What word goes before emissions, footprints, offsets, capture, credits, and taxes?
No, it’s not fart.
It’s the ubiquitous carbon. Consideration of CO2 and its impact on the climate, what is producing it and what is reducing it, is a matter of daily debate.
As a result, it can be easy to overlook the other harmful Greenhouse Gases (GHGs) that are warming global temperatures. After CO2, methane (or CH4) is probably the most familiar. It accounts for about half of the net rise in global temperatures since the pre-industrial era and 30% since the post-industrial era. It is seen to be less of an existential threat than CO2 as it does not hang around for as long, but it has a very strong heating effect during its shorter lifespan.
There are several human habits that emit methane into the atmosphere. The majority comes from agriculture, waste disposal, and fossil fuel production. According to the International Energy Agency (IEA) Global Methane Tracker 2023, the global energy industry released 135 million tonnes of methane into the atmosphere in 2022.
This is despite the Global Methane Pledge that was made at COP 26, 112 countries agreeing to reduce methane emissions by at least 30% by 2030 from 2020 levels. This methane reduction was deemed to be “the single most effective strategy to keep the goal of limiting warming to 1.5°C.”
The good, but frustrating news (given lack of progress) is that it is entirely feasible for the energy industry to reduce its methane emissions. Reductions depend on low-maintenance measures such as fixing leaks and replacing pumps. Had the oil and gas industry spent just 3% of the income accrued last year on existing technologies, for instance, its methane emissions could have come down by 75%.
There is just no excuse,” said IEA Executive Director Fatih Birol. “The Nord Stream pipeline explosion last year released a huge amount of methane into the atmosphere. But normal oil and gas operations around the world release the same amount of methane as the Nord Stream explosion every single day.”
There is no doubt that finance is on board with the need to reduce carbon emissions – investing, lending, and engaging with corporates with a view to managing the risks of taxes, fines, and loss of license and generating opportunities by creating low carbon solutions. Investment companies increasingly measure the carbon emissions of their operations, their investments, and the underlying companies they invest in. But what is the role of finance in helping limit methane?
One thing it could do more of, according to a recent report by Planet Tracker, is help to tackle emissions produced by the livestock industry, or “agri-methane”. Finance companies could do this by requiring the companies they support to have clear policies in place to cut their methane emissions. They should also report annually on their progress with respect to limiting methane emissions within their investment portfolios. Financial leaders will often say they need supportive government policy to help them make an impact, and not risk reducing financial returns for their investors. However, it appears that some of that supportive policy has arrived.
The significant piece of legislation that is the US Inflation Reduction Act of 2022 is also aiming to be a methane reducing act. The act requires that companies in the US start producing precise measurements of their methane emissions and face fines if they exceed permissible levels. Under the new law, the EPA can fine companies $900 per ton of methane starting in 2024, rising to $1,500 in 2026. For companies with significant leaks, the costs could be substantial. A Texas natural gas compressor station was observed by satellite to release about 2,000 tons of methane over eight days in 2020. That leak would trigger fines of $1.8 million if it occurred in 2024 or $3 million in 2026.
History suggests that an environmentally damaging GHG becomes a global priority when two conditions are met: First, when the scientific evidence underscoring its impact becomes impossible to ignore; and second, when policy directs the private sector to pay attention. Methane is fast approaching this stage.
With science and government policy creating methods to deal with methane, it is to be hoped that the money will also align with this mission.
You can help too, by choosing to align your savings and investments with sustainable values. It is possible to nourish your wallet as well as nurture the planet, by investing in ways which support positive impact, or at the very least in ways which do not promote negative outcomes.
Contact me here to find out how you can do good with your money: www.somersetwm.co.uk/contact
Difficulty measuring methane slows plan to slash emissions | Financial Post
Photo by adrian millon on Unsplash
