Methane Abatement’s Underfunding Problem

Exhibit 1: Sector Investment vs. GHG Emission Mitigation Potential

Source: Climate Policy Initiative (with input from Intergovernmental Panel on Climate Change)
Exhibit 2: % of Methane Abatement Finance vs. Methane Emissions by Sector

Source: Climate Policy Initiative (with input from the Community Emissions Data System)

Key Points: A CPI study highlights severe underfunding of methane abatement efforts ($11.6B vs. a required $110B per year) relative to methane’s impact on global warming (and commercial potential, at least in Oil & Gas). It calls on government to provide policy for methane emissions reduction and reporting and more fiscal incentives for private investment.  

Spending 1/10^th of what is required for methane abatement. A study out this week by the Climate Policy Initiative on Methane Abatement Finance concludes that global spending of $11.6 Billion per year was spent on average in 2019 and 2020, approximately 10% of the total required for methane abatement to play its role in keeping global warming under 2ºC by 2050. Put differently, it cites that methane abatement spending comprised 2% of climate finance while it argues that methane emissions are responsible for almost ½ of global warming.

Significantly less spend per ton of CO₂e abatement potential than other GHG abatement efforts. The study puts the underspend in context of other GHG emissions abatement efforts, using a ratio of investment flows ($B) to annual mitigation potential by 2030 (in Gigatons of CO₂ equivalent). There was 12 times less $B/GtCO₂e per year spent on methane abatement than in low carbon transport — a ratio of 3.9 $B/GtCO₂e ($11.6B spend/3.0 GtCO₂e per year mitigation potential) for methane abatement vs. 45.6 for low carbon transport (see Exhibit 1).

Within methane abatement spending, disproportionately less spending in the Oil & Gas sector. The study cites a mismatch between source of methane emissions and funding going to try to abate it. The waste and water sector accounts for 62% of tracked methane abatement finance but only 18% of methane emissions. On the other hand, the fossil fuel sector accounts for 1% of tracked spending but 41% of methane emissions (see Exhibit 2). With that said, the study acknowledges the very high likelihood of under-reporting of investment by fossil fuel companies and agriculture, forestry and land use (AFOLU) (as well as under-reporting of methane emissions).

Regulation and incentives to spur investment in fossil fuel methane abatement. The study acknowledges the significant momentum building within the fossil fuel sector towards methane abatement. This includes new commitments and regulations in OECD countries as well as voluntary steps by the sector, such as those adopted by signatories to the Oil & Gas Climate Initiative. Although it is often cited that capturing methane lost to leakage can pay for itself, the study correctly notes that incentives can be misaligned, either because the natural gas infrastructure isn’t in place or the owner of the equipment may not benefit directly from reducing leaks. Thus, it recommends a combination of additional regulation and incentives. The potential incentives cited include use of carbon offset credits; only 13% of the credits issued between 2015 and 2020 related to methane abatement, per the Berkeley Carbon Trading Project’s Voluntary Registry Offsets Database.

7/15/2022