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Energy Gang
Methane is both a problem and an opportunity: How market-based solutions can cut emissions even after climate policy has retreated
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- [00:00]
A
The IEA has just estimated that about 200 billion cubic meters per year of methane can be unlocked by mitigating methane emissions and reducing flaring. And to put that in context, right, that's about 1/5 of US supply. That's about one third or over one third of the global LNG trade. And it's nearly twice the amount of gas that was exported through the Strait of Hormuz in 2025.
- [00:29]
B
Those numbers are mind blowing. They're saying about 30% of all warming has been caused by methane. The majority of them comes from carbon dioxide. But methane is kind of number two there in terms of its significance as a greenhouse gas.
- [00:41]
A
Methane emissions from oil and gas are kind of frustratingly high or plateaued at about 80 million tons per year. But we've built this really important institutional infrastructure, better understanding technological capability that when brought together, can yield significant real world mitigation in the coming years.
- [01:08]
C
Founded nearly 50 years ago, Rocky Mountain Institute has grown from a small Colorado nonprofit into a global force in the energy transition. Today, RMI works with businesses, governments and communities in more than 50 countries around the world to scale clean energy, improve efficiency and strengthen energy systems. From accelerating solar batteries and electrification to enhancing industrial efficiency and reducing building emissions, RMI focuses on pragmatic, market driven solutions that cut costs, improve resilience, and expand energy access. Five decades in, RMI's vision remains the same. Build a cleaner, more prosperous energy future for all.
- [01:52]
B
Hello and welcome to the Energy Gang, a discussion show from Wood McKenzie about the fast changing world of energy. Hi, I'm Ed Crookes and on this show, we're going to be talking about methane. We're going to be talking about it as a problem. It is, of course, a very potent greenhouse gas and we're also going to be talking about it as an opportunity. Methane, of course, is the single largest component of natural gas, which is the source of about one fifth of the world's energy. And if you can use it, it can be extremely valuable and useful. Now, to talk about that, I'm joined by TJ Conway. TJ is a a principal at the Climate intelligence program at RMI. Hello, T.J. welcome to the show.
- [02:33]
A
Hello, Ed. Thank you so much for having me. I'm very excited to be here.
- [02:36]
B
Yeah, it's great you could join us. I want to talk about you and your background a little bit in just a moment. Before we get onto that, can we talk a bit about rmi? If you could tell us a bit about what it is and what it does. I think some people in Our audience may remember Rocky Mountain Institute, which is what it used to be. It hasn't been that, what, for about five years. I think the name changed to rmi. But yeah, as I say. Could you explain perhaps what it is that you do?
- [03:02]
A
Sure. RMI is an independent nonprofit organization. We were founded in 1982 and our mission is to transform the global energy system to secure a clean, prosperous and zero carbon future for all. So we're active globally now. Even though our name implies that we are centered in Colorado, in the Rocky Mountains, and we focus on practical market based transformation. We take a think, do and scale approach to our work. So we combine rigorous analysis with implementation solutions. We try to scale technologies, policies, financial mechanisms and business models to drive system wide change in energy.
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B
Yeah, got it. Thanks very much. So what's your story then? How did you first get interested in energy and what was the path that led you to that role you now hold at rmi?
- [03:57]
A
Yeah, so I kind of got into energy a bit indirectly. I started out very passionate about development economics and spent some really formative time in Latin America, in Chile, in Ecuador, in Mexico, and became fascinated by the concept of the resource curse, basically how being a major resource holder does not necessarily yield overwhelmingly positive outcomes in certain respects. And I realized that to really understand the energy sector was critical to advancing some of those priorities that I had early on. And so I kind of delved into energy. I worked at PFC Energy, which eventually became part of S and P Global. I spent some time at the Inter American Development bank and then spent about 10 years at Energy Intelligence where I joined with a small team to help build the research and consulting practice there. And during that time I loved being an analyst. There's always something fascinating in global energy, but I also wanted to have, try to have an impact. And so I decided to join RMI almost five years ago. And there I dedicated a lot of my time to the question of methane, which is obviously why we're here today.
- [05:13]
B
Right, and can you talk a bit about your role then? So in what way are you working on the methane problem now?
