Clipped Voice Over
"Much of the heat at the climate conference is over carbon dioxide, but cuts to another greenhouse gas — methane — could give us the best chance to keeping the global temperature rise to 1.5 degrees. "
"Emissions of the highly potent greenhouse gas are rising faster than ever before."
"Cutting back on methane emissions is one of the most effective things we can do to reduce near-term global warming and keep 1.5 degree Celsius."
Host: As the world continues to feel the growing effects of climate change, with record-breaking heat waves and climate catastrophes becoming our new normal, the need to cut global emissions has never been more urgent. The world’s economies are racing to decarbonize and meet our global 2030 and 2050 climate targets. But as countries and industries work to slash carbon emissions, there’s another greenhouse gas that, if we can tackle it, offers a huge near-term impact. Methane.
Over the next few weeks, we’ll explore methane’s effect on our climate, why it’s responsible for nearly a third of the warming we’ve experienced so far, and what we can do about it. We’ll take you into the sectors that are responsible for most of the world’s methane and explore what’s already being done to cut those emissions. We’ll look at opportunities for investors to support credible abatement efforts and discover why methane mitigation is one of the best opportunities for both immediate climate impact and long-term sustainability.
This is Financing the Future, with the Climate Bonds Initiative.
Host: Thanks for joining us today. My name is Gabriel Carhart, and today, I’ll be talking to climate finance experts about the role that methane plays in global warming, where it comes from, and what we can do now to curb our methane emissions and preserve a 1.5-degree future. We’ll look at some of the sectors that are most responsible for methane emissions, including energy, agriculture, and waste, and over the next few weeks, we’ll dive into each of them to understand how investors, policy makers, and the industries themselves can all pull in the same direction to curb methane emissions and transition to a more sustainable and resilient future. But before we do that, we have to understand why methane is so important in the first place.
Magali Van Coppenolle: To give you an idea of scale around the place of methane in this big bundle of greenhouse gases, we consider a round 30 % of total warming since the industrial revolution has been caused by methane emissions.
That’s Climate Bonds’ global head of policy, Magali Van Coppenolle. She says that methane stands out from other greenhouse gases both because of its potency and its short-term warming potential.
Magali Van Coppenolle: The reason why we are singling out methane from that bundle of greenhouse gases is because methane is what we call more potent. Basically it has a much higher global warming potential. than CO2, which is the most emitted gas. How much more potential does it have in terms of global warming potential? We say it's about 84, so one molecule of methane has the same global warming impact as around 84 CO2 molecules.
Just like CO2, not all methane emissions are caused by anthropogenic sources, or basically human activity, but we consider that around 2/3 of methane emissions are caused by anthropogenic activities — basically by us humans doing stuff here on Earth.
While methane has over 80 times the warming potential of CO2, it doesn’t linger as long in the atmosphere. Where the warming effects of the carbon dioxide we emit today won’t be felt for decades, the effects of methane emissions hit quickly, and they hit hard. But while it has a profound effect on our climate, that short life span also means that slashing methane emissions is one of the most effective was to curb near-term warming and preserve the 1.5 degree limit of the Paris Climate Agreement — the minimum requirement to stopping catastrophic climate change.
As our understanding of methane’s effect on the climate has changed, we’ve also developed a better understanding of where it comes from and what we can do to curb and cut those emissions. Unfortunately, we may be putting out more methane than we previously thought.
Lily Burge: We've also underestimated how much methane is being emitted into the atmosphere. In recent years, with improvements in satellites, improvements in reporting requirements, we've had a greater understanding of the level of methane that we are emitting and where it's coming from.
Lily Burge, Climate Bonds’ policy manager, says that greater understanding has led to a stronger focus on methane among the climate community. That focus reached a key point at COP26 in Glasgow, with the signing of the Global Methane Pledge.
Lily Burge: Signatories to global methane pledge have committed to a 30 % reduction in methane emissions by 2030. And that is a really important piece because it's that near term target. The Global methane pledge probably actually isn't enough though. To stay on the 1.5 pathway, we need to see a 4.45 % reduction globally. And that's not just from methane, global methane plus signatories, that is global. Some of the most highly emitting countries aren't signatories to global methane pledge. China, India, Russia are some of the largest emitters of methane and they aren't signatories to the Global Methane Pledge, which means that we also need to look for policy levers that tilt global emissions.
In order to hit that target, the world’s economies need to move quickly to cut methane emissions. That’s an undertaking that will require, beyond policy and industry action, a tremendous amount of finance. The good news is, we know where that finance needs to flow. The problem is, it isn’t flowing nearly fast enough.
