Report extract

Methane and climate change

The concentration of methane in the atmosphere is currently around two-and-a-half times greater than pre-industrial levels and is increasing steadily. This rise has important implications for climate change.

Estimates of methane emissions are subject to a high degree of uncertainty, but the most recent comprehensive estimate – provided in the Global Methane Budget – suggests that annual global methane emissions are around 570 Mt. This includes emissions from natural sources (around 40% of emissions) and those originating from human activity (the remaining 60%, known as anthropogenic emissions).

The Global Methane Budget synthesizes results from top-down studies and bottom-up estimates to provide global figures for methane emissions from 2008 to 2017. The largest source of anthropogenic methane emissions is agriculture, responsible for around one quarter of emissions, closely followed by the energy sector, which includes emissions from coal, oil, natural gas and biofuels.

Sources of methane emissions

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Methane has important implications for climate change, particularly in the near term.

Two key characteristics determine the impact of different greenhouse gases on the climate: the length of time they remain in the atmosphere and their ability to absorb energy. Methane has a much shorter atmospheric lifetime than CO2 (around 12 years compared with centuries for CO2), but it is a much more potent greenhouse gas, absorbing much more energy while it exists in the atmosphere.

There are various ways to combine these factors to estimate the effect on global warming; the most common is the global warming potential (GWP). This can be used to express a tonne of a greenhouse-gas emitted in CO2 equivalent terms, in order to provide a single measure of total greenhouse-gas emissions (in CO2-eq).

The Intergovernmental Panel on Climate Change (IPCC) has indicated a GWP for methane between 84-87 when considering its impact over a 20-year timeframe (GWP20) and between 28-36 when considering its impact over a 100-year timeframe (GWP100). This means that one tonne of methane can considered to be equivalent to 28 to 36 tonnes of CO2 if looking at its impact over 100 years.

In addition to its climate impacts, methane also affects air quality because it is an ingredient in the formation of ground level (tropospheric) ozone, a dangerous air pollutant.

It is important to tackle all sources of methane emissions arising from human activity, but there are reasons to focus on emissions from oil and gas operations.

First, although emissions also come from coal and bioenergy, oil and gas operations are likely the largest source of emissions from the energy sector.

Second, our analysis shows clear scope to reduce them cost-effectively. Unlike CO2, methane – the main component of natural gas – has commercial value: the additional methane captured can often be monetised directly, and this is typically easier in the oil and gas sectors than elsewhere in the energy sector. This means that emissions reductions could result in economic savings or be carried out at low cost.

Our scenario projections also suggest that oil and, particularly, natural gas will play important roles in the energy system for many years to come, even under strong decarbonisation scenarios such as the IEA Sustainable Development Scenario.

Gas can play an important supporting role in energy transitions by replacing more polluting fuels; it may also deliver services that are difficult to provide cost-effectively with low-carbon alternatives, such as peak winter heating, seasonal storage, or high temperature heat for industry. However, fulfilling this role requires that adverse social and environmental impacts are minimised: immediate and major reductions in methane emissions are central to this.

Changes in the global average emissions intensity of gas production in the Sustainable Development Scenario, 2019-2030

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Changes in the global average emissions intensity of oil production in the Sustainable Development Scenario, 2019-2030

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Emissions come from a wide variety of sources along the oil and gas value chains, from conventional and unconventional production, from the collection and processing of gas, as well as from its transmission and distribution to end-use consumers. Some emissions are accidental, for example because of a faulty seal or leaking valve, while others are deliberate, often carried out for safety reasons or due to the design of the facility or equipment.

The World Energy Outlook has produced detailed estimates for methane emissions from oil and gas operations, which form the basis for the detailed data available in the Methane Tracker. We also developed first-of-a-kind global marginal methane abatement cost curves. These curves describe the reduction potentials as well as the costs and revenues of measures to mitigate methane emissions globally.

We estimate that it is technically possible to avoid around three quarters of today’s methane emissions from global oil and gas operations. Moreover, a significant share of these could be avoided at no net cost, as the cost of the abatement measure is less than the market value of the additional gas that is captured. Natural gas prices around the world affect the share of global emissions that can be abated at no net cost; this share is typically around 40-50%, although the plunge in natural gas prices in 2020 temporarily brought this down to around 10%.

Marginal abatement cost curve for oil- and gas-related methane emissions by region, 2020

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Marginal abatement cost curve for oil- and gas-related methane emissions by region at higher natural gas prices

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If a significant share of current emissions can be mitigated using measures that will pay for themselves from the methane recovered, why have these not already been widely adopted?

There are three primary categories of obstacles that serve to limit the uptake of mitigation measures:

  • A lack of complete information regarding the problem, including a lack of awareness about emission levels or the cost-effectiveness of abatement.
  • Inadequate infrastructure or underdeveloped/saturated local markets that make it difficult to match abated gas to a productive use.
  • Misaligned investment incentives, arising from competition for capital within companies with a variety of investment opportunities, insufficiently quick payback periods, or the possibility of split incentives (where the owner of the equipment does not directly benefit from reducing leaks or the owner of the gas doesn’t see its full value).

The benefit to overcoming these hurdles would be enormous. Industry and other stakeholders recognise that policy and regulation can play a key role in addressing barriers to action and can align incentives to encourage companies to act.