- [05:19]
A
So at rmi, we focus on increasing emissions visibility. So better understanding the, the extent of emissions across the oil and gas supply chain, particularly around methane, and leveraging that expertise, that intelligence, the analysis that we do around emissions to drive real world change. And that change can occur in various ways. It can be supporting policy and regulation, it can be advancing market based solutions, and also, you know, engaging, for example, with the financial sector to increase investment and financing for methane mitigation. So we take a broad based approach to, or a multi pronged approach to advancing methane mitigation, knowing that in any particular case, one or two or not all of those different prongs could be applied. Right. And we ultimately are seeking to keep building the momentum that we've seen growing in methane over the last several years.
- [06:24]
B
Right. So let's talk a bit about the scale of that then. In the intro I was talking about methane as both a problem and an opportunity. How big of a problem is it and how great is the opportunity? Right.
- [06:38]
A
I think it's great framing to think about this as both a problem and an opportunity. And the challenging side.
- [06:44]
B
Right.
- [06:44]
A
Methane is a super pollutant and it has accounted for about 30% of warming to date. But as you mentioned in the introduction, methane is also a valued commodity. And as a result of that, all of the methane that is leaking into the atmosphere from the oil and gas sector is its energy wasted, its money lost, and it is damaging the climate. And so for that reason, there's a great opportunity here for reducing methane emissions and in doing so, improving energy security, improving energy efficiency and operational efficiency and benefiting the climate. The problem. Or we can talk about the problem in more detail. So maybe I'll leave it there.
- [07:25]
B
Go. What were you going to say about the problem?
- [07:27]
A
You can think about the sort of the problem in a couple of different respects. First is in the market context. The IEA has just estimated that about 200 billion cubic meters per year of methane can be unlocked by, by mitigating methane emissions and reducing flaring. And to put that in context, Right. That's about 1/5 of US supply. That's about one third or over one third of the global LNG trade. And it's nearly twice the amount of gas that was exported through the Strait of Hormuz in 2025. So these are meaningful volumes of methane that are leaking into the atmosphere that could be brought to the market and help improve across those different priorities that I laid out earlier.
- [08:15]
B
Sorry, the different priorities being what you mean economic development, energy security.
- [08:20]
A
Energy security especially. But, but also, but also sort of the strong business case for methane mitigation.
- [08:26]
B
Yeah, those numbers are mind blowing. So just, just to double back on a few of those points, and so you were saying about 30% of all warming has been caused by methane. So this is of the total increase in anthropogenic warming since the 19th century. About 30% of that comes from methane. Obviously the majority then comes from carbon dioxide. But methane is kind of number two there in terms of its significance as a greenhouse gas.
- [08:52]
A
Yeah, great clarification. So 30% of overall warming, anthropogenic emissions or anthropogenic contribution is roughly estimated around 60%. And then within that, oil and gas methane emissions account for about 25%. We have a real opportunity to, to slow warming. And because methane is what we call a short lived climate pollutant, it only stays in the atmosphere for a relatively short period of time, around 12 years. So if we mitigate those methane emissions, it can significantly slow near term warming and then that provides opportunity for advancing longer term decarbonization solutions. So on the climate side, this is a great near term opportunity and it happens to be significantly beneficial for energy security and efficiency.
- [09:38]
B
Right, yeah. And so just on the the sources of methane, where it comes from then. So you mentioned the oil and gas industry being one, the coal industry is another. I think I'm right in saying the number one source of anthropogenic methane is agriculture, is that correct? And then waste is another big one. Right. So it's sort of between the fossil fuel industries, waste and agriculture. Those three account for the great majority of human caused methane emissions.
- [10:07]
A
Yes, that is right. And when we think about sort of fossil fuel emissions, roughly speaking, it's about a third. A third, A third, Oil, gas, coal. So oil and gas being about 25% of total, is a significant opportunity for methane mitigation. And we have a lot of the tools available today to significantly reduce those emissions.
- [10:28]
B
Right, okay, so how is that done then? So you mentioned flaring is clearly one potential part of it. And so this is, I mean, just to clarify what we're talking about, we're talking about flaring. Typically what happens here is that in oil production there is natural gas also in the formation that gets produced when the oil is produced and has to be burned off in a flare for safety reasons to avoid risk of explosion. And so that's a big issue in the oil industry around the world, varies widely from place to place in terms of how much flaring is done. But as you say, the total scale of it globally is very, very large. So that's one thing. And then there's also, then there's just emissions in terms of leakage of methane from, from valves, from pipes and so on.
