Incentivising methane mitigation

Melissa Cox, Veolia Institute

Perhaps the principal obstacle to slowing anthropogenic climate change is that the release of greenhouse gases (GHGs) is inextricably linked to things that we don’t want to do without. Burning fossil fuels to produce heat and energy has underpinned industry, and hence our economy, for centuries. The fact that CO2 is produced in the process is inconvenient, but seemingly unavoidable, unless the – so far – misaligned incentives are turned into a real stimulus for decoupling economic growth and CO2 emissions. That is the first lever of action.

There is another GHG that is arguably as important as CO2, and may prove easier to tackle by virtue of not being linked to the production of something useful: methane. That is the other lever. This was the focus of an international Conference hosted by the Veolia Institute, jointly with the Agence Française de Développement and the Prince Albert II de Monaco Foundation, on 9th November 2015, along with two associated COP21 side-events held on December 8 at COP21. The most prevalent of the Short-Lived Climate Pollutants (SLCPs), methane accounts for one-third of GHGs. It does not remain in the atmosphere as long as CO2 – its half-life is only around a decade – but it certainly packs a punch: its impact on climate has been shown to be a colossal 84 times as great as CO2 over a 20 year period. So in terms of getting to grips with GHGs in the near term, the way we deal with methane could prove to be critical. The good news is that many strategies to mitigate methane emissions already exist. The challenge is thus not to create new technologies, but to identify the appropriate incentives to ensure these strategies are implemented and solutions scaled-up.

An illustration of the challenge comes from landfills (third source of anthropogenic methane) where methane is produced when waste buried in landfill decomposes anaerobically. The technology exists and operators know how to capture it, to flare to prevent it entering the atmosphere and even to recover the gas and turn it into an alternative source of energy. However, this will not happen without a financial incentive to make the process viable. There additionally needs to be regulation of landfill tariffs and power prices, which currently vary enormously from region to region.

As for the largest industrial source of methane, it comes from various leakages of methane in oil and gas operations and distribution. The business actors in this sector have the resources, the technologies and the means to drastically reduce methane emissions.

Last but not least comes methane from agriculture: from livestock and from rice farming to a smaller extent. In the latter case, a solution is to intermittently drain the field. The deployment of this technique known as Alternate Wetting and Drying (AWD) is already used in China, motivated by the financial expedience of saving irrigation water. The real challenge is to innovate and up-scale these technologies to make 140 million farmers follow that practice.

A potentially powerful incentive would be to put a price on methane – like carbon. Since its impact on climate is 84 times greater than carbon, it should arguably be priced 84 times higher. This would provide a financial incentive for mitigation that is proportionate to the potential cost of inaction.

Meanwhile, the World Bank has developed a climate finance mechanism called the Pilot Auction Facility (PAF), which coordinates the auction of a ‘put option’ an option to sell assets at an agreed price on or before a particular date for methane projects – guaranteeing the practitioner a minimum sale price for carbon credits, and hence providing a financial incentive to invest in the project. At scale, this could provide further assistance for private sector investment in methane reduction projects.

More generally, financial resources are available and the challenge is to direct investments towards low-emitting projects and operate a real transition towards a low-carbon future.

Methane mitigation is critical for achieving short-term targets in GHG reductions. The solutions already exist and they can come with positive returns: health improvement, and profitable projects. The innovation lies, as Dr. Ramanathan from the University of California stated at the Methane conference on November 9th, “in the convergence of scientists, policy-makers and companies working together because everyone benefits”.