Tackling methane emissions by reducing wasteful flaring and venting of natural gas is especially significant since it meets other development priorities. (Natural gas flaring in the oil and natural gas industry is the controlled combustion of natural gas for operational, safety, or commercial reasons; natural gas venting is the direct release of natural gas into the atmosphere, creating methane and other chemical emissions.) Developing countries often think that meeting their targets for emissions reductions requires increased expenditures on new investments and on innovations, and to compensate those who may see a consequent loss in real incomes. By contrast, in this initiative countries can gain fiscal revenues, increase local energy supply, and improve health outcomes while making a significant contribution to reducing emissions.
The prize is substantial. Based on an assumed average gas price (US$4/MMBtu, or million British thermal units), reducing these specific emissions could provide an additional natural gas sales value of no less than US$40 billion each year, assuming 75 percent of the global gas flared and vented is captured. The relatively small initial costs and effort involved in implementing methane reduction by wasting less gas should make it an attractive opportunity for the private sector, and for donors and oil and gas producing countries looking for quick wins. The International Energy Agency (IEA) has noted that reducing methane emissions from oil and gas operations is among “the lowest of the low hanging fruit” for mitigating climate change.
Fiscal innovation, transparency, and technology advances now present opportunities for all countries to measure, capture, and use otherwise wasted gas. Moreover, the experiences of Nigeria in reducing emissions while raising revenue and of Norway in applying existing gas monetization technologies which are now affordable and smaller in size, show that progress can be made. Recent international political support (The Global Methane Pledge, successfully launched at COP26, together with the U.S.-China Joint Glasgow Declaration on Enhancing Climate Action in the 2020s) gives momentum to scale up such success stories.
Much needs to be done in 2022 to scale up this initiative. Actions that can be taken by each partner by the Spring G20 and IMF-World Bank meetings include:
Oil and gas producing countries could volunteer to apply remote sensing (satellite) technology to measure—and fiscal policies to disincentivize—methane emissions from wasteful gas flaring (following Nigeria’s example), and also volunteer to implement existing gas monetization technology (following the example of Norway). Egypt (COP 27 chair) and Indonesia (G20 chair) could take leadership roles in this initiative;
Multilateral development banks (MDBs) and other donorsshould help developing countries take advantage of the available technology in pursuit of country objectives (as the UK’s FCDO (formerly DFID) did in Nigeria);
Countries hosting satellite data companies should ensure that data on emissions is placed in the public domain on a timely basis, and not kept private. Transparency and accountability open the window to improved regulation and fiscal arrangements; and
The IMF with its unique global reach should urge, in its annual consultations, each oil and gas producing country to adopt the IMF’s innovative fiscal policy advice of applying penalties for excess methane emissions on a deemed basis unless disproven by the emitters themselves.
As was noted at COP26, to achieve the global climate targets, time is of the essence! The actions proposed in this initiative on energy-related methane emissions in 2022 would provide for relatively easy wins with very large payoffs and much-needed tangible progress for the first annual meeting of the Global Methane Pledge and the COP27 meeting in Sharm El-Sheikh in November 2022.
John Hicklin is a non-resident fellow at CGD. Kathryn McPhail is CEO of EnergyCC, based in Singapore. Information about EnergyCC’s work and partnerships is available at www.energycc.com
This blog was published by Center for Global Development on:https://www.cgdev.org/blog/practical-proposal-methane-2022-climate-pledges-action