- [11:16]
A
That's right. So methane leakage, you know, I've been talking specifically about methane leakage. There's also combustion emissions through flaring. So much of that is CO2. But within flaring itself, incomplete combustion is another source of methane leakage. So there is a relationship between methane emissions and flaring as well. The other important point on flaring is, is that in many instances, as, as you well know, in most instances, frankly, the oil and gas are in the same reservoir. And if you have a reservoir that is predominantly oil, the economic value is often resides with the oil. And so that creates an incentive for a producer in some instances to, to monetize the oil and see the gas as basically a waste product. In that instance, we often see flaring take place. And that again is an example of what wasted energy that could be monetized and help improve energy security and bring business benefits as well.
- [12:22]
B
So at a high level then, what are the solutions? What are the key routes for avoiding this wastage of gas through leakage and flaring and turning it into a useful commodity that, as you say, helps with economic development and energy security?
- [12:42]
A
The IEA has, has cited about 75% of methane mitigation. They, they estimate it can be carried out today with existing technology. So we have the technology that we need to dramatically reduce emissions in methane emissions in the oil and gas sector. How to do that? It starts with robust leak detection and repair programs. So, you know, consistent with the framing that I laid out earlier of emissions visibility and driving action first, better understanding where emissions are coming from, the extent of those emissions, and being able to detect any leak immediately is a critical, critical first step. In addition to that, there's potential for methane leakage throughout the entire oil and gas supply chain. But a significant share of those emissions occur in the upstream. And as a result, a lot of the solutions reside around addressing methane leakage in that segment of the supply chain. And that can be done by replacing equipment. For example, pneumatic devices can be quite leaky. Tank batteries also can be significant emitters. But it really starts with better understanding the emissions across a particular facility or asset, obviously across a company's portfolio as well, and then being able to very quickly address leaks that are detected and identified.
- [14:10]
B
Right. So it seems like we had quite a lot of international action aimed at reducing methane wastage over the past five, six years or so was the Global Methane Pledge, signed first in 2021 that brought together 159 countries, I think at one time committing to a 30% or aiming for, perhaps to put it more accurately, aiming for a 30% reduction in global methane emissions from 2020 levels by 2030. You had the big Industry Initiative, the Oil and Gas Methane Partnership, which we've talked about on the show in the past. That's a lot of big oil and gas companies, I think 150 companies or so working together on reporting and reducing methane emissions. So as I say, there has been a lot of international activity. However, it seems pretty clear that climate action has been deprioritized globally over the past few years, in part because of change of administration in the US and current US administration very much not focused on climate action. There's also been a general global shift towards concern about energy security and affordability, in particular in the wake of Russia's invasion of Ukraine and now because of the crisis in the Gulf. That's got everyone worrying about where their energy is coming from and how much they're going to have to pay for it, and much less about the associated emissions. Do you think we're in a world now where it's more difficult to make progress on emissions reduction, particularly for methane in this context? Because, as I say, climate action has been deprioritized globally?
- [15:58]
A
Yeah, that's a great question. You did a very good job of laying out some of the most important developments over the last few years. But I also like to think back over the last decade and if we think back 10 years, methane was not on the radar. We didn't have the technologies that, that we do today. The concept of a super emitter, for example, which is a major factor in overall methane emissions, really was not well known.
- [16:23]
B
Yeah, sorry, just to jump in there, what is a super emitter then? What does that mean?
- [16:26]
A
So, so a super emitter is, is defined as a, a source of methane emissions that meets a particular emissions threshold of 100kg per hour or more. And research done around 10 years ago showed that super emitters could account for upwards of 50% of total methane emissions. So this is a very important factor and consideration for, for dramatically reducing methane emissions as we need to. And what has been very important in this space is advancing satellite technologies that are better able to detect super emitters and address them, especially addressing them in short order. And so that's been a critical priority and we really didn't know much about them until about 10 years ago. So that's just an example of the type of progress that we have seen where technologies like satellites were part of the Carbon Mapper Consortium, which launched a satellite in 2024 to detect point source emissions, particularly super emitters. That technology is now helping us have a much better understanding of where emissions are and how we can best tackle those emissions. And, you know, technological advancement, I think is a good place to start in thinking about the momentum that I think is continuing to build in this space, because as we are getting a better and better understanding of the extent of the emissions where they're coming from across supply chains, that enables action in a way that is in some ways independent from the political or policy context in any particular moment. And just coming back to the fact that because methane is at once a super pollutant and a commodity, at a moment when there is a need to secure supply and resources, this is a valuable commodity that can help to improve energy security.
