Why Canadian LNG Is Not a Path to Global Energy Security or a Stronger Domestic Economy

A United States-led wave of tariffs and trade negotiations is disrupting international trade, adding uncertainty to global energy markets. As a response in Canada, industry proponents and government leaders have suggested accelerating support for new projects such as LNG facilities to diversify the country’s export markets while supporting global energy security. However, LNG is a volatile commodity, subject to high and unreliable prices, international supply shocks, and trade disruptions. Importing markets—notably in Europe and Asia—are already downgrading demand for LNG in favour of more reliable and affordable alternatives, including domestic renewables. For exporters such as Canada, long-term demand decline and low prices threaten the profitability of high-cost, long-lived, and often publicly supported new LNG projects. This leaves taxpayers and communities exposed as global markets shift—all while increasing domestic greenhouse gas emissions and possibly delaying the energy transition abroad. Ultimately, LNG is a risky bet for exporters and importers alike.

Canada’s Proposed LNG Exports: Economic risks

Investment decisions for LNG infrastructure are not to be taken lightly and must consider long-term market dynamics. LNG export and import infrastructure—including liquefaction facilities, pipelines, regasification plants, and supportive electricity lines (see Figure 1)—is capital intensive, likely to run over budget and/or rely on public subsidies, and takes years to complete. LNG Canada Phase 1, for example, began construction in 2019 and is only now set to begin operations, over 6 years later and following several delays, such as disputes between contractors over rising costs. Indeed, the LNG terminal itself, and the Coastal GasLink pipeline built to supply it with gas, ran 29% and 263% overbudget, respectively, amounting to an estimated CAD 14.5 billion in unexpected costs. Most other Canadian LNG projects, aside from Woodfibre LNG, are not expected to come online until near 2030 (far too long to address immediate LNG demand in Europe, for example).

Moreover, as a new entrant facing high construction and infrastructure costs, Canadian LNG is expected to struggle as it competes with cheaper producers such as the United States and Qatar, both of which are rapidly expanding production. The United States is also leveraging the persistent threat of tariffs to pressure importers to buy more American LNG in an increasingly mercantile trading environment, exacerbating Canada’s competitiveness challenge. With long construction times, potential cost overruns, increasing competition, and infrastructure lifespans of 20 to 60 years, the profitability of Canadian LNG projects would depend on sustained global demand and high prices over the long term.

Figure 1. LNG production and shipping process

LNG Market Volatility: History and current risks

LNG prices can fluctuate significantly, carrying risks for producers and consumers. In the short term, if prices are high, there could be profits for exporters. However, LNG links regional gas markets together as it is increasingly traded around the world, meaning supply shocks abroad could raise prices for Canadians who use gas for home heating. Over the longer term, as the market saturates with increased supply, and as countries, homeowners, and businesses move to more price-stable and increasingly affordable renewable energy options, an international oversupply of LNG is expected. Exporters would then face strong competition, declining profits, and long-term viability risks for multi-billion-dollar infrastructure investments. 

Piped natural gas and shipped LNG are each subject to supply shocks and price spikes that can be triggered by several events, including export facility outages, extreme weather, and geopolitical shocks. LNG markets spread these local supply risks globally, as shipments can be redirected to regions where gas prices are inflated by local supply constraints. In this way, regional gas price spikes can raise global LNG prices. The economic impacts of these supply disruptions are then amplified further by speculative trading in commodity markets, resulting in dramatic swings in benchmark prices (e.g., the Dutch Title Transfer Facility [TTF] and the Japan/Korea Marker [JKM]; see Figure 2).

Figure 2. Major gas and LNG pricing benchmarks from 2019 to 2025
 

LNG markets also work the other way, exposing regional gas and electricity markets to international shocks. In 2022, diverted shipments to Europe drove record-high LNG prices, which raised domestic gas costs in Canada to unprecedented highs in May 2022, with knock-on effects for home heating and electricity bills. Even larger impacts were seen in price-sensitive countries like India, Pakistan, and Bangladesh, where high prices and supply defaults led collective LNG consumption to fall 16% in 2022. Similarly, domestic gas consumers in countries that export LNG are exposed to higher prices during global price spikes as domestic gas is diverted for more lucrative exports abroad. This happened in both the United States and Australia during the 2022 price spike. Higher domestic gas prices are also expected in British Columbia as LNG exports grow, along with more expensive electricity rates for businesses and households as ratepayers partially subsidize LNG-related grid expansions.

This increasing awareness of LNG’s economic volatility and risks coincides with utility-scale renewables like wind and solar becoming the cheapest option for new electricity generation in most markets. Renewables now offer an affordable alternative to LNG imports that can reduce countries’ exposure to the international supply volatility and price spikes associated with traded fossil fuels. Meanwhile, high prices have sparked unprecedented plans to increase global LNG supply. Market analysts thus widely expect an oversupply of LNG, which could begin as early as 2026 and extend well into the 2030s, driving down prices and threatening exporter profitability. This market glut could extend indefinitely as the global energy transition accelerates (see Figure 3). While low prices may benefit importing countries with existing regasification facilities and pipelines in the short term, they are unlikely to incentivize the infrastructure investments in many emerging markets needed to sustain high LNG demand over the medium to long term, as we discuss below.

Figure 3. Global LNG capacity versus demand under three International Energy Agency scenarios

The Downward Trend in Global Demand 

We can look at three key market geographies—Europe, East Asia, and South and Southeast Asia—to assess how energy security concerns appear to be influencing LNG demand.

