The DOE Study Gives a Vision of an Energy-Dominant, Climate-Responsible United States

Joseph Majkut, Director, Energy Security and Climate Change Program

The China Dilemma and a Nudge for Geopolitical Consideration in Public Interest Determination

Jane Nakano, Senior Fellow, Energy Security and Climate Change Program

Amid the highly anticipated analyses on the economic and emissions effects of expanded LNG exports is the discussion on China’s growing gas appetite. Under its energy security section, the study singles China out as the likely dominant destination for U.S. LNG in 2050. In concluding the China section in her statement, Energy Secretary Jennifer Granholm notes that “future authorization decisions of what is in the ‘public interest’ need not be made solely on a binary—yes or no—basis but could be undertaken using a broader framework of requirements for all authorizations.” This is an explicit nudge that the future evaluation of “public interest” standards for exports to non-FTA countries include geopolitical considerations.

Since they began in 2016, U.S. LNG exports have helped allied countries escape energy crises, including post-Fukushima Japan and Europe following Russia’s 2022 invasion of Ukraine. Clearly, LNG is a commodity which can support allies. But what do the geopolitics of LNG mean for non-allies? Already, proposed legislation has attempted to restrict LNG exports to China.

The United States currently bans LNG exports to countries it deems adversarial (i.e., Cuba, Iran, and North Korea). The question of whether and how to implement an additional or separate evaluation for China requires careful consideration. Unlike the above-mentioned prohibited destinations, the Chinese market is important to the economics of the industry, which in turn affects national interests, such as reliable domestic supplies and low prices. China is a large market player and Chinese offtakers have come to underpin many LNG export projects. Restricting export to China directly or indirectly—such as by controlling what global portfolio players can do with U.S. cargoes—could have unintended consequences for the U.S. economy.

The central question has been whether U.S. LNG exports can create a type of economic interdependence which could help to put a brake on rapid deterioration in bilateral relations, or whether they would simply help underwrite China’s industrialization. Yet U.S. LNG export may serve neither. LNG exports do not create the type of dependence for China that the United States has on China for critical minerals. China enjoys multiple sources for gas imports—both in the form of LNG and via pipelines, including from nearby Russia and Central Asia. Today, the United States accounts for around 5–10 percent of China’s total LNG imports.

At least for the next four years, the geopolitics test will likely spare China as the incoming administration will likely see LNG exports as a valuable route through which to address the U.S. trade deficit against China. Yet the geopolitical viability of LNG exports to China will likely remain a live conversation in Washington for years to come.

Ready, Study, Go?

Kevin Book, Senior Adviser (Non-resident), Energy Security and Climate Change Program

At a high level, the DOE’s 2024 LNG study methodology resembles that of prior efforts: It establishes scenarios by combining different categories of variables and then runs those combined scenarios through macroeconomic models. However, this year’s study differs from past efforts in that one of the principal variables is climate policy. Moreover, all three climate policy cases—“Defined Policies,” “Commitments,” and “Net Zero 2050”—lay out escalating levels of ambition.

“Defined Policies” comes closest to what one generally thinks of as business as usual, but it nonetheless incorporates “various provisions” of the Inflation Reduction Act, the Infrastructure Investment and Jobs Act, and the U.S. Environmental Protection Agency’s “recently finalized power plant rules based on Section 111 of the Clean Air Act.” At risk of understatement, at least some of those assumptions seem unlikely to bear out in Trump 2.0.

“Commitments” and “Net Zero 2050” both assume the United States will reduce net greenhouse gas (GHG) emissions 51 percent below 2005 levels by 2030—the Biden administration’s (previous) Paris Agreement pledge—and hit net zero by 2050. The difference is that the “Net Zero 2050” scenario also expects the rest of the world will hit that target, too. Neither obviously comports with readily observable trends in GHG emissions (which keep rising) or Western politics (which keep shifting to the right).