Lily Burge: Current methane abatement finance is probably about a fifth of where it needs to be. when you sort of dig down into the sub-sectors, it's what is the money that is flowing to methane abatement isn't really flowing to the right areas or the areas most in need of abatement. Methane is emitted from a whole range of sectors and it's also emitted naturally. there's a third of emissions come from natural sources and that is something that is important to bear in mind that things like wetlands do emit methane and human action is also impacting those indirectly. as the planet warms, we might well see increased emissions from these natural sources, such as from thawing of permafrost. But the biggest sources (of human-induced methane) are the agriculture sector, the energy sector and the waste sector.
Those three sectors: agriculture, waste, and energy, account for nearly 77% of global methane emissions, and addressing them could make a huge amount of progress toward limiting near term global warming. They each present challenges, but taken together, they present a huge opportunity not just for climate benefits, but for establishing resilient and sustainable investment in the future.
Ana Diaz: The energy sector, especially the oil and gas, is one of the largest sources of methane emissions, primarily through leaks, venting and flaring. But this is also where the biggest and most cost-effective mitigation opportunities lie.
That’s Climate Bonds Global Energy Transition Lead, Ana Diaz, who has led the creation of guidance for credible methane abatement investment in the energy sector. She says that the energy sector is one of the largest sources of human-made methane emissions globally — about 35%. These emissions come from many different sources in the sector, including abandoned and mismanaged gas wells and coal mines. But the vast majority of the sector’s emissions come from the fossil gas supply, often referred to as LNG, or liquified natural gas. The gas extracted from wells and burned for energy is primarily made of methane, and leaks throughout pipelines or other infrastructure can mean that the gas escapes into the atmosphere. Emissions can also come from routine venting and flaring, where excess gas is either released or burned. But all of these emissions, Ana says, have one thing in common — they result in less gas, and less profit.
Ana Diaz: Don't forget that methane is the product, is the gas industry product. technology for detection and reduction already exists, they are mature, and deploying then could cut emission in half by 2030. So this is a huge opportunity, not just for climate, but also for energy efficiency and economic gains.
Ana says that the energy sector is starting to recognize this opportunity. Preventing leaks and loss, and stopping venting and flaring, not only delivers more product through their supply chains, but can make a drastic and immediate cut on the sector’s methane emissions.
Ana Diaz: one of the biggest turning points for methane abatement came at COP 28, where we saw a real shift in the oil and gas industry approaching to methane emissions. In fact, 50 companies representing 40 % of global oil production signed onto the oil and gas decarbonization chapter, known as OGDC. That is a major commitment to virtually eliminate methane and flaring emission and its signal to the industry is starting to take its role in the climate action seriously.
To that aim, Climate Bonds has joined with a number of organisations to establish the Methane Finance Working Group. This coalition, which includes organisations like the Environmental Defence Fund, the Rocky Mountain Institute, the Center for Global Energy Policy at Columbia University, and many others, has created guidance to support credible investment in methane mitigation across the oil and sector.
Ana Diaz: The guidance provides market-ready frameworks, like use of process bonds and KPI-linked instruments, to help investors and companies structure their financial around methane reduction goals. The aim is to mobilize around 175-200 billion by 2030 to meet methane reduction target and make the oil and gas sector part of the climate solution.
We’ll dive deeper in the working group’s guidance in our next episode. And while preventing emissions from leaks and excess gas disposal is an important step toward reducing our methane emissions in the energy sector, it doesn’t change the fact that, if we’re going to keep global warming below 1.5°C — which we have to do, to preserve a livable future — we’re going to have to transition away from fossil fuels, including gas. So while the sector needs urgent attention to address its emissions, Magali stresses that investment in those mitigation measures can’t be used to prolong the life of a fossil fuel-based economy.
Magali Van Coppenolle: What we can't do is talk about methane abatement without talking about phasing out, right? Because we are asking the energy sector to invest in their infrastructure to reduce methane emissions. At the same time, we do not want those infrastructure to, to lengthen the life cycle of those infrastructure. Like those two things have to come together to be able to, to reach climate objectives. And the question is, how do we engage on those questions while maintaining a pathway to 1.5 degrees? And this is why the conversation needs to have both methane abatement conversation and the phasing out conversation together. Because one without the other, are jeopardizing the 1.5 objective.
Credible standards and guidance, like those created by the Methane Finance Working Group, can help. But the problem is wider than the oil and gas industry. It spans the entire economy, and mitigations methods vary between sectors and countries. After the break, we’ll look at the agriculture sector and the waste sector, to see what can be done to mitigate their methane emissions, and how investors can play a role in building that sustainable economy.
