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ESG SPOTLIGHT

With this blog we hope to shed some light on our thoughts, practices, research and views – how we can help overcome the challenges ahead and at the same time find opportunities for investment.

  • Saarthak Chhabra

Methane – The best lever against Climate Change

The enormous, unprecedented pain and turmoil caused by the climate crisis is often discussed alongside what can seem like surprisingly small temperature increases – 1.5C or 2C hotter than it was in the era just before the car replaced the horse and cart. The world has already heated up by around 1.2C, on average, since the preindustrial era, pushing humanity beyond almost all historical boundaries. An IPCC 2021 Report predicts that a moderate pathway to reducing emissions would still mean that we reach a +1.5C temperature rise by 2030 and a +2.0C temperature rise by 2052. Given the urgency of required change, we need to be agile and efficient and use the best path for reducing the emissions. This is where Methane comes in. According to the IPCC Report Methane emissions are the second largest contributor to global warming to date after carbon dioxide (CO2), accounting for about one third of the warming impact of all well-mixed greenhouse gas (GHG) emissions and 45 per cent of the net warming impact of all anthropogenic activities in 2019. Along with black carbon and tropospheric ozone, methane is a short-lived climate pollutant (SLCP), a class that has much greater warming impacts per ton than CO2, but a much shorter atmospheric residence time. Methane accounts for more than half of the warming of all SLCPs.

Methane is of concern because it has an outsized impact on the climate. The gas makes up a tiny fraction of our atmosphere — CO2 levels are more than 200 times higher. But in the first 20 years after release, methane is around 80 times more powerful than CO2 at trapping heat in Earth’s atmosphere. It also breaks down much more quickly than CO2, with an average lifetime of around a decade, compared with centuries for CO2. This means that curbing methane emissions could provide short-term relief while governments and businesses negotiate the more difficult transition from fossil fuels to clean energy. What are the biggest sources of Methane Emissions?

According to an IEA report, The largest source of anthropogenic methane emissions is agriculture, responsible for around a quarter of the total, closely followed by the energy sector, which includes emissions from coal, oil, natural gas and biofuels.


Reducing methane from livestock and Agriculture represents a particular challenge. People could eat less meat, but persuading people to change their diet is rarely straightforward. Moreover, meat consumption is rising in low- and middle-income countries — in line with rising incomes. It should be easier to curb emissions from other sectors. In many cases, doing so wouldn’t cost anything — and it could even be profitable.


Global methane emissions could be cut by 57% by 2030 using existing technologies. And almost one-quarter of the global methane total could be eliminated at no net cost. The oil and gas industry could make the biggest difference here, having both the infrastructure and the incentive to minimize methane losses: more methane in their pipelines means more revenue. In other sectors, the operators of landfills, coal mines and wastewater-treatment plants could capture the gas and use it to generate electricity. If these measures were implemented worldwide, projected increases in global warming could be reduced by 0.25 °C by 2050, and 0.5 °C by 2100, the study finds.

As investment managers, this is where is gets exciting. The issue of methane emissions in the Oil and Gas sector is not necessarily an issue of innovation or technology. Rather, this is an issue of willingness and momentum. Analysing and funding the companies that are being leaders in the sector is a very rewarding exercise.

Another exciting opportunity is to invest in companies that are developing technologies to convert landfill waste into electricity and avoiding the methane emissions. Velox have invested in one such company and its truly rewarding to see our investment helping turn waste into green electricity, saving methane emissions and also helping with Land Pollution.


And with the above in mind we should be hopeful and appreciate of the recently launched Methane Pledge. The United States, the European Union, and partners formally launched the Global Methane Pledge, an initiative to reduce global methane emissions to keep the goal of limiting warming to 1.5 degrees Celsius within reach. A total of over 100 countries representing 70% of the global economy and nearly half of anthropogenic methane emissions have now signed onto the pledge.









Sources

IEA, Sources of methane emissions, IEA, Paris https://www.iea.org/data-and-statistics/charts/sources-of-methane-emissions-2

https://www.ipcc.ch/report/ar6/wg1/downloads/report/IPCC_AR6_WGI_Full_Report.pdf


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