An uncertain future

Executive Summary

For the last 15 years, proponents have touted B.C. LNG as a cleaner substitute for coal in Asian power plants that would lower global emissions while growing B.C.’s economy. The LNG industry points to the province’s abundant natural gas reserves, proximity to Asian markets, and the ability to produce LNG with fewer carbon emissions than its competitors as reasons why B.C.’s LNG industry is positioned for takeoff.

But the world is a very different place in 2024 than it was in 2009, and cracks are showing in this rosy picture. While the province’s LNG industry is set to begin exports next year, bringing jobs and opportunities to some B.C. communities, the reality is that in the coming years the world may no longer need B.C.’s LNG. And betting the province’s economy on the fossil fuel may instead deliver rising gas and electricity prices for families while worsening climate change by locking out cleaner, cheaper energy sources.

As it stands, B.C.’s nascent LNG industry comprises six projects at various stages of development, with two under construction and currently slated to begin operation in 2025 and 2027. Our new report, An Uncertain Future, explores the risks of further LNG development to the province’s economy, B.C. ratepayers and taxpayers, and efforts to reduce global emissions. Below is a summary of its key findings.

More supply than demand

For starters, future demand for LNG is highly uncertain. The International Energy Agency holds that there is no need for investment in new fossil fuel supply in a world that reaches net zero by 2050. LNG-specific forecasts vary wildly. Importantly, energy trends and policy developments in some of the key export markets for B.C.’s LNG suggest a future decline in demand.

Japan’s LNG imports, for example, have steadily declined over the last decade and fallen to the lowest level in 15 years as the country restarts nuclear power plants and builds out renewables. Put simply, there is far from a guaranteed market for B.C.’s LNG, and governments should think carefully before providing financial incentives, loan guarantees, or taking equity positions in these projects.

What’s more, B.C. has plenty of competition in the market. Global LNG export capacity is anticipated to increase by 43% from today by the end of the decade, just as B.C.’s export projects are planned to come online.

Oversupply may be even more pronounced in likely export markets for B.C.’s LNG, with key competitors—many of which are able to supply much lower-cost LNG—projected to add around 50% more export capacity by 2030 compared to today.

B.C. will pay a high price for LNG

Expanding LNG will not come without trade offs. For starters, electricity. If all six LNG facilities were to be built, it would require around 43 TWh of electricity per year. For context, that’s 69% of B.C.’s total 2022 demand, or the equivalent of the electricity from more than eight Site C dams.  Diverting this much power to LNG would mean less is available for households or cleaner industries on a less risky growth path.

Indeed, B.C. has many promising alternative economic opportunities with less uncertain futures. Critical minerals and metals and clean hydrogen are among the key sectors of B.C.’s economy that are poised for growth.

Such alternatives are also much more popular with British Columbians, with recent polling indicating a growing appetite for cleaner solutions and a waning one for LNG.

LNG would also come at a cost to household affordability,  jobs, and possibly the taxpayer. Importing just one Site C’s worth of electricity would cost the B.C. ratepayer, or potentially taxpayer, around $600 million annually. Meanwhile, the U.S. government anticipates that LNG exports could cause domestic natural gas prices to increase by up to 28% over the next 25 years. Building these facilities would also divert construction workers away from housing and other projects, such as expanding B.C.’s clean electricity grid and generation, at a time when this kind of labour is projected to be in short supply. And because there are very limited options to repurpose LNG terminals, new infrastructure risks creating stranded assets when demand dries up amid the global energy transition, potentially leaving the taxpayer on the hook.

In short, the future of LNG is uncertain, and expanding the industry means trade-offs for B.C.’s economy and electricity system.

LNG undermines B.C.’s climate ambitions

LNG is far from clean, with emissions associated with every step of the supply chain, from extraction to liquefaction to combustion. Even if the latter is undertaken elsewhere in the world, the implications for B.C.’s emissions from the first two are still vast. If all six proposed LNG projects were to be built, their operational and upstream emissions alone would make up 40% of the province’s 2030 emissions target (that is even assuming most facilities are electrified).  And that’s just B.C.’s emissions. Combusting the exported fuel at its destination—which is accounted for in the importing countries’ greenhouse gas inventories—would be 10 times greater. And those combustion emissions don’t even account for the transportation emissions from shipping the LNG from the export facility to its destination.

In addition, the assumption that LNG can reduce emissions by displacing coal is highly uncertain, with some studies suggesting it could actually have a negative overall impact on emissions. LNG production and transportation leads to methane leakage, which is a potent greenhouse gas with significant near-term warming potential. In addition, there are emissions from shipping the LNG to its destination, and, once it arrives, there is a risk that instead of replacing coal it displaces cleaner sources of energy, like renewables, or increases overall energy use. Furthermore, any expansion or reliance on LNG risks crowding out public and private-sector investments in renewable energy and locking in fossil-fuel-related infrastructure.

Put simply, LNG expansion is difficult to square with and arguably outright incompatible with a world—and a province—that achieves net zero.

What needs to change?

The risk is real that more LNG development will crowd out cleaner industries better poised for growth in the coming decades, and so is the risk of future stranded assets backed by government incentives drawing on taxpayer dollars. To minimize these risks to the province’s economy and the B.C. taxpayer, the B.C. government should:

• Develop an economy-wide industrial strategy that aligns with a net-zero economy and prioritizes opportunities for clean economic growth and considers the scarcity of resources like electricity supply, government incentives, and construction workers.
• Develop specific roadmaps for net-zero aligned industries that lay out the timelines and actions needed to secure the necessary clean energy, labour, and infrastructure for these sectors. 
• Develop a decision-making framework to prioritize the use of available clean electricity that supports household affordability, underpins energy security, and prioritizes industrial investments in alignment with climate targets.
• Amend the province’s environmental assessment process to require the consideration of emissions from the use of exported LNG (termed scope 3 emissions).