Accelerating the Fossil Gas Transition to Net ZeroSummary
The IPCC has made it clear that
if we are to avoid catastrophic
climate change and limit
global warming to 1.5°C, global
carbon emissions must be cut
50% by 2030.
Investment in fossil gas is a threat to achieving
the goals of the Paris Agreement. The scientificconsensus from the Intergovernmental Panel on
Climate Change (IPCC) and International Energy
Agency (IEA) is that the global carbon budget
to 1.5°C has no room for new unabated fossil
gas infrastructure or assets. Existing fossil fuelinfrastructure will emit more greenhouse gases(GHGs) than this budget without early retirement
or reductions in utilisation.1

Fossil gas’s blind spot
Gas

Methaneleakage actually
70% higher

Fossil gas currently accounts for 22% of the EUenergy mix, 90% of which is imported, and 50%
from Russia.2

f globalby 2030

H alson

bon emiss
rica

1.5C

Fossil gas will never be atransition fuel: gas-fired power
needs to be removed from thelist of transition activities.
Methane emissions from the energy sector
are 70% higher than official figures5 – all fossilgas operations urgently require leakage mitigation.
The extent to which this underestimation threatens
the energy transition and climate goals calls
for a precautionary approach – that fossil gas
operations cannot occur without certainty
on leakage. Full value chain leak detection andreduction technology, alongside full lifecycle
assessments of carbon intensity, are critical.

Incremental change
will not prevent catastrophic
climate change.
The world needs to leapfrog from fossil fuels
to renewable energy. The energy transition
will be met not with incremental change butwith the rapid expansion of renewable energy(RE), energy efficiency gains, and low-carbonhydrogen. This report outlines the opportunity
for transformational change in fossil gas power
distribution and generation.

Leap torenewables

Fossil gas is mostly methane, a potent
greenhouse gas with a global warming potential
over 80 times that of carbon dioxide (CO2) on a
20-year time scale.3 Just 3% of methane leakage
can increase the carbon intensity of fossil
gas-fired power to reach that of a coal-fired
power plant.4
Gas has in the past been thought of as a transition
fuel. The IPCC and IEA reports and the leakage
factors make it clear that it cannot be defined assuch. Energy security issues arising from Russia’s
invasion of Ukraine make the transition away fromfossil gas more important than ever.

Officalmethaneleakage

Gas-fired power

Accelerating the fossil gas transition to net zero - Summary Climate Bonds Initiative1

Policy tools need to accelerate urgent action
on methane leakage, alongside efforts to reduceoverall demand. Policy will need to guidetransition pathways, addressing key risks such asgas blending. These policies can also incorporatesocial development considerations to help
ensure a Just Transition.

Low-carbon hydrogenprovides a transition awayfrom fossil gas in many hard-toabate sectors.
Even conservative estimates expect hydrogento grow from 2% to 13-14% of the EU energy
mix. This will need rapid scaling of low-carbonhydrogen. Global hydrogen investment 2020-50
could total USD15tn.6
The scale of hydrogen project announcements
and these projects’ predictions of USD1-2/tH2
prices in 2022 show hydrogen poses a greater
opportunity than expected. Policy assistanceto hydrogen clusters can further accelerate thegrowth of the low-carbon hydrogen economy.
Immediate emissions benefits of hydrogen varysignificantly from sector to sector. To ensure
rapid emissions reductions by 2030, hydrogenuse will need to be prioritised for sectors withthe highest emissions reduction potential. For
example, the use of hydrogen in steel production
results in 98% emissions reductions,7 whereas incement production, hydrogen could only address
1/3 of emissions.8

The energy sector needs increased
investment and large-scale realignment.

FO

Large-scale installation of grid-connected
electrolysers will need to be linked to newrenewable energy generation; otherwise
they will increase fossil-powered electricity
demand, hindering grid decarbonisation –planned electrolysers in the EU RED II would
consume 50% of RED II planned renewableelectricity supply growth and so hinder griddecarbonisation, unless accompanied by new
dedicated renewables installations.

Gas-fired power, thanks to dangerous leakage
across the system, is no longer a transition fueland is also an energy security risk for Europe.
REPowerEU is a critically important opportunity
for the EU to transition away from all fossil fuels.

ILSSGAS INFRASRUCTU ETR

Retrofitting gas infrastructure is a falsetransition pathway. As blending is not a viable
decarbonisation strategy, the only valid retrofit
pathway is repurposing infrastructure for 100%hydrogen distribution. Given the smaller role ofhydrogen in the future than fossil gas today andthe differing distribution needs retrofit potential
is extremely limited.

Given the expected scarcity of the resource,hydrogen deployment should be prioritised
according to both impact and availability of otherdecarbonisation technologies.

NO NEW

Incremental change is not aligned with the needfor rapid decarbonisation by 2030. The transitionis threatened by the inefficient and regressive
strategy of gas blending, from which a 5% byvolume hydrogen blend only displaces 1.6%of fossil gas. Blending has limited emissions
reduction potential, and creates stranded asset
risk and cost with the incremental retrofits/
technology replacements required for increasing
blending volumes. This can be addressed bypolicies incentivising transformational rather
than incremental change.

5% H2 gas
blend = only
1.6% fossil
gas reduction

The EU energy transition is estimated to increase
investment needs by EUR390bn per year over the
next ten years.9 While the transition investment
needs are high so are fossil fuel investment flows,
accounting for 45% of global energy investment.
Policymaking can guide the transition, defining
credible technologies with taxonomies andstandards and setting out pathways withstrategic energy and infrastructure policy. The
European Commission’s Fit for 55 policy package
provides an overview framework for this. This
report outlines how to deliver this, accelerate thetransition and avoid locking in investments infurther fossil gas infrastructure.

Accelerating the fossil gas transition to net zero - Summary Climate Bonds Initiative

Endnotes
1. IPCC. 2022, Climate Change 2022: Mitigation of Climate Change.
Contribution of Working Group III to the Sixth Assessment Report of theIntergovernmental Panel on Climate Change, https://www.ipcc.ch/report/ar6/wg3/
2. https://ec.europa.eu/eurostat/databrowser/view/NRG_IND_ID__
custom_1666239/default/table?lang=en
3. IPCC. 2021, Climate Change 2021: The Physical Science Basis.
Contribution of Working Group III to the Sixth Assessment Report of theIntergovernmental Panel on Climate Change, https://www.ipcc.ch/report/ar6/wg1/
4. S&P Global. 2021, Natural gas use may affect climate as muchas coal does if methane leaks persist, https://www.spglobal.com/
marketintelligence/en/news-insights/latest-news-headlines/naturalgas-use-may-affect-climate-as-much-as-coal-does-if-methane-leakspersist-68096816
5. IEA. 2022, Global Methane Tracker 2022, https://www.iea.org/
reports/global-methane-tracker-2022
6. Energy Transitions Commission. 2021,
Making the Hydrogen Economy Possible: Accelerating Clean Hydrogenin an Electrified Economy, https://www.energy-transitions.org/publications/making-clean-hydrogen-possible/
7. Roland Berger. 2021, Green steel: the race is on, https://www.
rolandberger.com/en/Insights/Publications/Green-steel-The-raceis-on.html
8. Fennell, P.S., Davis, S.J. and Mohammed, A. 2021, Decarbonizing
cement production, Joule, https://doi.org/10.1016/j.joule.2021.04.011.
9. European Commission. 2021, State of the Energy Union 2021,
https://ec.europa.eu/energy/sites/default/files/state_of_the_energy_
union_report_2021.pdf

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