- [18:27]
B
Right. So that's a really interesting point in the sense that that distinguishes attempts to reduce methane emissions from other emissions reduction strategies. Very often, if you think about something like, let's say, carbon capture, the point of that is to capture the carbon dioxide and store it. That's entirely aimed at climate impacts. Whereas if you're reducing methane emissions, you're both helping the climate in the sense of reducing greenhouse gas concentrations in the atmosphere, but you're also then creating this product, you're capturing this product that can be used, as you say, for commercial purposes to support energy security and so on. So that is quite an important distinction. Is it?
- [19:18]
A
Yeah, it really is. And I like the visual in my head of what is called a marginal abatement cost curve. When we think about an abatement cost curve, you know, cost is in the name, it is the implied cost for that additional lever of abatement. And what's fascinating about the marginal abatement cost curve for methane is half of it is negative, meaning that it's profitable to. To make investments in methane mitigation. What is key is to have a better understanding of the emissions and where they are, and to strengthen and better align incentives across stakeholders so that they can take advantage of those opportunities. And when I kind of was talking about sort of the action component and engaging with a range of stakeholders, much of that work is really trying to better align and strengthen those incentives for action. Because, you know, as I continue to say, it makes business sense, it makes sense from an energy security standpoint. But sometimes the opportunities are just not well known or as transparent as they need to be.
- [20:23]
C
Electricity demand is rising fast. From AI data centers and air conditioning to industrial growth and electric vehicles. Rocky Mountain Institute works with utilities, businesses, policymakers and investors to help meet that demand. While keeping energy affordable, reliable, and low carbon across sectors, including power, buildings, transportation and heavy industry, RMI helps scale emerging technologies, reduce energy waste, and accelerate investment in clean energy systems that work well in real markets in the real world. With teams active in more than 50 countries, RMI focuses on pragmatic market driven solutions that strengthen energy security, improve resilience and support long term economic growth.
- [21:06]
B
Right, so where is the energy industry on this then? Because something I quite often hear in the oil and gas industry is people would absolutely accept your point that there are circumstances where cutting methane leakage and flaring is commercially viable, has in fact a positive return rather than a negative cost and therefore is worth doing. But people will say, okay, well if that's the case, where that is the case, then the industry is going to do it anyway because it has a commercial payback, the investments make sense and where it doesn't have that payback, it's not going to happen. But then it didn't make sense anyway, so people shouldn't do it. And so question, where is the role for policy and the role for organizations like RMI in terms of trying to advance these kinds of initiatives? Because there are a lot of people in the industry who would say if it makes sense, it'll happen and if it doesn't, it won't and it's actually counterproductive to try and kind of force it in some way through policy.
- [22:12]
A
Yeah, fantastic question. So we have seen that industry has set some important emissions reduction targets. Take for example the Oil and Gas Decarbonization charter that was announced at COP28. That includes over 50 companies that have set a goal of reducing methane emissions to near zero as well as reducing routine flaring to zero by 2030. We also, as you mentioned, have the OGMP 2.0 that includes over 150 companies altogether covering about 50% of production.
- [22:46]
B
Sorry, just. That's the Oil and Gas Methane pledge, right?
- [22:49]
A
Yeah, Oil and Gas methane partner.
- [22:51]
B
As always in this business. A lot of acronyms. Exactly.
- [22:54]
A
There's acronym. Yes, acronym soup for sure. Um, but yes. So we have companies that have set targets that constitute a significant share of total production. Those commitments remain and I think that there's still strong commitment and incentive to, to continue along those pathways. There are a couple of different ways to kind of think about the question you, you asked. And, and certainly one way is, is in policy. What I like to think about is, you know, we want there to be incentives across this range of actors and those incentives need to be incorporated into decision making. Right. There needs to be a strong desire for or strong reason for a company or a buyer to make a decision, a transaction based on methane intensity. And so what's been really interesting, let's say in the context of the European Union, methane emissions regulation or EU. Mr. As well as some of the work that is being done on a more voluntary basis in the United States is that we're shifting from solely focused on supply side solutions to buyer solutions as well. Right. Because to make a market, we need to have both suppliers and buyers coming together to transact based on methane emissions or what we would consider as sort of an attribute of that commodity. And we've seen significant progress there in the market development and market creation over the last few years.
- [24:27]
B
Right, that's really interesting. So in other words, then there's a critical factor here is the demand pull as well as the supply push. And so if you're thinking about the value proposition for reducing methane emissions there is on the supply side, well, if you capture more gas and don't waste it, then you get more gas that you can sell. But there's also the point that the gas that you are selling or the oil that you are selling is, if that has lower associated emissions, then you can get a premium price for that.
