As the window of opportunity to prevent catastrophic climate change narrows, natural gas has been lauded by many in the power sector as a “bridge” from high-carbon coal to a low-carbon future. Indeed, gas has been an important step on the path of reducing greenhouse gas emissions and helping to move the power sector away from coal. However, natural gas is still a fossil fuel that generates considerable climate impacts, both through methane leakage across the supply chain from production to use, as well as direct combustion emissions. To achieve a safe level of climate stabilization and to protect investor portfolio exposure from global climate risks, the bridge of natural gas and its associated emissions must have a clear end.

Yet billions of dollars are poised for investment to build natural gas infrastructure throughout the United States. This investment drive, which includes power plants and pipelines with multi-decadal lifespans, should prompt strong concern about the risk of stranded assets.

Investor engagements with utilities in recent years have been largely successful in moving companies to set ambitious targets to reach the Paris goals. Many utilities are even setting “net-zero” targets. However, such targets often are limited to direct company emissions (excluding upstream supply or downstream product use) or electricity generation (excluding natural gas distribution for cooking and heating uses in buildings). Even for utilities with the most commendable climate targets, there is a disconnect between achieving those targets and company plans to increase reliance on natural gas.

In response to climate change, some options that may significantly reduce demand for natural gas are gaining traction. “Electrify everything” is now a hot topic, and since Berkeley, CA. became the first city to pass legislation banning gas hookups for new buildings, some other cities have followed suit or have plans to do so. Demand-side management practices like improved efficiency and demand-response, which shifts demand to better match more variable renewable electricity resources, further reduce the need to invest in gas infrastructure.

Investors seek enhanced transparency about utilities’ planning and assumptions, so they can assess whether companies are adequately preparing for the risk of stranded fossil gas assets. Through related shareholder resolutions with Sempra Energy, Dominion Energy and Southern Company, As You Sow is articulating investor concern about these risks, asking companies to explain how they are preparing for reductions in natural gas demand that may come from accelerated policy action on the climate crisis. In particular, the resolutions point to the need for clear information on depreciation timelines for gas infrastructure and how such timelines can be reconciled with climate goals, pricing assumptions and cost comparisons with clean energy portfolio alternatives, and the company’s perspective on the role of unproven, emerging technologies like renewable natural gas or carbon capture.

Lila Holzman
Energy Program Manager, As You Sow