their energy sources - replacing Russian gas, in part, with more LNG.

The draft communique repeatedly condemned Russia's invasion of Ukraine and said the G7 would work with 'reliable partners' to reduce dependence on Russia.

In another potential win for energy-poor Japan, the draft communique mentioned ammonia as a hydrogen derivative which could be an "effective emission reduction" tool.

Japan is testing coal co-firing with ammonia as a tool to reduce carbon emissions from thermal power generation and wants to expand the system to as many power plants in the country as possible.

An official dealing with international affairs at the Japanese industry ministry declined to comment on the draft.

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