The new study does not explicitly find incremental U.S. LNG exports to be inconsistent with the public interest, the standard under Natural Gas Act Section 3(a). Yet the centrality of climate ambition to its analysis could create implicit gotchas. For example, if Trump 2.0 rolls back policies upon which the study’s more benign conclusions were predicated, environmental advocates might argue that the DOE’s findings no longer apply.

Likewise, Trump’s appointees at the DOE might prefer an analysis, which does not rely on climate ambition (and lawsuit-leery project sponsors might prefer to wait until the DOE substantially revises or replaces this one). A new study might soon be underway.

Limited Impact on Global GHG Emissions from U.S. LNG Exports

Arvind P. Ravikumar, Senior Associate (Non-resident), Energy Security and Climate Change Program

Debates around the climate impacts of U.S. LNG exports have remained entrenched, with little clarity for future policymaking. Proponents argue that increased U.S. LNG exports will reduce global carbon emissions, while opponents claim the opposite. It turns out that neither of them is right, or at least that is what the DOE concluded in its recent report on the global GHG emissions impact of U.S. LNG exports.

The report finds that, compared to a world where exports are limited to existing/final investment decision (FID) facilities, unconstrained exports will increase GHG emissions by about 710 million metric tons. And that number is entirely within the uncertainties of a global model premised on a static future policy landscape and future expectations of demand. To put that in perspective, global GHG emissions from existing/FID exports will be 48,639 teragrams of CO2 equivalent (Tg CO2e) in 2050. By contrast, unconstrained LNG exports will result in global GHG emissions of 48,680 Tg CO2e—a difference of less than 1 percent.

A common argument of proponents of LNG is that it can reduce global carbon emissions by substituting higher-emitting coal plants with gas plants in the developing world, just as it helped reduce carbon emissions in the United States and United Kingdom. But that is not the conclusion of the DOE. In a world with unconstrained U.S. LNG exports, only 13 percent is used for coal-to-gas substitution (good!), while 25 percent substitutes zero- or low-carbon energy (bad!) and , 58 percent is simply used for new gas use in the power sector and industry (neutral!). Critically, higher production of low-cost U.S. gas reduces production elsewhere. Whether this is good depends on how effectively the United States reduces methane emissions along the natural gas supply chain.

While that may not be welcome news to some, it is not entirely surprising. My own research has shown that coal-to-gas switching in the power sector is unlikely to be replicated at scale in the developing world because of high LNG prices, limited infrastructure such as pipelines, and national security concerns around import dependence. Imported LNG was always going toward high-value applications such as industrial use or district heating in places where air quality issues are politically salient.

Model results are just that; they are sensitive to assumptions about future demand, technological progress, and geopolitics. With a few small tweaks—such as modeling global momentum toward low-emissions gas or high methane leakage in other gas-producing countries, as recently observed by satellites—it is entirely possible for the model result to suggest a net reduction (albeit small) in global carbon emissions because of unconstrained U.S. LNG exports. There are several reasons why the United States should evaluate whether to allow unconstrained LNG exports. The impact on global GHG emissions is not one of them.

Flawed Assumptions on Global LNG Demand

Ben Cahill, Senior Associate (Non-resident), Energy Security and Climate Change Program

The study describes several idealized emissions reduction scenarios, from a path based on current policies to one with high climate ambition, and works backwards to estimate global demand for U.S. LNG exports. But these scenarios are a shaky foundation for any policy shift.

The modeled scenarios feature policy assumptions for the future evolution of energy and climate. In two “Commitments” variants based on the pledges made at COP26 (see Table 3 of the summary report), “countries without pledges are assumed to follow an emissions pathway defined by a minimum decarbonization rate of 8 percent per year.” Is this realistic? In 2023, only 12 countries in the world met or exceeded this CO2 reduction rate. Two other “Net Zero 2050” policy assumptions are consistent with net-zero emissions globally by 2050, but few countries are anywhere near the required trajectory. The final scenario of unconstrained U.S. LNG exports may also be unrealistic, since policy drivers and technology change could erode global gas demand.