- [24:59]
A
Yes, there's value attached to methane mitigation. And that's been an obstacle or sort of a set of obstacles over, in recent years that we are, I think RMI is very focused on working through. You know, you can take for example, on the voluntary side, let's say that you're a utility or an industrial buyer and you, you actually would want to purchase low methane gas, lower leakage gas over higher leakage gas. What ultimately a buyer would want to do is be able to include that purchase in their inventories, in their accounting inventories, and they don't necessarily have sufficient guidance and clarity that they need to do that today. So that's an area of focus. And then, you know, the, the EU methane regulation is an example where on the regulatory side, the EU policymakers have come together to say any oil, gas or coal that is sold within the European market should satisfy a methane intensity threshold that will be defined. But in order for this to function, we as importers of oil, gas and coal, we want to ensure that the methane leakage from those products that are coming from other markets too satisfy that threshold. And so the EU methane regulation is a demand side policy or demand oriented policy as well, that is sending a signal to global markets that methane mitigation is a priority in order to access that market. And if these types of demand side approaches are applied at scale, this can have a meaningful impact on overall methane emissions reduction and the development of a market where commodities, oil and gas are differentiated by this critical attribute of methane intensity.
- [26:45]
B
Yeah, so I want to come on to that question of the EU methane emissions regulation in just a moment because I think it's really an important part of the story. Well worth digging into. Before we do, though, just as a general point you say, then it's going to be important for markets to recognize the value of oil and gas that has a lower carbon intensity. And as you say, there is a lot of interest in called differentiated gas. Sometimes I guess you could talk about differentiated oil or oil products, gasoline and diesel and so on. How much of an actual market though is there for them now? I feel like I have looked into this issue from time to time and it still seems to be really pretty hard to get any kind of price premium for your lower carbon product. Is that still true?
- [27:35]
A
Great question. I would say that it's changing right now. I think we're at an inflection point in this area. And let me elaborate. So if we we incubated the methane performance standard called MIQ earlier in this decade and spun it out in 2023, MIQ has had a lot of success early on in certifying gas on the supply side to the point where about 25% of US supply is now certified by MIQ. At the same time, there's that that supply for lower leakage gas has expanded or the certification of lower leakage gas has expanded. There had not been the same focus on the buy side. And for that reason there's an imbalance in the market where it's hard to identify a clear market premium. But that's changing because we're starting to see more demand in the context of regulation, like with Europe, and because as I mentioned before, buyers are realizing that they can significantly reduce the product carbon footprint of the products that they sell by mitigating methane emissions. So they see the value there in the abatement that is attached to that. So I would say that we're on the cusp of the development of a market here and that hopefully will lead to stronger incentives for methane mitigation in the coming years.
- [29:02]
B
And on the private sector side, then you're arguing that companies will be prepared to pay a premium for lower carbon intensity differentiated gas because they can then charge a premium for products made with that gas to their own consumers, whether generating electricity with it, or making products out of plastic, or selling the gas direct to consumers in some way. Ultimately the end user has got to be prepared to pay a premium.
- [29:32]
A
Presumably that is definitely a factor. And I think the question is what is that inherent premium if the goal is to mitigate methane emissions? And kind of, we go back to that question of the marginal abatement cost, the premium should be related to the cost to mitigate those methane emissions, but it can be done so in a way that remains where it's not significantly cost prohibitive.
- [29:57]
B
That's really interesting. I got it. So, yes, there's a premium, but it does not need to be enormous to make these kind of investments in emissions reduction viable.
- [30:06]
A
Yes, yes.
- [30:07]
B
Yeah, got it, got it. Any examples you can point to in terms of companies or sectors that are making real progress here? Anything that's particularly interesting, perhaps, that RMI has been working on, or not that you would say this really shows what can be done.
- [30:24]
A
Yeah, I would say that we. That, you know, a lot of our work, as I mentioned, is oriented toward the buy side because that's where we see some of the most critical obstacles to kind of creating this market signal. And there has been a notable difference in just the level of attention that is being placed on this from a range of different buyers, including industrial buyers, as well as hyperscalers in recent years. And so that has been a very notable change in the overall level of attention that I think we are kind of actively working on to leverage so that we can kind of build this market in the way that we need to. I would still say, though, that there's this combination of voluntary approaches and regulatory approaches that enable the greatest level of impact. Right. And so one of the most important things, and I know that we're going to talk about the EU methane regulations in a second here, is that certain aspects of being able to demonstrate credibly that emissions reductions, methane reductions, are being accounted for are robust measurement, monitoring, reporting and verification standards and practices, and that those MMRV practices are harmonized or interoperable across different contexts. Right. So take for example, the. The OGMP 2.0 effort that is focused on measurement and reporting. The ability to apply practices like that in a voluntary context as well as in a compliance context, can enable significant scaling of impact in a jurisdiction that is regulated as well as one that is not or on a voluntary basis.
