Substantial reduction of methane emissions for achieving the climate goals
by Andris Piebalgs and Maria Olczak
Why methane emissions matter
Climate change is one of the major challenges humanity faces today. Climate change mitigation, involving drastic cuts in greenhouse gas (GHG) emissions is widely acknowledged as one of the key solutions to address this challenge. The European Union has committed to reducing GHG emissions by 40% by 2030. Moreover, the President of France Emmanuel Macron is calling to set a target of zero carbon by 2050 for the EU.
The attention is focused mostly on limiting carbon dioxide emissions and rightly so. However, we should not forget about the second most important GHG, which is methane. The Environmental Defence Fund estimates that 25% of human-made global warming is caused by methane. Methane is a potent climate force; when leaked to the atmosphere it traps 84 times as much heat in the atmosphere as CO2 over a 20-year time frame. That means that by emitting methane, humankind accelerates climate change.
Apart from the direct impact on climate, methane also has an indirect influence on human health. It is an important precursor to the formation of tropospheric ozone, which is a significant component of urban smog. It has been estimated that stopping methane leaks would bring societal benefits of USD 27 per thousand cubic feet.
Methane can come from many sources, both natural and anthropogenic. The largest humanmade sources are agriculture, oil and gas industry across the entire value chain, as well as waste. One-third of global methane emissions are related to fossil fuel (coal, oil and natural gas) production, transportation and use. As the global population (and its welfare) is growing, we can expect the increase in demand for energy and food and thus rising methane emissions.
Methane is the predominant constituent of natural gas used to produce electricity, heat and transport fuel. It is also considered “cleaner” than coal. When burned, it emits about half as much carbon dioxide as coal, and virtually no mercury, particular matter and Sulphur dioxide. However, the indirect methane emissions (i.e. vented methane and fugitive methane emissions) could compromise the environmental case for gas and thus put into question its role in an almost fully decarbonised economy. For this reason, the goal for the natural gas industry should be to narrow the emissions gap between gas and carbon-neutral energy sources.
The EU, as a large gas and oil consumer, should actively get involved in the minimisation of methane emissions across the entire value chain — from “well to wheels”. The first step to achieve this would be to have comparable transparency requirements in the reporting of detected, quantified and verified methane emissions. It is a rather complicated journey with national sovereignties prevailing, but with the support of the industry, it could be achieved.
An interesting solution for the use of methane emissions from the agriculture and waste sectors could be to capture methane and use it for the production of energy. The EU already has some experience with this. However, in the process of increasing the amounts of biomethane in the grids, it is important to address cross-border trade issues, as at this stage EU’s Member States have very different approaches towards the injection of biomethane into the gas grids.
Building on its implementation experience, new scientific knowledge and a real ambition to achieve climate goals, there is an opportunity to find an effective way to decrease humanmade methane emissions in the EU substantially. It would undoubtedly bring a valuable example to other nations in the combat against climate change.
Industry initiatives — key factors for addressing methane emissions
It is widely acknowledged that reducing oil and gas methane emissions is one of the most cost-effective ways to address GHG emissions. The IEA estimates that it is technically possible to avoid around three-quarters of the current emissions, and nearly half of these emissions could be avoided at no net costs. The IEA also calculated that on average, 1,7% of gas produced is leaked to the atmosphere before it reaches consumers.
It is essential that oil and gas producers acknowledge that it is in their interest to curb leaks. First, for the reputational risks. In fact, in today’s world non-action to address climate change is perhaps the biggest risk to the oil and gas industry. Second, fewer leaks give an opportunity to deliver more gas to consumers. There is considerable sales potential from the reduction of O&G methane emissions.
Looking from the societal perspective, it is important that the gas industry steps up monitoring efforts and increases technological development to demonstrate they do their best to address the issue of methane emissions. So far, there has been so far no correlation found between production and emissions, which indicates that existing methane emission reduction practices could be effective when applied.
While it is important that major oil and gas companies announce plans to address the methane emissions, it is not sufficient. Peer review and scaling up are crucial to achieve the results. From this point of view, the OGCI (Oil and Gas Climate Initiative) leadership could be crucial in changing the industry’s attitude. This initiative unites today companies that are providing for 25% of oil and gas production.
