Opinion: Reducing methane emissions the best place to start

The commitments made at the recent climate talks in Paris have left companies and investors alike asking for clear public policy direction that provides a coherent and credible trajectory to a low-carbon future.

Yet we know that as Prime Minister Justin Trudeau meets this week with Canadian premiers to chart Canada’s path forward, there will be numerous complexities and regional differences to be managed and accounted for.

This will be no easy task, and the stakes are high.

However, there is at least one step that the parties at the table this week should agree on. The prime minister and the premiers could achieve dramatic short-term impacts at a very attractive price by targeting the reduction of methane emissions in our energy value chain.

Methane is the primary component of natural gas and a powerful greenhouse gas (GHG) many times more potent than carbon dioxide. According to the Intergovernmental Panel on Climate Change, over 25 per cent of the human-caused global warming we are experiencing today is due to methane emissions.

Moreover, methane is a salable commodity with significant social benefits (from government royalties to reduced GHGs relative to the burning of coal). According to one study, over US$30 billion of potential value is lost to methane leaked or vented from global oil and gas facilities every year.

Canada is the world’s fourth-largest emitter of methane from oil and gas operations. Some analysis suggests that oil and gas methane emissions in Canada could be reduced by 45 per cent using existing technologies at an average cost of around one cent per thousand cubic feet of gas.

Some companies in the oil and gas sector have come a long way in reducing their methane emissions already, but what’s missing are regulatory incentives to reward deeper reductions from across the industry.

Efficient producers should be seeing greater rewards for outperformance. Conversely, poor performers should be paying a steeper penalty in the market. If regulations are properly crafted, investor capital will flow to the best performers as investors seek to optimize returns.

Alberta has committed to a 45 per cent reduction in methane emissions by 2025. In the U.S., the federal government and several states are already developing regulations to encourage steep reductions. These developments embody the kind of government ambition investors are looking for and provide a template for Canada’s premiers to follow. There is a clear benefit to companies and investors in harmonizing these various goals.

As a country, ensuring that our oil and gas industry is effectively managing methane emissions is one of the most cost-effective and impactful near-term steps we can take to minimize our climate impacts. It will be good for the climate, good for industry and good for investment.

That seems like a good place to start.

Robert Walker is vice-president ESG Services & Ethical Funds, NEI Investments; Peter Chapman is executive director of the Shareholder Association for Research and Education.

Leave a Reply

Your email address will not be published. Required fields are marked *