Europe

Following the disruption and record prices of LNG in 2022, the European Union (EU) and some individual members, notably Germany, have emphasized the importance of replacing Russian gas in the long run with affordable and secure clean energy. This is most explicit in the RePowerEU plan, which, if implemented, would see total gas demand in the continent decline by over 40% from 2024 to 2030 in favour of renewable energy and energy efficiency. Even if Europe’s energy transition policies fall short of their targets, the benefits of domestic renewables over imported LNG are already evident for European consumers and governments. For example, the IEA estimated that the EU’s expansion of wind and solar saved consumers EUR 100 billion between 2021 and 2023 by reducing exposure to record gas prices. More recently, the European Commission’s Action Plan for Affordable Energy (February 2025) includes the goal of “decoupling retail electricity bills from high and volatile gas prices,” in part by scaling up stable and affordable renewables. Thus, while Europe may benefit from lower LNG prices in the short term as supply expands, sustained demand for LNG, even in the medium term, is unlikely.

Basing investment decisions on today’s high prices risks stranding costly LNG infrastructure in Europe and Canada alike.

 

East Asia

Some of the top LNG-importing countries in Asia are China, Japan, and the Republic of Korea (South Korea)—all of which are adopting measures to reduce LNG demand.

In China, renewables—not LNG—are displacing coal in power generation. Analysis shows that while gas use has remained steady, renewable energy has grown, reducing coal’s share in the power sector. As a major gas producer with access to cheaper pipeline supply and a goal to cut imports, China’s role as a future LNG growth market is increasingly uncertain, especially amid ongoing trade tensions with the United States.

Both Japan and South Korea are mature LNG markets with declining domestic demand. Japan’s LNG imports fell 8% in 2023, and South Korea’s declined 4.9%. In both cases, nuclear and renewables are cutting gas demand in the power sector, while in South Korea, high LNG prices accelerated the decline. As with Europe, importers with existing LNG import infrastructure may benefit from increased supply (and reduced prices) in the short term, but with domestic consumption in decline, excess supply is increasingly likely to be diverted to other markets for a profit.
 

South and Southeast Asia

Energy demand is certain to rise in South and Southeast Asian economies; the question, however, is what energy sources will be preferred to fill the gap? Cost is the first factor to consider, as high LNG prices are seen as a threat to energy security in many emerging economies, including India and Pakistan. While prices are expected to fall in the coming years due to the forecasted global supply glut (as outlined above), this in turn would threaten the profitability of new export facilities in countries such as Canada. As the IEA explains in its most recent World Energy Outlook:

“Gas-importing emerging and developing economies would generally need prices at around USD 3-5/MBtu to make gas attractive as a large-scale alternative to renewables and coal, but delivered costs for most new export projects need to average around USD 8/MBtu to cover their investments and operation.”

In other words, key importing countries need LNG prices to be lower than what new export projects would typically need to be profitable.

There are also significant infrastructure barriers to increased LNG consumption in South and Southeast Asia. In India, for example, “infrastructure development, including pipelines and LNG terminals, has not kept pace with internal demand,” and there are “no plans” to build new gas-fired power plants. Similarly, delayed LNG plant construction in Vietnam, regulatory restrictions in the Philippines, and an announced halt of new LNG-fired power plant construction in Pakistan demonstrate infrastructure constraints. As such, several governments in South and Southeast Asia have signalled that their energy future lies in rapidly expanding renewables, not LNG. Forecasted LNG demand in emerging Asian economies is being revised downward as energy security concerns rise.

Impacts of Canadian LNG on Climate Change 

Finally, LNG accelerates climate change across its entire value chain, due to emissions from energy-intensive gas extraction and liquefaction, transportation, end-use combustion, and methane leaks at all stages. New large-scale fossil fuel projects are incompatible with global climate goals (see also Figure 3). In Canada, LNG facilities will also undermine domestic climate commitments by generating direct local emissions and/or diverting clean electricity from other sectors. Rather than replacing coal abroad, LNG exports can reduce or delay investments in renewables and increase global fossil fuel use. For this reason, the U.S. Department of Energy recently concluded that “the overall global effect of producing and exporting U.S. LNG leads to an increase in global GHG emissions.” To displace coal use abroad, accelerating investments in renewable power generation is a more efficient approach. LNG, then, is more likely to exacerbate climate change than mitigate it, amplifying economic and environmental risks in Canada and beyond.  

Conclusions for Canada

LNG is a volatile commodity, and recent overreliance on it has undermined energy security across several importing countries following trade disputes and geopolitical shocks. Going forward, governments in Europe and Asia are increasingly favouring cheaper and more reliable renewable power over long-term reliance on fossil fuel imports.

Meanwhile, government support to expand Canadian LNG production exposes Canadians to economic risks. The forecasted oversupply of LNG on the global market could lead to prices trending lower, shrinking profit margins, and Canadian LNG assets becoming stranded, potentially triggering demand for more taxpayer-funded subsidies to keep projects viable. Meanwhile, short-term supply imbalances could raise Canadians’ heating and electricity bills as new LNG exports increase Canada’s exposure to international market volatility.

LNG expansion ultimately delays the shift to cleaner, more resilient energy systems for both exporters and importers, exacerbating climate change and compounding the risks of extreme weather events, such as wildfires and hurricanes. Every dollar spent on LNG expansion is a dollar lost for real clean energy solutions and a step backward on the path toward economic resilience for Canada and energy security for its trading partners abroad.