There has been great interest in recent years in reducing methane emissions as part of efforts to limit climate change. Public and private investment has geared up and methane emission intensity has become a key factor in how markets view energy companies.

This is because cutting methane emissions is seen to be easier to address than carbon dioxide, because much of it can be done at no cost. The IEA estimates that of about 350 million tons of methane released every year, about 140 million tons come from the fossil fuel industry. Of that, in turn, it estimates up to 70% could be abated, and a large portion of that at cost, or even for profit under current market conditions.

The IPCC has estimated that cutting methane emissions quickly in the 2020s could take 0.2 degrees centigrade off the rise in global temperatures in the long run. It is also an area of the transition in which there is consensus that action now could lead to relatively quick impact in reducing climate impacts, because although methane is more potent than carbon dioxide as a greenhouse warming gas, it also decomposes in the atmosphere far quicker.

Against that background, a number of initiatives and regulations in jurisdictions have emerged to drive reductions. The Inflation Reduction Act (IRA), passed in the USA in 2022, contains provisions to charge a levy against methane emissions from oil and gas producers. The levy is expected to cost producers in excess of a billion dollars in 2024. In the European Union regulations are just about to come into effect which schedule company reporting on methane according to ever tighter standards, culminating in the setting of a maximum level of allowable emissions for all companies exporting oil and gas into the 27 countries of the union.

In the multilateral space, the Global Methane Pledge has signed up 120 countries pledged to produce emissions by at least 30% by 2030 from 2020 levels. Companies representing nearly 40% of total oil and gas production have signed up to the Oil and Gas Methane Partnership 2.0 (OGMP), which aims to move reporting on methane from estimates to high quality measurement and reduce emissions.

For more information please visit The Global Registry of Fossil Fuels.

Key Findings

Bottom-up methane emissions reported by major oil and gas companies are widely divergent, and lower, from top-down estimates derived from numbers published by the International Energy Agency (IEA) and United Nations Framework Convention on Climate Change (UNFCCC).
Allocating the IEA’s Methane Tracker data proportionally across company production (“implied emissions”), to estimate emissions of 10 select oil and gas companies implies emissions of just under 9 megatons, compared to self-estimates of under 1.5 megatons.
There are several potential explanations: different system boundaries could be applied, the implied emissions method is a country-level average, and some companies do not make data available on equity assets. But applying maximum margins of uncertainty to all these factors still leaves a considerable, unexplained gap.
Company numbers are still based overwhelmingly on projection from emissions factors, many of them generic, rather than site measurement. Typically, companies also do not publish enough information to enable independent evaluation of their methodologies.
Divergence is becoming crucial as legislation in both Europe and the USA comes into effect tightening reporting and imposing fees.
While more satellite coverage will increase actual data compared to projections, questions remain over how systemic a picture can be built from satellite data alone, given high detection thresholds.
It is critical to close the data gap both to drive the economics of methane abatement, which are more promising now than they have been for some time, and to baseline new regulation.