- [32:10]
B
Right. And sorry, you're saying on those kind of issues, as you say mmrv, there is a lot of progress being made. You think?
- [32:17]
A
Yes, yes, right. There is.
- [32:19]
B
Got it, got it. Yeah. And now, having just confidently used that acronym, I'm now trying to remember, if I can remember what I said, it's measurement, monitoring. What's the reporting and verification.
- [32:32]
A
Right, and verification.
- [32:34]
B
Exactly. Yeah.
- [32:35]
C
Fantastic.
- [32:35]
B
Yeah. And as you say, just just very kind of, obviously it's essential to get those Things. Right. For any kind of reduction program to have any kind of meaning, you need to know, as the old saying goes, what gets measured, gets managed. If you don't have good data for looking at all this stuff, then anything you're talking about in terms of comparisons of carbon intensity, basing regulatory systems on it, none of that's going to work.
- [33:02]
A
Yes, that's right. So at the beginning it's focused on, the focus is on understanding the extent of the emissions across the supply chain and where those, those emissions are. So that's sort of the emissions visibility component. But also if as a company sets an emissions reduction target and needs to demonstrate its methane performance against that target, on the other end of that, being able to, to monitor, report and verify that progress has been credibly delivered is equally important. Right. Because this, the data, credible data, is at the core of successful mitigation.
- [33:40]
B
Yeah, got it, got it. So, yeah, let's talk about those European regulations then. So the methane emissions regulation, I think I'm right in saying, was first put forward or first agreed in 2024 and it's sort of being implemented now, Right? It's being phased in over time with full implementation by 2030, is that right?
- [33:59]
A
Yes, that's right. And they're, there are kind of a couple of phases, or at least that's the way I like to think about it. There's, there's a phase that's more focused on reporting and transparency in the current period. So 2025, 2026, we're also entering a period where that MRV point on monitoring, reporting and verification, it becomes more of an emphasis is in the next couple of years. And what's most important, there is this concept of equivalence between the European regulations and any suppliers into the European market. And then there's, then there's this question of what is the right methodology for calculating methane intensity and then ultimately delivering against methane intensity thresholds, which will rise in importance and become sort of a core focus area in the 2027-2030 period.
- [34:50]
B
Right. And as you say, then, because we're heading towards that implementation, crucial phase of implementation starting next year, it feels like the controversy over that regulation has really been heating up and been a fairly steady flow of stories about it. And there seems to be quite a lot of opposition in the energy industry and from the United States to the ways that the EU has been thinking about implementing the regulation. And I think it is an interesting case of the tension between the energy security and the climate objective, as you say, quite often in the world of methane emissions reduction. Climate objectives and energy security. Climate objectives and energy security objectives go hand in hand. Very much point you in the same direction for Europe with this emissions regulation. That's not necessarily the case, right, That a more rigorously and stringently applied regulation could have negative consequences for Europe's energy security because it would shut off gas from being able to enter the European market. Is that fair or am I overstating the case?
- [36:09]
A
I would say that that's perhaps a bit of an overstatement that I think that this again presents a significant opportunity for, for building a market that factors methane mitigation into, into the equation in, in ways that can send a strong signal globally and can incentivize methane mitigation that again, can yield economic benefits as well. Certainly we're in a moment where energy security is, is a very high priority. But, but also that the, the regulation seeks to balance energy security priorities with methane mitigation priorities. And there are, there are ways that the regulation seeks to account for that and balance those, those priorities. So I would say that, you know, for from our standpoint, we are very solutions oriented in the way that we are engaging on these issues. Given that that we are in this implementation period. What we're seeking to do is to help provide solutions so that the regulation can be implemented effectively and advance the priorities that I set out earlier in the conversation. And I think that there are workable solutions here. There's a certain level of flexibility and pragmatism I think that policymakers have brought to this regulation that can enable it to continue to advance across these implementation milestones and recognize that there will be energy shocks and that those can be addressed within the context of the existing regulation.
