How the Energy Industry can Address Methane Emissions for a Quick Climate Win

Authors

• Emilie Prattico

  Former Manager, BSR

As we enter the second half of the year, activity is picking up in advance of COP21 in Paris this December. China just released its “Intended Nationally Determined Contribution” to peak its carbon-dioxide emissions around 2030. And in June, six oil and gas majors—BG Group, BP, Eni, Royal Dutch Shell, Statoil, and Total—published a joint letter to the UN and international governments to affirm their own climate commitments and call for action to ensure we remain within the 2°C threshold. Christiana Figueres, the executive secretary of the UN Framework Convention on Climate Change, responded with her own open letter to welcome the oil and gas industry’s efforts and suggest ways they can support government action.

Whatever Paris delivers, the energy sector can make immediate progress to build momentum for the transition to a low-emissions economy. The industry is uniquely positioned to address short-lived climate pollutants—black carbon, methane, tropospheric ozone, and hydrofluorocarbons—through fast mitigation. Indeed, up to 1°C of temperature rise can be avoided this way. Based on BSR’s work with the Climate and Clean Air Coalition (CCAC), there are three main areas where the sector can make progress on short-lived climate pollutants:

1. Address methane leakage in company operations: According to the CCAC, more than 8 percent of global natural gas production is lost to venting, leakage, and flaring, costing US$27 billion to US$63 billion in energy and economic losses every year. It is technologically feasible to capture much of the methane emissions associated with leakage in oil and gas production with varying break-even costs, but most companies see these investments as peripheral to their core business. Companies can address this by shifting more capital expenditures toward technologies to prevent leakage, and by collaborating with government (and the effort led by the Climate and Clean Air Coalition) to create a global standard in controlling methane emissions in oil and gas systems.
2. Place a price on carbon: If done effectively, a price on carbon, which is supported by the six majors, would take into account all carbon equivalents, including methane—a pollutant whose warming potential is 25 times greater than carbon dioxide. Many oil and gas companies have already begun moving in this direction by applying a shadow carbon price in making investment decisions, and this can also be applied to short-lived pollutants like methane.
3. Change company culture: Decision-making on fast mitigation of methane is most likely to happen at headquarters level, but methane leaks occur at the facility level. Companies can address this disconnect by encouraging methane management with an incentive structure that rewards implementing break-even or cost-negative mitigation measures.  

In addition to our partnership with the Climate and Clean Air Coalition, BSR is also partnering with the We Mean Business to support companies who wish to reduce methane emissions from oil and gas production. The coalition has added fast mitigation as one of the seven actions companies can take on climate.

Fast mitigation provides a tangible way for oil and gas companies to take action on climate in a way that is affordable, pragmatic, and beneficial across a range of sustainability metrics. These are the kind of solutions that will be needed to turn an agreement in Paris into a reality.