THE IMPACT OF THE KYOTO PROTOCOL ON THE DEMAND FOR NATURAL GAS IN SELECTED OECD COUNTRIES

As extreme weather events (heat waves, cold waves, and tropical cyclones) are becoming more and more frequent, the importance of dealing with the impact of human activity on the environment is brought to the attention of the general public. Likewise, vows to reduce pollution are becoming more and more present as the consequences of global warming in the form of severe floods, droughts, tornados, and blizzards are causing devastating effects on society. Unfortunately, efforts to reduce pollution are not satisfactory, and international agreements on climate change are rare. In 2015, in Paris, members of the United Nations Framework Convention on Climate Change (UNFCCC) adopted the first-ever universal, legally binding global climate agreement. Widespread usage of fossil fuels in economic activities (production and transportation) makes them one of the main culprits for global warming. As the transition towards renewable and sustainable energy sources is very slow and modest, to say the least, the attention was focused on identifying which among the fossil fuels pollutes the least. Generally, natural gas is considered to be 'cleaner' as it emits fewer pollutants in comparison to other fossil fuels like coal and oil. While the impact of the Paris Agreement on achieving climate goals is yet to be seen, this article assesses the impact of its predecessor, the 1997 Kyoto Protocol, on the demand for natural gas, a 'cleaner' fossil fuel. In particular, this paper analyses countries that are members of the Organisation for Economic Co-operation and Development (OECD), i.e., the countries that are mostly developed and advanced economies that could and should act as a signpost to other countries in efforts to reduce pollution and the global warming problem. The paper employs panel data methodology to assess the impact of various variables on demand for natural gas with particular emphasis on the impact of the 1997 Kyoto Protocol. The obtained results indicate that the increase in the demand for natural gas occurred due to the increase in economic activity while the Kyoto Protocol had a negative impact on the growth of the demand for natural gas.