- [37:45]
B
So tell me, what exactly is the role that RMI is playing here? You're working with businesses or with governments. What are you doing?
- [37:51]
A
Yes, great question. So our focus is on the successful technical implementation of the regulation. And there are a lot of technical questions that are being worked through over those phases that I outlined. You know, one, one early question is how do you trace emissions from the source in another country to the importer and be able to demonstrate that that cargo meets a methane intensity threshold? That traceability question is highly technical. There's the question, as I, as I mentioned earlier, about methane intensity. What is the right methodology? What is the right sort of threshold that should be established at the outset in, let's say, 20, 20, 30? And so we're providing our techno economic in various ways. We've collaborated with organizations, other NGOs and other stakeholders to present a solution to traceability that we think can ensure that the regulation can proceed with effective implementation, but also address some of the challenges related to very complex supply chains. And we've also shared our thinking with a range of different actors on methane intensity methodologies, for example. So we're trying to be very solutions oriented and collaborative in the interest of ensuring that this regulation is as effective and can be implemented within the time frame. Outline.
- [39:19]
B
Yeah, some of those technical issues are really quite fiendish, aren't they? Just as an example, if you're buying LNG from the US The LNG plant that it came from would have been taking gas from potentially many different sources, essentially just taking it from the US Gas pipeline network. And some of it might have come from offshore US where the associated emissions and the carbon intensity is really low, and some of it might have come from the Permian basin, where associated emissions and the carbon intensity are really high. And so how you, as you say, trace that through the supply chain, the molecules aren't labeled. That must be a really difficult exercise to try and work out what is an accurate and reasonable and fair figure to use for gas from a source where, say, you can't follow that supply chain to its ultimate origin.
- [40:16]
A
Yeah, and the US Is an example of a complex supply chain, for sure. There are obviously simpler supply chains if you have sort of an integrated LNG project where a field is connected closely to a liquefaction facility and that is then exported to a small set of buyers. So certainly there's. There's a range of different supply chains that need to be considered. The regulation focuses on upstream emissions at the source. And so for that reason, the questions really revolve around what is the provenance of the oil and gas and what is the emissions, the methane intensity of that source in the upstream segment that enables a couple of different potential pathways. One could be direct tracing. So in a simple supply, simpler supply chain, direct tracing. So at the, you know, transaction by transaction could be viable. Whereas in a more complex supply chain, there are other opportunities to basically certify that oil or gas at the source meets a certain methane intensity threshold, that that certification could be paired or unbundled from that particular source, but paired with volumes coming from that same country so that the importer has a certification that some oil or gas coming from that same country meets that methane intensity threshold. That's what is called a constrained book and claim approach. And both of those are considered as compliant or able to be used within the context of the regulation based on a December announcement that the European authorities made. So it is definitely a complex issue. It's certainly hard to try to explain, but it's also one great example where rmi, coming together with a range of organizations, identified this as a potential obstacle. We said we think we have a solution here. It can be a hybrid based approach where, you know, both of these traceability mechanisms can be applied. Obviously we want to get to a world where direct tracing can be used in every instance, but given the complexity of the supply chain today and the desire to actually effectively implement this regulation, that type of hybrid approach was the most sense in advancing some of the principles that we set out in that piece of analysis that we released in September of last year.
- [42:49]
B
Right. So another big issue I know is financing investment in methane emissions reduction. You're on this body, you, as in the rmi, is involved in this group, the Methane Finance Working Group. Could you explain a bit about what that does?
- [43:05]
A
The Methane Finance Working Group was created actually also at COP28 alongside the oil and Gas Decarbonization Charter and a couple of other high profile announcements, including the World Bank's GFMR or the Global Gas Flaring and Methane Reduction Partnership, another acronym.
- [43:23]
B
Yep.
