Natural gas has long been promoted as a cleaner alternative to coal, but tightening policies and emissions concerns threaten its role in the energy transition. Wood Mackenzie warns that unless the industry reduces methane leaks and lowers carbon intensity, LNG risks losing credibility as a bridging fuel.
Despite producing fewer emissions than coal, its environmental impact is increasingly scrutinised, particularly methane leaks. “Carbon dioxide and methane emissions need urgent action to preserve [LNG’s] role as a bridging fuel,” the report states. Regulators and investors are pushing for stronger accountability, forcing gas producers to adapt or risk losing their social license to operate.
New regulations are adding pressure. In the US, the Inflation Reduction Act incentivises methane reductions, while the EU tightens reporting rules for fossil fuel companies. Some European governments are delaying or cancelling new gas infrastructure, while major Asian economies are aggressively expanding renewables alongside gas to hedge against long-term risks.
Economic challenges further complicate gas’s outlook. Without a carbon price, it struggles to compete with coal in key markets. “Without a meaningful carbon price, [LNG] cannot compete with coal in Asia’s booming economies,” the report warns. High LNG costs have already slowed adoption in price-sensitive regions, with buyers favouring lower-cost energy alternatives.
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