Insights

Is LNG Really a "Low-Carbon Fuel"?
— Looking Beyond Combustion to the Suppl Chain Level

LNG (Liquefied Natural Gas) is natural gas that is produced, processed and liquefied for transportation. It is then transported by ship or pipeline and regasified before being used for power generation and other purposes. Because LNG emits less CO₂ during combustion than coal, it has been regarded as a relatively low-carbon "transition fuel."

Recently, policy momentum to maintain and expand LNG supply infrastructure has continued, driven by surging electricity demand from AI data centers and semiconductors, along with concerns over energy security. While the government projects that demand for natural gas will decline over the long term, it plans to expand LNG storage capacity to up to 8.87 million tons by 2038 to ensure supply stability. Given the prospect of continued growth in electricity demand from new large scales projects, LNG infrastructure and use are likely to maintain for a considerable period throughout energy transition.

However, discussions about LNG’s role and supply expansion have largely overlooked methane emissions from overseas supply chains. To properly assess LNG’s climate impact, it is necessary to look beyond emissions from combustion at power plants and consider the entire process through which LNG is produced and delivered.

     Full Lifecycle Emissions and the Need for Methane Management in LNG

LNG is recognized as an economic activity in the "transition sector" under Korea's Green Taxonomy (K-Taxonomy) when it meets the greenhouse gas emissions criteria. *

*LNG under the K-Taxonomy: LNG power generation is recognized as a "transition sector" activity when it emits 340g CO2eq./kWh or less per unit of electricity/heat generation, with a plan presented to achieve an average of 250g CO2eq./kWh over the facility's lifetime.

However, this standard only covers emissions at the combustion stage of power generation. Methane leaks throughout the extraction, production, processing, liquefaction, and transport process before LNG reaches the power plant. The K-taxonomy currently has no provisions addressing methane leakage (fugitive emissions) across the LNG supply chain.

Methane remains in the atmosphere for a shorter period than CO₂, but it has a much stronger short-term warming effect. According to the IPCC's Sixth Assessment Report on global warming potential (GWP), methane's warming impact is roughly 30 times that of CO₂ over a 100-year horizon, and about 83 times over a 20-year horizon.

Therefore, if LNG's emissions reduction effect is assessed solely based on power-plant-level emissions, methane released throughout the supply chain before LNG reaches power plant may not be reflected accurately.

     The Main Source of Methane Emissions within the LNG Supply Chain: Overseas Upstream Operations

The overseas upstream segment—where natural gas is extracted, produced, and processed—deserves particular attention. Because the LNG consumed in Korea is produced overseas, managing only domestic storage, transportation, and power generation is not sufficient to reduce methane emissions across the entire LNG supply chain.

The International Energy Agency (IEA) points out that roughly 70% of methane emissions across the LNG supply chain occur in the upstream segment, including natural gas extraction and production.

Moreover, methane emissions can vary significantly across different sources within the same upstream segment. According to IEA analysis, methane emissions intensity—the amount of methane emitted per unit of production—in the upstream LNG sector can vary by more than 100-fold between the sources with the lowest and highest emissions intensities.

This means that the climate impact of LNG can differ substantially depending on where and how it is produced and how effectively methane emissions are controlled throughout the production process.

Therefore, LNG management should include methane emissions from overseas production stages and assess how effectively suppliers measure and reduce fugitive emissions to properly track LNG’s climate impact.

     Limitations of Standard Emission Factor-Based Estimation

Currently, Korea's measurement of methane emissions from overseas LNG supply chain statistical estimates based on standard emissions factor. However, as mentioned above, observed methane emission levels can vary greatly depending on the LNG source. Therefore, applying the standard makes it difficult to track and compare suppliers’ methane management performance and observed emissions levels.

To enhance this limitation, the international community is shifting its approach to methane management from estimation toward the measurement and verification of observed emissions.

     Shifting Toward a Direct Measurement and Verification-Based Methane Management System

Reducing methane emissions across the LNG supply chain requires a system that identifies direct emissions through satellite, drone, and on-site measurements, followed by verification and disclosure. This should be complemented by Leak Detection and Repair (LDAR), which involves identifying leak points and repairing them promptly.

Ultimately, effective methane management should follow a process of estimation → measurement → verification → leak detection and repair (LDAR) → reduction. Accurate measurement of direct emissions is essential for comparing and evaluating the level of methane management across suppliers and, where necessary, requiring them to take concrete emission reduction measures.

