Address the Growing Climate Crisis by Supporting Methane Regulations
On November 11, 2022, the Biden Harris Administration announced a proposal through the EPA to strengthen and expand Methane regulations. The American Sustainable Business Network (ASBN) supports these efforts, and has released our own Business Case for Methane Emissions Regulation. The new rules are a major step in addressing the climate crisis and creating the impetus for business action on this harmful greenhouse gas.
The impacts of climate change on business and the economy are well documented from extreme weather to disrupted supply chains, changes in consumer spending, and other localized community impacts. Businesses need to focus on a range of different greenhouse gasses, not just carbon dioxide, when understanding their overall environmental footprint. As a greenhouse gas, methane has more than 80 times the global warming potential (GWP) than carbon dioxide over the first 20 years after it reaches the atmosphere. Even though CO2 has a longer-lasting effect, methane sets the pace for warming in the near term. A recent study by Abernethy and Jackson (2022) found that in the 1.5°C and 2°C 2040 scenarios laid out in the Paris agreement, metrics significantly underestimated the GWP of methane emissions by 67% and 34% respectively.
Addressing methane pollution will also prevent continued harm to local communities and ecosystems. This pollution has a very real impact on the climate and on the health of communities who live near these facilities. Facilities such as storage tanks, compression stations, and drilling sites emit significant volumes of methane as well as leak other pollution that is toxic to human health and can severely deteriorate air quality. Methane contributes to the formation of ground-level ozone, a dangerous air pollutant. Reducing these emissions could prevent 225,000 premature deaths and 775,000 asthma-related hospital visits. These impacts force higher health insurance premium costs, result in lost productivity and pose a severe health and economic risk to those who work and live closest to heavily polluted sites. Other economic risks of continued methane leakage include associated health risks impacting labor participation, consumer spending, and reputational risks for businesses located near sites where methane pollution occurs.
The business case for reducing methane pollution in the oil and gas industry can be broken down into three main categories: cost savings, revenue generation, and risk management.
Cost savings: By reducing methane leaks and venting, companies can save money by retaining valuable natural gas resources. Additionally, implementing leak detection and repair systems can help identify and fix leaks more efficiently, which can also save money.
We are in a critical window of opportunity for climate action and need to support policies that support this transition. The price of fossil fuels is often far outside of a business’s control and spikes due to demand, global conflict, and extreme weather. This issue prohibits businesses from being able to adequately plan for cost and prepare for infrastructure failure. These costs have direct impacts across the value network of energy production, suppliers, manufacturers, distributors and ratepayers. These costs impact a business’s ability to forecast performance and growth. While the transition to natural gas from dirtier sources of energy may have driven carbon emissions to decrease in the past decade, solar, wind, storage and cleaner energy sources have reached cost parity with fossil fuels and proven more dependable.
Revenue generation: Regulations on methane can drive innovation by setting standards for emissions reduction and providing incentives for companies to invest in new technologies and practices that reduce methane leaks and venting from oil and gas operations. By creating a level playing field and a clear market signal for investing in methane reduction, regulations can also foster competition among companies to develop and implement the most effective and cost-efficient solutions. This can lead to cost savings for companies, as well as environmental benefits by reducing methane pollution. Additionally, this competition across businesses can also help to protect public health by reducing air pollution caused by methane leaks.
According to ASBN’s recent Business Case on Methane regulation, the total methane market is over $88B, projected to grow to $126B by 2026. There is a large addressable market that can directly benefit from investment in efficiency, capture and sequestration innovation and new solutions; like the $2.8 Billion dedicated to the US Department of Agriculture’s Climate Smart Commodities program which ASBN is entering into a partnership agreement to support the engagement of cattle and buffalo producers. The industries that are the source of methane pollution, Oil and gas for example, have a large infrastructure footprint. Reducing methane pollution can be as simple as tightening a valve, but there are millions of oil and gas wells around the world and hundreds of thousands of miles of major pipelines. Finding and fixing leaks is good business (lost gas equals wasted money) and can be done through new technologies and markets which generate new jobs and economic opportunity
Risk Management: Last but not least, addressing methane pollution must also be a part of a business’s risk management strategy. Companies that reduce methane emissions can improve their reputation and avoid potential regulatory penalties or fines. Additionally, reducing methane emissions can help businesses maximize the opportunities outlined in innovation, investment and a growing market.
Overall, the implementation of these technologies and practices can help polluting industries improve their bottom line and reduce their environmental impact. In some cases, it could increase their competitiveness and avoid reputational risks. Businesses should support methane regulations because they can provide a level playing field and a clear market signal for investing in methane reduction. The new rules will set standards for emissions reduction and provide incentives for companies to invest in new technologies while cleaning up our environment and protecting our communities.