Save for later Print Download Share LinkedIn Twitter As the decarbonization drive accelerates, the industry that once blithely referred to natural gas as a "bridge" or even "destination" fuel is under huge pressure to clean up its act. The International Energy Agency (IEA) is blunt. "Natural gas occupies a difficult space in clean energy transitions," it said in a green energy investment report out last week. In the EU and US, gas is steadily being demonized as renewables win more and more praise (WGI Jun.9'21). In emerging markets in Asia and Africa where coal is dominant, and energy and infrastructure needs are fast increasing, a switch to gas can help meet decarbonization targets. But producers must still take environmental performance into account, delivering energy with the lowest possible carbon footprint. That requirement will likely become more compelling after environmentalists won a court case in the Netherlands in May after arguing that Royal Dutch Shell, the biggest LNG portfolio player among the majors, was failing to reduce emissions quickly enough (WGI Jun.2'21). CEO Ben van Beurden said last week that the company will act in line with the landmark ruling, fast-tracking emissions reduction plans, but that it still intends to appeal. Environmentalists say it is the first time that a company has been legally obliged to align its policies with the Paris climate accord, rather than comply with emissions legislation. The risk is that the Dutch court ruling could intensify legal scrutiny of the broader industry, particularly in Europe, while stirring up wider questions about its social license to operate. Growing concerns about gas' role in the energy transition are already stoking more interest in "cleaner," or carbon-neutral, LNG. Singapore’s Pavilion Energy last week agreed a third term deal that requires LNG suppliers to measure and report greenhouse gas emissions from wellhead to discharge terminal. Deal winner BP will work with Pavilion on developing a transparent methodology. The LNG importer has already sealed similar contracts with Chevron and Qatar Petroleum. None of the deals obliges the supplier to offset the carbon emissions, but Pavilion says carbon neutrality is the intent. The number of carbon-neutral cargoes has multiplied over the past year as more governments and companies set net-zero emissions targets. The first such deal was reported in June 2019, when Japan's Tokyo Gas bought a "green" spot cargo from Shell. The most recent came last week, when Oman LNG said it would deliver a carbon-neutral shipment to Shell. Although such cargoes have accounted for less than 1% of deliveries so far this year, demand is growing: Consultancy Wood Mackenzie says the number almost doubled from eight to 14 in the past six months alone. Various factors are at play -- suppliers' corporate targets, government policy and buyers' requirements. But carbon neutrality comes at a price. The IEA says early reports suggest that buying carbon credits that offset either the supply chain or combustion emissions raises the delivered cost of LNG by 60¢-$1.20 per million Btu. That could add up to 10% to today's already-high Asian spot price -- and gas is already often more expensive in emerging markets than cheap domestic coal or other indigenous fuels (related).