At COP26 in 2021, the Global Methane Pledge was launched with a target to reduce global methane emissions by at least 30% by 2030 compared with those from 2020. Corresponding to this target, the European Union (EU) has significantly strengthened its methane management regulations. Notably, starting in 2027, overseas LNG companies exporting to the EU will be required to comply with measurement-based methane emissions reporting.  EU importers will be required to demonstrate that overseas suppliers maintain a measurement, reporting, and verification (MRV) system equivalent to Level 5 — the highest tier — of the UN Environment Programme’s (UNEP) Oil and Gas Methane Partnership 2.0 (OGMP 2.0) reporting framework. From 2028, importers will be required to report methane emissions intensity at the production stage of imported natural gas and other fuels, and from 2030, they will be subject to a maximum methane intensity standard.

This demonstrates that methane is no longer solely an environmental issue for producing countries to address. Instead, it is increasingly becoming an issue that importing countries and companies must also manage.

     The Role of LNG Buyers in Supply Chain Management

Korea is one of the world's major LNG importers, and the Korea Gas Corporation (KOGAS) is a key buyer, accounting for 74% of domestic LNG procurement as of 2025. Given the scale of its long-term LNG purchases, KOGAS has the purchasing power to demand methane emissions information from overseas suppliers and incorporate methane management requirements into its contracts.

Traditionally, price competitiveness, supply security, and supply diversification have been considered key criteria in LNG procurement. However, methane management across the supply chain should now also be incorporated as an important procurement criterion. This means including requirements for MRV and the implementation of LDAR in contract terms, allowing methane emissions across the supply chain to be continuously monitored and managed.

KOGAS has already launched the CLEAN Initiative with JERA, Japan's major LNG buyer and power generator, to investigate LNG suppliers' methane emissions and reduction efforts and improve transparency around related information. This existing cooperative framework can be leveraged by expanding participation among suppliers contracted with KOGAS and raise the methane management standards across the supply chain.

In particular, KOGAS is approaching the expiration and renewal of several long-term LNG contracts around 2030. This coincides with the EU’s introduction of maximum methane intensity standards for imported fossil fuels. As global LNG suppliers strengthen their measurement and verification systems and methane intensity management to meet EU market requirements, the importance of relevant data and management standards in the international LNG market is expected to grow further.

In Korea, however, the institutional foundation for incorporating methane emissions from overseas production into LNG procurement and contract standards are not in place. The government needs to establish standards for measuring, reporting, and managing methane emissions and build an institutional framework that enables KOGAS to incorporate methane management requirements into new and renewed contracts.

Because long-term LNG contracts, once signed, remain in place for extended periods, upcoming contract renewals represent an important opportunity to strengthen methane management across the LNG supply chain.

     From Strengthened Methane Management to Energy Transition

Nonetheless, stronger methane management does not eliminate the climate and environmental concerns associated with LNG expansion itself. Reducing methane emissions across the LNG supply chain should be regarded as a minimum management responsibility while LNG continues to be used, rather than as a justification for expanding LNG infrastructure and consumption.

According to the 2024 Fossil Fuel Finance White Paper, domestic natural gas finance has continued to grow over the past five years, with investment flows centered on public institutions, extending to private financial institutions as well. If investment in LNG-related infrastructure and assets continues to expand on the grounds as “transitional energy," this could lead to long-term fossil fuel dependence and delay the energy transition.

Therefore, while methane emissions from the LNG supply chain currently in use should be measured and disclosed more accurately and actively reduced, one must consider the environmental costs and risks that follows. In the long term, renewable energy should continue expanding to reduce overall dependence on fossil fuels including LNG.

The Korea Sustainability Investing Forum (KoSIF) previously sent a letter to KOGAS urging for stronger methane emissions management across the LNG supply chain. The letter demanded KOGAS to incorporate MRV and LDAR into their procurement and contracting processes for overseas suppliers. [See related content]

KoSIF plans to expand its efforts beyond KOGAS’s LNG procurement practices, working to raise awareness of methane management across domestic companies and promote the development and strengthening of effective methane management systems.

Only when accurate measurement and management of methane emissions, corporate reduction efforts, and improvements in financial and policy standards are pursued together with expansions of renewable energy and reduced dependence on fossil fuel can this lead to a genuine energy transition.