Three aspects that deserve our attention. First, there is a strong commitment to transparency by reporting collective methane intensity, including data aggregation done by independent third parties. Second, there is a commitment to improving data quality. Third, and most importantly, there is a quantitative target. By 2025 companies under this initiative should achieve the collective average methane intensity of aggregated upstream gas and oil operations to below 0,25% from the 2017 baseline of 0,32%. It would mean the reduction of methane emissions by more than one fifth compared to 2017. Even if this target does not seem ambitious enough, it is important to have a credible measurable target. The OGCI speaks about the ambition to reduce to the emissions by one third by 2025, let’s hope that industry makes the orientation on this goal.
The methane emission policies in Russia are of particular interest for the EU. Gazprom provides around 40% of the EU gas imports and potentially more in the future with declining EU domestic production. In 2018 Gazprom signed the Guiding Principles on reducing methane emissions across the natural gas value chain. Thereby, it committed to reduce methane emissions from the company’s facilities and increased transparency.
The level of the “fugitive emissions” from Gazprom activities is the source of some controversy. The American expert Paul Bledsoe estimates the level of the methane emissions from all of Gazprom’s gas value chain as 5–7%, at least three times the global average. Gazprom, from its side, performed an independent audit review of corporate information on GHG emissions, carried out by KPMG. The audit brought positive conclusions about the monitoring, accounting and management of the methane emissions in place. According to Gazprom’s calculations, its overall GHG emissions decreased in 2017 by 12,9% compared with 2013.
The 2018 European Gas Regulatory Forum, held in Madrid, prompted important activity of the European gas industry concentrating on potential way industry can contribute to the reduction of methane emissions. The initiative led by GIE (Gas Infrastructure Europe) and MARCOGAZ (Technical Association of the European natural gas industry), focuses on better understanding of losses across the entire gas value chain, challenges concerning the standardisation of methodologies and improving transparency. The final report with recommendations will be presented at the Madrid Forum in June 2019.
One should not forget that a significant difficulty in addressing the methane emissions stems from the fact that companies are collecting data on a corporate basis. This approach isn’t satisfactory to analyse gas industry operations on a national basis. The experience demonstrates that the gas industry’s voluntary actions are important but not sufficient to address the society’s concerns. As a result, some regulation will eventually be necessary on a national basis. To find the best regulatory tools, it is important to understand well the existing challenge, and for this purpose, the data on a national basis is crucial.
Effective regulatory system for methane emission
Methane has value and now with the industry taking action, the introduction of new regulations targeting methane emissions should be well justified. Methane abatement economic potential depends on gas price, the emission rate and the abatement potential of the mitigation measures. Fluctuations in all of these factors could significantly delay the payback period for companies. Moreover, the social costs of methane emissions are considerably higher than revenues for the company from selling captured methane. The economic opportunity is not sufficiently strong to rely solely on it, which is why regulation is needed. Additional reasons include the avoidance of “free riders” and the urgency in the reduction of the GHG emissions.
The current examples of methane regulations are mostly focused on the upstream part of the gas value chain. The regulations in the US and Canada target large upstream producing and receiving installations. They require frequent reporting, use of leak detection and repair programmes, the avoidance of flaring and venting. These regulations are expected to help to reduce the methane emissions by 40 to 45% below 2012 levels by 2025. It is true that the majority of emissions occurs in the upstream, but there are also substantial losses in midstream and downstream as well. The regulations should target also these parts of the value chain.
In Russia, the regulations require the abatement of emissions from every facility and there are fees for emitting methane. The supervision is carried out by environmental and tax authorities. Norway claims that due to stringent regulation, the companies operating on the Norwegian shelf are world leaders in the solutions to reduce GHG emissions. From all the GHG emissions, methane accounts for only 3%. Mexico has proven that strong regulation to reduce methane pollution can be implemented, while simultaneously having growth in oil and gas industry. Experiences in different countries pave the road for specifying issues that need to be regulated to significantly reduce methane emissions.
First, it should require regular leak detection and repair, the so-called LDAR programmes. A LDAR programme is the system of procedures used to identify and repair the leaking components. Regulation should require regular inspections with thorough record keeping and transparent public reporting. It should incentivise the operators to implement continuous monitoring.
