Methane: Carbon’s shadier sibling

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Iancu Daramus

06 May 2020

Why we believe tackling methane emissions must be a priority for companies and policymakers.

With viral videos of gallivanting goats in Wales and boars in Barcelona, it is easy to think that nature is having a small moment of respite, with emissions of carbon and other pollutants falling drastically amid the economic shutdown. Yet given the tragedy of COVID-19, this is not something any of us can cheer.

Some environmental threats we can see – like the smog clogging up our cities. Some, we have learned to respect – like the invisible carbon dioxide that is now increasingly the focus of action from regulators, companies, and civil society. Others, however, have received comparatively little attention.

Foremost among these is methane, a greenhouse gas that is over 80 times as potent as carbon dioxide over shorter timeframes. It is currently leaking in huge quantities: analysts in January spotted plumes coming from three oil and gas facilities in January leaking 25 tonnes of methane in just one hour. That’s about the same as the CO2 emissions from a massive coal power plant.

As most of these leaks are often undetected, the real number might in fact be higher: a recent study found methane emissions in a key US shale gas region were twice as high as previously estimated. And there are worries that, with methane being less regulated than carbon, its emissions might actually rise during the coronavirus crisis as oil and gas companies postpone planned pipeline maintenance.

We believe there are also important implications for investors as well. Tackling methane leakage will be the defining issue if our society successfully shifts from ‘Big Oil’ to ‘Big Gas’. This can generate savings for companies, as an estimated 40% of methane emissions could be avoided at no net cost

Despite the gloomy picture, there is some good news. We have already seen companies – from large oil majors to smaller shale producers – adopting zero or near-zero methane leakage targets. Just as the mining industry has adopted zero fatalities as the only acceptable target, zero leaks must similarly become the norm, not the exception. It is incumbent on the industry to step up, not only in terms of targets but – equally importantly – on what and how it measures.

Investors need to trust the data that companies report, and other data providers are coming to the fore to help us verify their accuracy. Ideally, though, high standards should be set by regulators.

There are many aspects of the climate debate where we are asked to think of future generations. This is not one of them. Unlike carbon, which remains in the atmosphere for centuries, methane dissipates much quicker – so if we stop emitting, the positive benefits can be felt within just a decade or two.

As investors, we will continue to engage with companies and regulators like the European Commission on this key issue.

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