Methane is both a problem and an opportunity: How market-based solutions can cut emissions even after climate policy has retreated

0:00The IEA has just estimated that about 200 billion cubic meters per year of methane can be unlocked by mitigating methane emissions and reducing flaring. And to put that in context, right, that's about one fifth of U.S. supply. That's about one third or over one third of the global LNG trade. And it's nearly twice the amount of gas that was exported through the Strait of Hormuz in 2025. Those numbers are mind-blowing. They're saying about 30 % of all warming has been caused by methane. The majority then comes from carbon dioxide. But methane is kind of number two there in terms of its significance as a greenhouse gas.

0:40Methane emissions from oil and gas are kind of frustratingly high or plateaued at about 80 million tons per year. But we've built this really important institutional infrastructure, better understanding, technological capability that when brought together can yield significant real world mitigation in the coming years. Founded nearly 50 years ago, Rocky Mountain Institute has grown from a small Colorado non-profit into a global force in the energy transition. Today, RMI works with businesses, governments, and communities in more than 50 countries around the world to scale clean energy, improve efficiency, and strengthen energy systems.

1:25From accelerating solar, batteries, and electrification to enhancing industrial efficiency and reducing building emissions, RMI focuses on pragmatic, market-driven solutions that cut costs, improve resilience, and expand energy access. Five decades in, RMI's vision remains the same, build a cleaner, more prosperous energy future for all.

1:51Hello, and welcome to The Energy Gang, a discussion show from Wood McKenzie about the fast-changing world of energy. I'm Ed Crooks, and on this show, we're going to be talking about methane. We're going to be talking about it as a problem. It is, of course, a very potent greenhouse gas. And we're also going to be talking about it as an opportunity. Methane, of course, is the single largest component of natural gas, which is the source of about one-fifth of the world's energy. And if you can use it, it can be extremely valuable and useful. Now, to talk about that, I'm joined by TJ Conway. TJ is a principal at the Climate Intelligence Program at RMI.

2:31Hello, TJ. Welcome to the show. Hello, Ed. Thank you so much for having me. I'm very excited to be here. Yeah, it's great. You could join us. I want to talk about you and your background a little bit in just a moment. Before we get on to that, can we talk a bit about RMI, if you could tell us a bit about what it is and what it does? I think some people in our audience may remember Rocky Mountain Institute, which is what it used to be. It hasn't been that, what, for about five years. it. I think the name changed to RMI. But yeah, as I say, could you explain perhaps what it is that you do? Sure.

3:02RMI is an independent nonprofit organization. We were founded in 1982. And our mission is to transform the global energy system to secure a clean, prosperous and zero carbon future for all. So we're active globally now, even though our name implies that we are centered in Colorado in the Rocky Mountains. And we focus on practical market-based transformation. We take a think, do, and scale approach to our work. So we combine rigorous analysis with implementation solutions. We try to scale technologies, policies, financial mechanisms, and business models to drive system-wide change in energy. Yeah, got it.

3:47Thanks very much. So what's your story then? How did you first get interested in energy and what was the path that led you to that role you now hold at RMI? Yeah, so I kind of got into energy a bit indirectly. I started out very passionate about development economics and spent some really formative time in Latin America, in Chile, in Ecuador, in Mexico, and became fascinated by the concept of the resource curse. basically how being a major resource holder does not necessarily yield overwhelmingly positive outcomes in certain respects. And I realized that to really understand the energy sector was critical to advancing some of those priorities that I had early on.

4:32And so I kind of delved into energy. I worked at PFC Energy, which eventually became part of S &P Global. I spent some time at the Inter-American Development Bank and then spent about 10 years at Energy Intelligence, where I joined with a small team to help build the research and consulting practice there. And during that time, I loved being an analyst. There's always something fascinating in global energy. But I also wanted to have tried to have an impact. And so I decided to join RMI almost five years ago. and there I dedicated a lot of my time to the question of methane, which is obviously why we're here today.

5:12Right. And can you talk a bit about your role then? So in what way are you working on the methane problem now? So at RMI, we focus on increasing emissions visibility, so better understanding the extent of emissions across the oil and gas supply chain, particularly around methane, and leveraging that expertise, that intelligence, the analysis that we do around emissions to drive real world change. And that change can occur in various ways. It can be supporting policy and regulation. It can be advancing market-based solutions and also engaging, for example, with the financial sector to increase investment and financing for methane mitigation.

6:01So we take a broad-based approach to, or a multi-pronged approach to advancing methane mitigation, knowing that in any particular case, one or two or not all of those different prongs could be applied, right? And we ultimately are seeking to keep building the momentum that we've seen growing in methane over the last several years. Right. So let's talk a bit about the scale of that then. In the intro, I was talking about methane as both a problem and an opportunity. How big of a problem is it and how great is the opportunity? Right. I think it's great framing to think about this as both a problem and an opportunity.

6:42And the challenging side, right, methane is a super pollutant and it has accounted for about 30 % of warming to date. But as you mentioned in the introduction, methane is also a valued commodity. And as a result of that, all of the methane that is leaking into the atmosphere from the oil and gas sector is it's energy wasted, it's money lost, and it is damaging the climate. And so for that reason, there's a great opportunity here for reducing methane emissions and in doing so improving energy security, improving energy efficiency and operational efficiency, and benefiting the climate. The problem, or we can talk about the problem in more detail, so maybe I'll leave it there.

