Environmental Defense Fund was the first environmental group to hire a full-time economist, way back in the 1970s. At the time, many wondered what economics had to do with protecting the environment. We saw an opportunity and seized it because we believe prosperity and stewardship can go hand-in-hand, and solutions that make good business sense have the best chance of catching on and delivering environmental benefits that stick. That idea remains one of our guiding principles today.
So, it should be no surprise that EDF recently commissioned a detailed economic analysis of opportunities to cut methane emissions from the U.S. oil and gas industry. Our objective was simple – show how leading companies can cut methane emissions quickly and cost-effectively.
Why focus on methane emissions, and why now? Because pound for pound, methane is a very potent greenhouse gas – initially at least 120 times more potent than CO2 when released into the air. Whether intentionally vented or inadvertently leaked, methane from the oil and gas sector is America’s largest industrial source of U.S. methane emissions.
It’s a serious problem… but after extensive analysis and discussion with industry leaders and other experts, this study shows us it’s a solvable one. Better yet, it makes a solid case for immediate action.
Here is EDF’s view of what the report tells us:
- Methane emissions are a growing problem – Even with current regulations, emissions from oil and gas production are expected to grow 4.5% between now and 2018, with nearly 90% of emissions in 2018 coming from existing infrastructure.
- Significant reductions are achievable – With current technologies already used in the oil and gas sector, we can cost effectively cut methane emissions from onshore oil and gas sources by 40% from 2018 projections.
- Reducing emissions is cost effective – The 40% cut in emissions is achievable at a net cost of less than a penny per thousand cubic feet (Mcf) of gas produced – which has traded in the range of $2.00-4.50 per McF over the last few years. In other words, the climate will take notice if we cut methane emissions, but your electricity and gas bills won’t.
- Lower emissions means higher revenues – Lastly, some of the emission controls more than pay for themselves, as the methane captured and sold offsets the cost of implementing these state-of-the-art technologies. Just over half of the emissions reduction measures identified will actually make industry money.
Now that the facts are clear, it’s time for industry to seize this opportunity.
EDF calls on companies across the oil and gas value chain to take a hard look at the report, and take action starting this year in four steps:
- Measure– As a first step in benchmarking, take measurements of your emission, including direct measurements, to better understand how your company is performing on this issue;
- Reduce – Set targets and use reduce your emissions with the proven technologies identified in the cost curve study and any others that may work for your company; and
- Report –Monitor and report on your progress implementing methane management activities and reducing emissions.
- Lead – Ultimately, leverage your position as an industry leader to advocate for emissions reductions across the value chain, encourage peers to follow your lead, and support policy changes that maximize the climate benefits of natural gas.
Cutting methane emissions won’t solve climate change by itself – we need to continue to reduce CO2 emissions – but doing so will put a major dent in the rate of near-term global warming. That means a real chance of reducing emissions that warm the planet for decades and deliver climate benefits in our lifetime. And, because methane is also a product – natural gas – cutting waste of that resource is often a win-win for companies and the environment.
If every company in the oil and gas industry takes these steps, it will go a long way toward helping the climate. That’s a win that matters.