(The following article is printed with permission from Climate Tech VC and was featured in their Feb 27 newsletter. Don't get their newsletter? Consider signing up!)
Despite a big focus on addressing the global methane problem in the fall of 2021, CH4 emissions aren’t yet trending down.
Methane emissions from the energy sector rose slightly in 2022, according to a new report from IEA. Energy is the second-largest source of methane emissions created by human activity (behind agriculture), accounting for nearly 40% of the total each year.
While the intensity of methane emissions from oil and gas production has fallen by ~5% since 2019, overall emissions from the energy sector are still increasing— illustrating the need for the O&G industry to take a more aggressive, zero-tolerance approach to curbing methane emissions.
Importance of CH4: Over a 20-year period after release, methane is 84x more potent than CO2 when it comes to trapping heat. Methane currently accounts for more than 25% of global warming, but its lifespan once in the atmosphere is much shorter than CO2 at ~10-12 years. That means rapidly cutting methane emissions could immediately slow our planet’s warming.
In 2021, 100 countries joined the Global Methane Pledge and committed to reducing methane emissions by 30% from 2020 levels by 2030. Last year, the passage of the IRA included the first-ever fee on a greenhouse gas in the US, charging O&G companies for methane emissions.
Not just leaks: Although major events like the Nord Stream pipeline incident are dramatic examples of methane leaks, normal O&G operations release about the same amount of methane as a Nord Stream-sized disaster into the atmosphere every day on average. Better monitoring for smaller-scale oil and gas leaks and repairs to leaky equipment could reduce methane emissions in the sector by 75%.
Adopting regulations to stop non-emergency flaring is the No. 1 action governments could take to reduce O&G methane emissions. Measures to reduce flaring and emissions could bring ~200 billion cubic meters of otherwise-wasted natural gas—more than the EU’s imports from Russia prior to the invasion of Ukraine—to markets each year. Avoiding this waste would shave 0.1 °C off of the global temperature rise by mid-century.
Coal is also the hidden culprit for methane emissions, releasing 40 Mt of methane emissions in 2022. Coking coal, used mainly in steel production, makes up about 25% of current coal emissions—another reason it’s urgent to solve steel emissions. While curbing coal consumption is one of the most effective methods to cut these emissions, applying existing abatement measures to coal mines could reduce their methane emissions by 55%.
O&G receipts: The rise in methane emissions from coal and natural gas last year happened amid record O&G profits.
Cutting methane emissions is not only one of the quickest ways to slow warming, but also one of the cheapest. Because the cost of tech aimed at avoiding methane emissions is actually less than the potential revenue generated from capturing that additional gas, ~40% of methane emissions from O&G operations could be abated with zero net cost to the industry.
Reducing methane emissions by 80% would cost the O&G industry ~$100B—less than 3% of the fossil fuel industry’s profits from 2022 alone. Meanwhile, O&G companies are spending only a small portion of that cash on acquisitions aimed at decarbonization: Shell, BP, and other energy companies were among the top acquirers of climate tech companies (like EV charging and renewable natural gas startups) in our analysis of climate tech exits since 2020.
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