Unconventional natural gas production has expanded very rapidly in the United States and is looked to as a secure source of energy in other countries. By 2035, the International Energy Agency expects 40% of increased gas production globally to be from unconventional sources, primarily shale gas. Whether shale gas can be exploited in other countries as rapidly and as successfully as in the USA remains to be seen.

The discovery of shale gas in an energy-hungry economy provides a tempting development opportunity. It means that economy is potentially more resource-rich and energy-secure than previously anticipated, and that this newer energy source could reduce greenhouse gas emissions by displacing power generation from dirtier sources like coal.

Development that relies on shale gas may, however, be constrained by another critical natural resource: water. Further, evidence from the US suggests that greenhouse gas benefits from shale gas exploitation may quickly be eroded if there are methane leaks between the well and the power plant; if coal-fired power displaced by shale gas returns after gas prices rebound; or if coal is exported to power other economies.

Each of these factors highlights the need for a regulatory and institutional framework that can manage these trade-offs and risks.

These challenges are starkest in China. Many of the provinces where shale gas is thought to be abundant are also critically water-constrained, and Chinese institutions may not be equipped to manage the water-energy trade-off or to nest shale gas exploitation in a long term plan of greenhouse gas emissions reductions.  The technology is only nascent, so it is too soon to tell how many of these environmental challenges can be mitigated against. However, the key institutional questions must be asked now if China will be prepared to manage the dangerous opportunity that shale gas presents.

Research will focus on the implications of Chinese exploration of shale gas: it is here where the resource appears to be most abundant and promising as a more climate-compatible alternative to China’s coal power generation, but also where the dangerous development trade-offs between water, energy and climate are expected to be starkest. The primary questions framing research will be:

• What would shale gas exploration mean for Chinese water resources and greenhouse gas emissions?
• Are China’s institutions in a position to use shale gas to fuel a green growth transition by (a) managing the water resource implications and (b) realising climate mitigation benefits from shale gas development?