Second, it should seek to reduce or even eliminate intentional methane venting. The regulation should demand to use non-emitting equipment and regular replacement of parts known to leak when worn. Third, it should prioritise gas capture and utilisation over flaring.
The potential benefits resulting from the implementation of more stringent regulations are substantial. The IEA estimated that the expected emissions savings are equivalent to shutting down all coal-fired power plants in China.
The additional aspect of dealing with methane emissions could be the customers demand for climate-friendly gas. That could give a market-based premium for low-emission gas. A study shows that gas delivered from the Norwegian shelf to customers in Germany has only half of the emissions intensity of European average. Today’s market does not reward it. However, the development of transparent and comparable systems of measuring, reporting and verifying the drive to limit GHG emissions could change this.
In an ideal case industries actions would be supported by effective regulation and market forces. That really could be a game changer.
Towards a new European methane emissions strategy
Methane emissions are still an important hurdle towards a zero-carbon economy in the EU. Methane accounted for 11% of total GHG emissions in 2016. The lions share comes from agriculture and waste, but the energy sector also contributes 6% of all methane emissions. With the phase-out of coal mining and a substantial decrease in EU gas production, the remaining emissions mostly stem from EU gas networks, underground storage and LNG. We lose volumes equivalent to 0,18% of gas sales, with more than half lost in the gas distribution networks. One could ask, do these emissions matter since they are so small? The answer is yes if we intend to use gas in the future — and there is a good chance that we will continue to use gas transmission and distribution networks to bring to customers renewable and low-carbon gas.
The first EU strategy to limit methane emissions was adopted in 1996 and addressed emissions from agriculture, waste and energy sectors. At that time, there were only 15 Member States. The countries which joined the EU later have been affected only through European legislation that came out in the implementation of the Strategy. Actions have been proposed and implemented in all three sectors. The expectations have been high — to reduce methane emissions by 41% by 2010 compared to 1990 level. The results achieved have been significant but did not meet all expectations. The methane emissions came down, but only to 30%. And this reduction has been strongly supported by the unexpectedly high level of coal mines closure. As a result, the energy sector contributed to almost one-third of all reductions achieved between 1990 and 2010, in agriculture and waste in particular substantial results have been achieved, but far from what has been expected.
Absolute change of CH4emissions by large key source categories 1990 to 2010 in CO2equivalents (Tg) for EU-15 and share of largest source categories in 2010 for EU-15. Source: EEA, 2012
A new Strategy aiming at the abatement of methane emissions will come not only as a logical step in the pursuit of creating a zero-carbon economy in the EU but also as a legal requirement. The Regulation on the Governance of the Energy Union requires the European Commission to make a proposal for a new strategy using the experience and expectations from applying the principles of a circular economy.
In the meantime, there are some interesting pilot projects that could provide inspiration like Valdemingomez technological parc in Madrid. In this technological park, nearly all urban waste of Madrid is processed, and in a complex technological process, biomethane is produced from the collected waste and injected into the grid. This example demonstrates that the best results could be achieved with an integrated approach, giving incentives to capture methane from agricultural production and waste management. Valdedomingez technological park is still the only one in Spain. The creation of this type of projects requires not only vision but also financial and regulatory incentives. The upcoming 2020 gas package could best reflect how to incentivise the approach of a circular economy for agriculture and waste.
This approach will also have a valuable impact on the creation of zero-emission energy system by 2050. The recently published “Gas for climate study” by Navigant comes to the conclusion that in a net zero emissions energy system gas will be used to provide flexible electricity production, heat to buildings in times of peak demand, high-temperature industrial heat and feedstock for industry, and to fuel heavy road transport and industrial shipping. The study concludes that the sustainable scale-up of biomethane production at strongly reduced production costs is possible. This approach would allow the existing gas grids to ensure the reliability and flexibility of the energy system. That is why it is important that midstream and downstream sectors deliver a robust approach aiming at the minimization of methane leaks.
Learning from the experiences from the implementation of the first methane strategy and new developments of biomethane production, the new strategy could provide for an important stepping-stone towards a zero carbon economy in the European Union.
