Tuesday

18th Sep 2018

Opinion

Tackling methane could be substantial climate fix

  • Methane leakage from gas pipelines is a major problem, but can be easily fixed, says Tim Goodman (Photo: Bilfinger SE)

As we reach the two-year mark of the Paris Agreement, climate change is evolving from a social and political challenge to a business and financial one.

Away from the lights and cameras, whole industries are sorting out how to meet new obligations. No surprise then that investor influence on climate took centre stage this past week at French President Emanuel Macron's second anniversary climate summit.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

Financial markets are watching carefully as energy companies in particular are quietly racing to stake out competitive advantage in a field that most of them dismissed for years.

Even as they grapple with long term efforts to reduce fossil fuel use and carbon emissions, another challenge – and new opportunity – has emerged in the form of methane, an extremely potent greenhouse gas responsible for a quarter of the warming we see today.

Scientists say we need to reduce both.

But while carbon reductions involve systematic long-term transformation of whole sectors, methane solutions in the oil and gas sector are quick and easy by comparison, and they don't cost much to implement (methane from agriculture is another, more complicated matter).

This makes it possible for oil and natural gas companies to differentiate themselves not just in their policy rhetoric, but through concrete and measurable practices.

And it's not just about legal compliance or public reputation. Methane, which is the main ingredient in natural gas, is itself a commodity, which means there are direct operational benefits to reducing emissions.

Some solutions are simple

The global oil and gas industry emits 76 million metric tons of methane into the atmosphere each year, everywhere from remote wellheads to the gas mains under your street. Some solutions require new infrastructure or drilling practices, but many are simple plumbing issues: Tightening pipes, closing valves, sealing up storage facilities.

In its closely watched annual World Energy Outlook, the International Energy Agency estimated last month that companies can cut global methane emissions 75 percent with existing technologies, and that about two-thirds of those savings can be achieved at zero net cost, largely because the methane can be sold instead of wasted in the form of valuable natural gas.

Just the reductions at no net cost would have the same climate benefit in 2100 as immediately closing all of the coal plants in China.

The impact of methane and its potential role as a near-term complement to carbon reductions has only come into focus in the past few years.

But it's no wonder that as the reality of Paris sinks in, investors are zeroing in fast on methane and methane strategy as key performance metrics. Now the trend is taking off.

Earlier this year, investors from 36 global institutional firms overseeing $4.2 trillion (€3.6 trillion) in assets launched a major oil and gas methane initiative providing specific guidelines for investors to engage with oil and gas companies on methane management and disclosure.

Eight months in, it appears that the oil and gas industry is on the brink of making considerable operational shifts in how it manages methane.

Last spring, close to 40 percent of ExxonMobil shareholders voted for the company to increase transparency on methane management, while 60 percent voted for greater transparency on climate risks across the board.

The vote happened thanks to pressure that asset managers were getting from their own clients, who have a long-term perspective and see climate change as a risk to their funds.

Since then, Exxon rolled out a methane reduction program for its subsidiary XTO. Meanwhile, Shell deployed a continuous methane tech pilot program, similar to projects run by Statoil and Pacific Gas & Electric Company.

In October, 10 oil and gas companies responsible for 20 percent of global production pledged to move towards near zero methane emissions as part of the Oil and Gas Climate Initiative.

Less than a month later, BP, Shell, Exxon and five other energy companies pushed further with a pledge to continually reduce methane emissions across the entire natural gas supply chain, aligned under a set of guiding principles, including advocating for regulations, developed collaboratively by industry and civil society stakeholders, including an environmental defence fund.

The direct financial opportunity is obvious: the industry emits $34 billion (€29bn) worth of methane each year. But there are other big considerations.

Laggards on methane are more likely to be considered as an irresponsible partner both commercially and within their local communities.

EU to the rescue?

EU policy on methane appears to be gaining ground, as well. Last week, the European Parliament moved a step closer to directing the Commission to develop a methane policy after a key industry and environment committee vote.

The market signals are obvious to what's coming, but more awareness of the risks and financial opportunities for operators is needed to help make change happen faster.

And global leaders implementing the Paris Agreement must factor methane into the overall strategy, and encourage the oil and gas industry to make this timely and feasible fix.

Tim Goodman is director of engagement at Hermes Investment Management. The views and opinions are his own.

