Methane emissions: A challenge and an industry response

Danila Bochkarev,
Senior Fellow,
EastWest Institute,

Methane – a powerful greenhouse gas – is at the center of an environmental debate, especially in Europe. In the European Green Deal, the need to reduce methane footprint, has been identified as one of the areas that shows that are vital to help slow global warming, reduce pollution and improve air quality.

The EU Methane Strategy which outlined how Brussels plans to reduce man-made emissions is expected to be adopted by the end of the year. At the first sight, energy contributes only 24 % of anthropogenic methane emissions after agriculture (44 %) and waste, and should not feel ‘threatened’.  However, the European Commission targets particularly the energy sector as it wants to step up efforts to reduce methane emissions for the entire supply chain and improve reporting standards. Given that methane leakage is a (largely) avoidable emission source, this is of course a step in the right direction in case the rational and balanced approach is adopted. Brussels plans to tax imports based on their carbon footprint with natural gas producers – in the context of methane leakage – are likely to be affected, in the context of ‘methane’ issue coming into play.

A number of environmentalist NGOs suggest using ‘methane tax’ as a tool to engineer environmental policy changes in the third countries. For example, the Environmental Defense Fund (EDF) proposes that a methane fee should be based – at least in the early stage – on the country’s average methane footprint. This is because the main suppliers (to Europe) are national oil companies, which tend to dominate the sector in their home countries and, therefore, a majority of methane leakage originates from these dominant suppliers. According to the EDF, such a move will send a signal to the whole country to reduce its methane footprint and lead to tightening of environmental regulations. Not only is this proposal politically ambiguous and costly for the European consumers (proposed measures will lead to an increase in wholesale gas prices ranging from 0,60 €/MWh to 1,68 €/MWh), it also punishes companies investing heavily in reducing their GHG emissions – like conventional gas producers – while other industries in the same country with higher emissions drag the country’s “export carbon footprint” up. This approach of collective responsibility should be avoided as non-constructive and counter-intuitive. Furthermore, Under WTO rules a carbon tax could be clearly seen as a protectionist measure. The carbon tax could open a new front in the trade war as the third countries might use this legal basis to retaliate with additional tariffs and trade barriers to even-out the playing field.

European energy companies and a number of non-EU pipeline exporters has a good track record of keeping fugitive emissions under control and took further commitments to reduce their carbon footprint. Methane emissions from natural gas accounted for only 0.5 % of EU-28 greenhouse gas emissions. In addition, fugitive emissions from natural gas decreased by 37 million tonnes of CO2 equivalent between 1990 and 2017 as the European gas industry took steps to reduce its methane footprint. Furthermore, a 2019 report by Gas Infrastructure Europe (GIE) and Marcogaz, found that super-emitters, i.e. specific points in the system that are responsible for disproportionately large volumes of gas leakage, have not been identified in the EU gas sector.

Pipeline gas exporters to Europe also have made some steps towards methane emission reductions and climate neutrality. For example, Norwegian energy company Equinor’s low methane emissions are industry leading at around 10% of the global industry average. Furthermore, in 2016, Equinor carried out a study on methane leaks from Norwegian gas delivered to customers in the UK and Germany showing that they were below 0.3%, compared to 0.6% average for the gas distributed and consumed in Europe. Europe’s largest supplier Gazprom also took some steps to reduce methane leakage and the company’s carbon footprint. In its 2018 Environmental Report independently audited by KPMG, the Russian gas company stressed it has a low methane footprint comparable to the best performers in Europe. According to 2019 Gazprom data, methane emissions from Gazprom’s production facilities amounted to 0.02 % of the volume of gas produced, 0.29% of the volume of gas transported, and 0.03% of the volume of natural gas stored underground.

Considering, industry’s responsible approach to the methane leakage issue, it is logical to suppose that the energy transition process should be jointly managed by the EU and the energy exporters while based on a gradual decarbonization of their businesses via the application of intermediate – economically and technically – realistic targets.

Disclaimer: The opinions expressed in this article solely reflect the views of the author, not of his organisation.

This piece is based on the author’s findings published here and here

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