- [43:24]
A
But is also an important finance mechanism. And the idea behind it is that there's a huge methane financing opportunity here. There's a need for significant investment. And one of the obstacles is that there isn't sufficient guidance to bring capital providers or financial institutions together with capital seekers or companies because there's not necessarily sufficient clarity on what constitutes a methane mitigation intervention that could be financed. There's questions around whether a bank or a company has clarity that there will be support for methane mitigation, given that there have been, you know, historically, what are called like exclusion policies and investment in oil and gas. And so the idea behind the guidance was to help provide that level of clarity that would be needed to unlock and scale investment in methane abatement finance. And you know, the size of the opportunity here is also significant, ranging from, you know, 100 billion to $200 billion of financing needed in order to, to significantly reduce methane emissions. And so that was the, the opportunity. And we, we outlined guidance that focused on a kind of two different approaches or structures. The first was is what is called a use of proceed structure. The idea behind that is every single dollar of capital used would be deployed directly to methane mitigation. And the obvious need, therefore, is to then determine what constitutes methane and mitigation within any particular company. So all the different measures, whether it's swapping out pneumatic devices, addressing leakage at storage tanks, as I mentioned before, leak detection and repair. What is that long list of all the interventions that would be required? So that's use of proceeds, and then there's one called KPI linkage, where the capital invested, not every single dollar, would have to go to methane mitigation per se, but the company that would be receiving that financing would have to meet methane intensity targets or KPIs, in order to have access to preferential terms like interest rates, for example. And so we outlined what constitutes methane mitigation, what are targets or KPIs that could be helpful to indicate progress. And then also consistent with what we were talking about earlier, what is the monitoring, reporting and verification that is required to demonstrate credibly that those emissions reductions had taken place? And so we released that guidance about a year ago in June 2025. And since then, companies and financial institutions have been working together to try to advance transactions based on that guidance. Now, for rmi, we worked closely with a range of different organizations to create this guidance. After making that guidance public, that's where we in some ways pass the baton to the financial institutions and companies to work together, often in confidence, to figure out if there is a transaction that can be completed. So we have less visibility into the exact progress that is being made. But I think across those that have been deeply involved in the Methane Finance Working Group, we're very confident and hopeful that we will see some transactions being announced in the coming months. And, you know, that is also, we've. We've also seen some important announcements from the World bank and the GFMR as well, that are, you know, supporting financing for programs in a growing number of countries, too.
- [47:09]
B
So in terms of your efforts on methane emissions reduction, what does success look like if we were to be talking again in five years, 10 years from now, whatever makes sense as a time horizon to think about how would the world be different if you had achieved everything you want to achieve? And perhaps just to put that in context, I think I'm right in saying, am I not, that we are not on course, as a planet to achieve the goals of the Global methane pledge, that 30% reduction in emissions by 2030. And of course, we're in that period now where there is, I think, a bit of target fatigue and a bit of target skepticism. And given that in particular, I guess people invested quite a lot intellectually and emotionally, even in the goals of the Paris Agreement, which it now looks like it's pretty certain the world will not achieve those goals. I guess that casts a shadow, you could say, over a lot of climate efforts in a lot of different areas and as I say, raises that question of what is practically achievable. What can you do that would look like success to you? And how would that make the world different?
- [48:25]
A
Yeah, so again, I think that the historical context is important here. Looking back just five years, a lot of the organizations and initiatives that we've discussed barely existed, IF at all. OGMP 2.0, MIQ, the oil and Gas Decarbonization Charter, the list goes on. And so we've seen an incredible amount of progress in building institutions, building initiatives that help us better understand the extent of the emissions, the extent of the opportunity. What is critical now is to shift the focus from not just data, but data to action and to real world mitigation. You are certainly right to point out that methane emissions from oil and gas are kind of frustratingly high or plateaued at about 80 million tons per year. But we've built this really important institutional infrastructure, better understanding technological capability that when brought together, can yield significant real world mitigation in the coming years. So if I'm to look out over the next five years, over the next 10 years, the priority that we have is to dramatically reduce those emissions. And I think it's completely achievable. I think that we should be focused on reducing methane emissions 75%. We know that the technology is available to do that, and that's the North Star that we continue to have to do. That requires, as I mentioned before, incentive alignment, strengthening incentives, incorporation of market based solutions that are also interoperable with compliance or regulatory solutions. That is in the works. And I think that I'm very hopeful and will continue. RMI and all the other stakeholders in this ecosystem are, I think, strongly committed to continuing to advance down this path.
- [50:19]
B
Well, I hope you'll come back again in five years, if not sooner, and be able to talk to us about the progress you've made. Unfortunately, for now we do have to leave it there, but it's been fantastic talking to you. T.J. conway, thanks very much indeed, Ed.
- [50:32]
A
Thank you so much. It's been such a pleasure and I look forward to the next opportunity.
- [50:35]
B
Yes, me too, very much. Many thanks to our producers, Stuart Duffy, Molly Merwin and Toby Biggins Gilchrist. And above all, many thanks to all of you for listening. We really value your feedback, so please do keep that coming. And we'll be back very soon with all the latest news and views on the future of energy. Until then, goodbye.