Welcome back to Financing the Future. We’ve looked at the energy sector, and how changes in venting, flaring, and leaks can curb methane emissions. But while those measures can make a serious difference in the energy sector, emissions from the agriculture sector have a different, and more familiar source.
Leonardo Gava: when we talk about agriculture I would say that we have two like big sources first is animal production, and you have a rice paddy cultivation.
Leonardo Gava is Climate Bonds Brazil Country Manager, and works closely with investors and the agriculture industry in Brazil, where, like the rest of the world, Agriculture is the country’s largest source of methane emissions. In Brazil, most of those emissions come from livestock production.
Leonardo Gava: For animal production we are looking mainly at what we call ruminants — animals that feed from fiber and they can break fiber into little pieces that they can make energy out of. This process of breaking fiber is a process that is methanogenic, so it produces methane. I'm talking about like cattle, I'm talking about sheep, goats; so they feed out of fiber and by breaking fiber to produce other pieces that they can use to generate energy in their body they are emitting methane. Of course there's a substantial amount of methane that comes from manure, because manure, when it's stored in anaerobic conditions, all this fermentation process also emits a lot of methane.
While most of Brazil’s emissions come from livestock, in other parts of the world, there’s another crop that emits huge amounts of methane. The crop that we eat more than any other. Rice.
When we are talking about rice paddy cultivation, of course most of the rice paddy cultivation in the world is through flooded areas and when we think about like a flooded environment it's an anaerobic environment that also enhances methanogenesis and emission of methane.
In the agriculture sector, addressing methane emissions isn’t as simple as plugging leaks. When methane comes from the crop and livestock production itself, we have to address the crops and livestock if we’re going to make meaningful reductions in our methane emissions.
Leonardo Gava: For each one of those you have different strategies for what you can do to reduce methane emissions. When we are talking about animal production, I mean, ruminants are ruminants, they are always going to emit methane, this is their metabolism, it will always be their metabolism. But there are ways to mitigate those emissions when we are talking about animals. So thinking about ruminants the main strategy and I think that the first step into this strategy is efficiency. If we are able to reduce the amount of time the animal needs to reach that moment that it's going to the slaughterhouse, then we are reducing methane emissions over the production cycle.
And jumping into crops when you were talking about like rice paddy cultivation what we need to do is to reduce the flood period of the rice. You can do this by many different strategies like crop management, different varieties, different places, and each region has its own specificities. There are strategies, some of them are easy, bAut they need some sort of incentive and they need to be invested on.
That last point is the key. None of what Leonardo is talking about relies on emerging technologies or fundamental shifts in the industry, but they do require investment. And for the agriculture sector, getting that investment is a familiar challenge.
Leonardo Gava: The challenge is when we talk about the cost-efficiency balance, it's not yet something accessible to pretty much all the farmers in the world. So it's expensive and you don't have a specific result in terms of enhancing efficiency. It's just reducing methane and no one is getting paid to reduce methane. So it still has a long way to go, but they are in the discussion.
When we talk about agriculture, we are talking about a business with very tight margins. So the cost of capital is really important when it comes to promote any change that you want in the sector. And that's why the sector is heavily subsidized. So if we want actually to move the capital, we need to find ways to make that capital reach the farmer at a fair price.
Subsidies are a huge part of how the global agriculture industry functions, and how we all keep food in our markets and on our tables. We’ll talk later about how those subsidies can be used to drive investment and production to more sustainable methods and practices, in Brazil, the EU, and around the world. But those subsidies aren’t enough on their own. Transitioning the agriculture sector and cutting its methane emissions will need the support and encouragement of private investment.
Leonardo Gava: We need private investors. This is not a problem the governments or treasuries or sovereign nations are going to solve by itself. We need good farmers with governance. We need technical assistance. And we need all of that targeting the same interventions. Because I cannot have public policy subsidizing the recovery of degraded pastures and not having the technical assistance and the know-how to implement this project. So all the pieces need to move at the same time.
That coordination between private investment, public capital, and policymakers is essential not just in agriculture, but in every sector working to transition to a more sustainable future. It’s where investors can both influence the speed and direction of the global transition, and secure long term sustainability of their investments by supporting projects and companies that will be fit for the green future. Those opportunities can be found throughout the economy, and investors have shown a tremendous appetite for green and sustainable investments. But there’s one sector that often gets overlooked.
Marian Rodriguez: The waste sector is often underestimated, and it is the third largest source of methane behind agriculture and the oil and gas industry. The waste sector accounts for around 20 % of anthropogenic methane emissions. And it is important to highlight that those emissions are expected to grow rapidly, mainly from landfills, open dams and wastewater systems.