MEPs adopt compromise air-pollution bill

MEPs are willing to agree lower emissions targets than they initially wanted, the three largest political groups in parliament told this website.

MEPs snub regulation of cow methane

Methane is second most important greenhouse gas after carbon dioxide. But MEPs voted to exclude "enteric methane," which is 80 to 85 percent of agriculture's share of emissions.

News in Brief

  1. EU investigating BMW, Daimler and VW 'collusion'
  2. Spain wants special Gibraltar chapter in Brexit deal
  3. Italy cancels Vienna talks over South Tyrol 'dual citizenship'
  4. Britain will not accept Brexit deal with Irish Sea border
  5. Slovakia seeks witness to journalist killing
  6. Finland's Stubb considers running for EU commission job
  7. Romania ponders anti same-sex marriage referendum
  8. EU lawyers back Slovenia in Croatia border dispute

Will the centre-right stand up for EU values?

Time for Christian Democrats in the EP to show where they stand on Hungary and on the EU's founding principles, say Human Rights Watch and Amnesty International in a joint text.

Europe needs more modern leadership

If Europe wants to be a global leader, our political leadership has to change dramatically. Power needs a new face in Europe, and it needs to get legitimacy from the people, argues liberal MEP Sophie in 't Veld.

Stakeholders' Highlights

  1. NORDIC COUNCIL OF MINISTERSThe Nordic gender effect goes international
  2. NORDIC COUNCIL OF MINISTERSPaula Lehtomaki from Finland elected as the Council's first female Secretary General
  3. NORDIC COUNCIL OF MINISTERSNordic design sets the stage at COP24, running a competition for sustainable chairs.
  4. Counter BalanceIn Kenya, a motorway funded by the European Investment Bank runs over roadside dwellers
  5. ACCACompany Law Package: Making the Best of Digital and Cross Border Mobility,
  6. IPHRCivil Society Worried About Shortcomings in EU-Kyrgyzstan Human Rights Dialogue
  7. UNESDAThe European Soft Drinks Industry Supports over 1.7 Million Jobs
  8. Mission of China to the EUJointly Building Belt and Road Initiative Leads to a Better Future for All
  9. IPHRCivil society asks PACE to appoint Rapporteur to probe issue of political prisoners in Azerbaijan
  10. ACCASocial Mobility – How Can We Increase Opportunities Through Training and Education?
  11. Nordic Council of MinistersEnergy Solutions for a Greener Tomorrow
  12. UNICEFWhat Kind of Europe Do Children Want? Unicef & Eurochild Launch Survey on the Europe Kids Want

Latest News

  1. EU promotes 'Egypt model' to reduce migrant numbers
  2. Tensions mount over Kosovo-Serbia deal
  3. New book: Why war is coming
  4. EU parliament will not budge on office expenses
  5. Why Orban's project to reshape EU politics will be unsuccessful
  6. 10 years after Lehman Brothers what has changed for EU consumers?
  7. Sefcovic launches bid to be EU Commission president
  8. Is Russia blackmailing the Council of Europe?

Stakeholders' Highlights

  1. Nordic Council of MinistersNordic Countries Take a Stand for Climate-Smart Energy Solutions
  2. Mission of China to the EUChina: Work Together for a Better Globalisation
  3. Nordic Council of MinistersNordics Could Be First Carbon-Negative Region in World
  4. European Federation of Allergy and AirwaysLife Is Possible for Patients with Severe Asthma
  5. PKEE - Polish Energy AssociationCommon-Sense Approach Needed for EU Energy Reform
  6. Nordic Council of MinistersNordic Region to Lead in Developing and Rolling Out 5G Network
  7. Mission of China to the EUChina-EU Economic and Trade Relations Enjoy a Bright Future
  8. ACCAEmpowering Businesses to Engage with Sustainable Finance and the SDGs
  9. Nordic Council of MinistersCooperation in Nordic Electricity Market Considered World Class Model
  10. FIFAGreen Stadiums at the 2018 Fifa World Cup
  11. Mission of China to the EUChina and EU Work Together to Promote Sustainable Development
  12. Counter BalanceEuropean Ombudsman Requests More Lending Transparency from European Investment Bank

Join EUobserver

Support quality EU news

Join us