The range of scenarios is useful because they show the policy choices and demand shifts required to meet various emissions reduction targets. But it is misguided to cite four modeled scenarios with questionable assumptions to argue, as Secretary Granholm did, that projects already approved and under construction “will be more than sufficient to meet global demand for U.S. LNG for decades to come.” That would let aspiration guide practical policymaking.

There is inherent uncertainty over long-term LNG demand. It is quite possible that bullish demand forecasts will be wrong. European gas demand may fall even faster than expected (although it will still need LNG supplies). Chinese LNG demand could disappoint due to continued resilience of coal and the country’s astonishing growth of renewable energy. In Southeast Asia, gas will continue to face challenges in competing with cheap, abundant coal. Gas may struggle to compete in South Asia as an industrial fuel due to relatively high prices and a lack of gas infrastructure.

LNG market participants are aware of these risks. Considering that the United States is already the largest global LNG exporter, could double export capacity within a decade, and still has a queue of viable projects waiting for FID suggests that many buyers and banks believe the market will need U.S. LNG. These projects have always involved commercial risk. But it is best for government agencies to continue policies that have worked: use a rigorous process to vet projects but let the market sort out which are built. Otherwise, the risk is that the United States cedes competitive advantages to the benefit of other global gas suppliers.

Drawing Geopolitical Conclusions After a Year of Pause

Leslie Palti-Guzman, Senior Associate (Non-resident), Energy Security and Climate Change Program

With much anticipation, the Biden administration has released its final DOE study, updating the economic and environmental analyses used to evaluate LNG export applications. The long-awaited study had been cited as the rationale for the LNG export permit pause initiated in early 2024. The report will disappoint the LNG industry, which is likely to challenge certain climate-focused conclusions, such as the assertion that LNG displaces renewable energy rather than coal. Overall, the pause and report demonstrate the Biden administration’s emphasis on prioritizing climate goals over geopolitical interests—a balance it has struggled to achieve since Russia’s invasion of Ukraine in 2022. Meanwhile, developments from the last year show the practical outcomes of forestalling U.S. LNG exports.

In 2024, all LNG FIDs were outside the United States. In total, about 31 million tons per year (mtpa) of capacity started construction in Qatar, the United Arab Emirates (UAE), Oman, Canada, and Mexico.

Uncertainty over U.S. export reliability prompted trade partners to diversify gas supply, indicating resilient demand. European importers have hedged U.S. LNG with the potential return of Russian pipeline gas. The average share of U.S. LNG in Europe’s LNG imports this year is 38 percent, according to SynMax Leviaton data, but it accounts for less than 20 percent of Europe’s total gas imports, including both pipeline gas and LNG. Asian buyers, including Japan, have signed new contracts with non-U.S. suppliers. Notably, Japan has capped (for now) its reliance on U.S. LNG at 11 percent since 2021 and did not sign any new contracts for U.S. LNG projects in 2024. Globally, the Middle East accounts for 36 percent of all new LNG contracts signed in 2024, compared to 29 percent from North America. Several buyers have also opted to contract with portfolio suppliers which can secure supplies from different sources, diversifying shipping routes and geopolitical risks.

Competing LNG suppliers have leveraged the U.S. permitting pause to accelerate projects and secure offtake agreements with consumers who might have otherwise committed to U.S. LNG. While Qatar Energy sought to capitalize on the U.S. regulatory hold to attract new markets, its expansion remains significantly under-contracted. In contrast, other Middle Eastern exporters, such as the UAE and Oman, have successfully captured market share this year.

On Domestic Energy Security, LNG Exports Are a Distraction

Cy McGeady, Fellow, Energy Security and Climate Change Program

Given a nationwide focus on cost of living, the impact of LNG exports on domestic energy prices is arguably the most politically salient question covered by the new DOE study. Yet the report delivers quite banal findings not materially different than past DOE work on the question. Yes, the study’s reference scenario models price increases at Henry Hub of $1.09 per mmbtu by 2050, but this only equates to a 4 percent rise in residential natural gas prices. Stated plainly, the study shows that the United States can both significantly scale LNG exports and retain access to the cheapest natural gas in the world for American households and businesses.