That’s Marian Rodriguez, Climate Bonds’ Head of Standards, who has been leading development of science-based criteria to facilitate credible climate investment in the waste sector. Recently, that work has focused on methane.
Marian Rodriguez: When you think about reducing or mitigating methane emissions from waste operations, you can easily think about abatement solution that can be deployed today with ready technologies and practices, including, as I mentioned before, adapting the waste management hierarchy to methane management, source reduction, organic diversion, landfill gas capture.
Methane capture through dump site upgrades, better landfill design and operation, and comprehensive emission monitoring. So there is nothing like a very innovative thing that should be implemented. Most of the technologies necessary to address waste and methane emission from waste are already available, which is something good, but there are many financial challenges that become a barrier when you think about implementing some of those strategies, especially in developing economies.
Like in the agriculture sector, addressing methane emissions in waste isn’t a matter of developing some new technology. It’s a matter of driving finance to the places where it can have the most impact. But right now that finance isn’t moving nearly fast enough.
Marian Rodriguez: When you think about the global climate finance, the tracked global climate finance, only around 1% of those financial flows go to abate methane. So there is a huge gap. Only around 6 % of the waste finance is directed to climate strategies, such as gas capture from landfills, composting, anaerobic digestion — the rest, we are talking about around 94% of waste finance, is going to waste incineration.
One of the issues in the waste sector, Marian says, is figuring out exactly where the emissions are coming from, and what interventions will make an impact.
Marian Rodriguez: that's something super challenging, especially when you think about the waste sector, because there are not necessarily like specific sources of emissions compared to other processes, for example, when you can easily identify the sources of the emissions. When you think about a landfill or composting facilities, emissions are all around. So it's a bit more difficult to monitor or to measure that.
To aid investors in identifying and supporting the kind of credible methane abatement measures we need, Marian and the Climate Bonds Standards team have developed updated criteria for waste management that connect necessary ambition with practical investment. We’ll dive into those criteria with Marian a little later down the line, because she says that they are an invaluable tool to bring the waste sector into the sustainable transition.
Marian Rodriguez: The criteria offer guidance to investors, governments and issuers in general, to be able to identify projects, assets and entities in the waste sectors that are really contributing to climate change mitigation. We are also trying to promote that the waste sector becomes an important part of the climate change mitigation conversation. Because in the end, If the waste sector is not included, we are missing a huge opportunity to address methane emissions from a critical sector.
Across all three sectors, one important factor of methane mitigation efforts is that most of them can be done at no net cost. Whether its measures to reduce inefficiencies, prevent leaks, or capture the gas that’s already being produced, many abatement measures won’t cost the industries anything in the long run. Because of this, they’re sometimes referred to as “low hanging fruit.” But, as Lily Burge says, this isn’t entirely accurate.
Lily Burge: A vast majority of abatement comes at no net cost. However, it’s not being done because there's actually an opportunity cost because the companies that control this infrastructure are weighing it up against further investment in additional extraction sites against further investment in or even just further operational expenditure.
Because of that opportunity cost, many companies and industries aren’t motivated to go through the complicated process of addressing methane mitigation. But, at the same time, it gives investors and policymakers a clear direction for their regulations and their investments.
Lily Burge: It's a sort of dangerous place to say this can happen at no net cost. Methane abatement is low hanging fruit. If it was, it would be happening and it's not. So we need to have those policy levers that make it happen, that realize the cost, that evaluate and understand what the opportunity cost of methane abatement might be. It’s bit more complicated than is implied by the figures and drive that action because while it might not happen organically, if it is no net cost to the company, it makes it that much easier for the government to put in place a requirement for the company to invest in that technology.
Methane mitigation is a complicated issue, and it spans across industries and across the globe. Tackling it will require clear policy guidance to direct financial flows, industry efforts to put mitigation into practice, and private and public investment to ensure that we meet our methane and climate goals. It’s a big agenda, but if we can tackle methane now — not just in the short term, in the immediate term — it will give our best shot at preserving a livable future.
Next week, we’ll take a closer look at the energy sector. We’ll hear about how the guidance created by the methane finance working group can support credible investment on methane abatement in the oil and gas sector without prolonging our use of fossil fuels, and we’ll look at how policies, like those in the EU, can speed, steer, and simplify the global transition and the rapid reduction in our methane emissions.
If you want to learn more about Climate Bonds work on methane mitigation, you can find all our criteria, guidance, and insights at ClimateBonds.net.
Thanks for joining us on Financing the Future. We’ll see you next time.