Such an increase is plausible, but it may yet overstate the rate of price escalation. The last decade of expanded energy exports, of both oil and natural gas, have only driven increased supply and capital investment and resulted in lower prices than past DOE studies projected.

Excessive policy focus on LNG exports distracts from far more pressing matters, and real risks, facing the domestic energy system. The United States possesses vast natural gas reserves and unparalleled commercial expertise, which ensures natural gas supply can scale to meet greatly increased demand. But the United States will need a larger, more robust midstream to enable this growth and dampen volatility.

Meanwhile, a new era of growing electricity demand means the electric power sector will grow ever more reliant on natural gas generation—which for now at least remains a larger source of demand than exports. The unresolved question of gas-electric reliability coordination poses an acute risk to reliability which could cause significant economic damage and cost lives.

For domestic energy security, the LNG export debate is largely a distraction. Policymakers serious about domestic energy security and affordability would do well to instead focus sustained attention on the real and pressing policy issues at play in the domestic energy sector.

DOE Study Shows Opportunities for Supporting Energy Security

Kunro Irié, Visiting Fellow, Energy Security and Climate Change Program

The new DOE study shows both the rapid expansion of US LNG exports and their potential to anchor the global LNG market. The incorporation of energy security considerations into the study’s analysis reinforces the United States’ position as a global supplier, demonstrating a holistic approach that extends beyond domestic market dynamics and emissions concerns to encompass global energy security considerations.

In addition to the total volumes that U.S. exports contribute to the global market, the unique flexibility of U.S. LNG with respect to destination (i.e., cargoes can be traded or delivered to multiple destinations) offers geopolitical benefits and stable import flows for importing nations. The DOE study acknowledges that these market characteristics are outside its modeling capacity but posits that they are important for global energy decisions. The incorporation of energy security considerations into the study analysis reinforces the United States’ position as a responsible global supplier, demonstrating a holistic approach that extends beyond domestic market dynamics and emissions concerns to encompass global energy security risks.

The study cites Pakistan and Bangladesh as examples where potential LNG demand has dissipated in the face of price volatility and increases, likely preventing additional coal-to-gas transitions. This analysis warrants further consideration, as increased U.S. LNG supply should help mitigate price volatility by adding both volumes and flexibility. As the DOE modeling shows, countries can look to other producers for supply, but fixed-contract projects cannot add flexibility as immediately as the U.S. industry.

Consideration of volatility and emissions reductions present the United States with a dual opportunity to facilitate fuel switching while expanding its market presence in the global LNG trade.

Evolving Public Interest Criteria in U.S. LNG Export Policy

Janet Whitaker, Senior Associate (Non-resident), Energy Security and Climate Change Program

One interesting development in the DOE’s assessment of U.S. LNG exports is the emphasis on analyzing the consistency of exports with the “public interest” on the effects of upstream and midstream natural gas production and exports on local communities.

The political context has changed since previous studies on the impacts of U.S. LNG exports in 2018 and the life-cycle GHG impacts of U.S. LNG exports in 2019. Specifically, the assessment describes “growing national attention on the positive and negative effects of expanding natural gas production and exports, leading to a range of responses, including federal Executive Orders defining environmental justice, climate justice, racial equity, sustainability, and energy communities.”

Acting on the environmental and climate justice requirements in previous executive orders, the assessment addresses not only pollution and other health impacts, but also the broader economic and social effects on communities local to LNG facilities, including impacts on existing local industries, quality-of-life effects, and other community disruptions. This marks an evolution from a primary focus on environmental effects toward a broader assessment of both environmental and social considerations—especially impacts felt by non-white and low-income communities. This attention to social impacts is aligned with the Biden administration’s wider environmental justice vision (e.g., reflected in its Justice40 Initiative) as well as recent international approaches to pursuing a just transition.

The assessment acknowledges the conflicting stakeholder priorities relevant to gas production and LNG exports, such as between locally felt environmental impacts, job creation, and increased wages. While the incoming administration may place less emphasis on environmental justice, it may find common cause with the idea that economic development should raise local and working-class wages.