7:25Okay, well, what are we going to say about the problem? You can think about the sort of the problem in a couple of different respects. First is in the market context. The IEA has just estimated that about 200 billion cubic meters per year of methane can be unlocked by mitigating methane emissions and reducing flaring. And to put that in context, right, that's about one fifth of US supply. That's about one third or over one third of the global LNG trade. And it's nearly twice the amount of gas that was exported through the Strait of Hormuz in 2025. So these are meaningful volumes of methane that are leaking into the atmosphere that could be brought to the market and help improve across those different priorities that I laid out earlier.

8:15Sorry, the different priorities being what you mean, economic development, energy security, energy security, especially, but also sort of the strong business case for methane mitigation. Yeah, those numbers are mind-blowing. So just to double back on a few of those points, and so you were saying about 30 % of all warming has been caused by methane. So this of the total increase in anthropogenic warming since the 19th century. About 30 % of that comes from methane. Obviously, the majority then comes from carbon dioxide, but methane is kind of number two there in terms of its significance as a greenhouse gas.

8:51Yeah, great clarification. So 30 % of overall warming, anthropogenic emissions or anthropogenic contribution is roughly estimated around 60%. And then within that oil and gas, methane emissions account for about 25%. We have a real opportunity to slow warming. And because methane is what we call a short-lived climate pollutant, it only stays in the atmosphere for a relatively short period of time, around 12 years. So if we mitigate those methane emissions, it can significantly slow near-term warming. And then that provides opportunity for advancing longer-term decarbonization solutions. So on the climate side, this is a great near-term opportunity.

9:32And it happens to be significantly beneficial for energy security and efficiency. Right, yeah. And so just on the sources of methane, where it comes from then, so you mentioned the oil and gas industry being one. The coal industry is another. I think I'm right in saying the number one source of anthropogenic methane is agriculture. Is that correct? And then waste is another big one, right? So it's sort of between the fossil fuel industry is waste and agriculture. Those three account for the great majority of human caused methane emissions. Yes, that is right. And when we think about sort of fossil fuel emissions, roughly speaking, it's about a third, a third, a third oil, gas, coal.

10:14So oil and gas being about 25 percent of total is a significant opportunity for methane mitigation. And we have a lot of the tools available today to significantly reduce those emissions. right okay so how is that done then so you mentioned flaring is clearly one potential part of it and so this is i mean just to clarify what we're talking about we're talking about flaring uh typically what happens here is that in oil production there is natural gas also in the formation that gets produced when the oil is produced and has to be burned off in a flare for safety reasons to avoid risk of explosion.

10:56And so that's a big issue in the oil industry around the world. Varies widely from place to place in terms of how much flaring is done. But as you say, the total scale of it globally is very, very large. So that's one thing. And then there's also, then there's just emissions in terms of leakage of methane from valves, from pipes, and so on. That's right. So methane leakage, you know, I've been talking specifically about methane leakage. There's also combustion emissions through flaring. So much of that is CO2. But within flaring itself, incomplete combustion is another source of methane leakage.

11:32So there is a relationship between methane emissions and flaring as well. The other important point on flaring is that in many instances, as you well know, in most instances, frankly, the oil and gas are in the same reservoir. And if you have a reservoir that is predominantly oil, the economic value often resides with the oil. And so that creates an incentive for a producer in some instances to monetize the oil and see the gas as basically a waste product. In that instance, we often see flaring take place. And that, again, is an example of what wasted energy that could be monetized and help improve energy security and bring business benefits as well.

12:21So at a high level, then, what are the solutions? What are the key routes for avoiding this wastage of gas through leakage and flaring and turning it into a useful commodity that, as you say, helps with economic development and energy security? The IEA has cited about 75 % of methane mitigation. They estimate it can be carried out today with existing technology. So we have the technology that we need to dramatically reduce emissions in methane emissions in the oil and gas sector. how to do that. It starts with robust leak detection and repair programs. So consistent with the framing that I laid out earlier of emissions visibility and driving action, first better understanding where emissions are coming from, the extent of those emissions, and being able to detect any leak immediately is a critical first step.

13:23In addition to that, there's potential for methane leakage throughout the entire oil and gas supply chain, but a significant share of those emissions occur in the upstream. And as a result, a lot of the solutions reside around addressing methane leakage in that segment of the supply chain. And that can be done by replacing equipment. For example, pneumatic devices can be quite leaky. Tank batteries also can be significant emitters. But it really starts with better understanding the emissions across a particular facility or asset, obviously across a company's portfolio as well, and then being able to very quickly address leaks that are detected and identified.

14:10Right. So it seems like we had quite a lot of international action aimed at reducing methane wastage over the past five, six years or so. There was the Global Methane Pledge, signed first in 2021, that brought together 159 countries, I think, at one time, committing to a 30 % or aiming for, perhaps to put it more accurately, aiming for a 30 % reduction in global methane emissions from 2020 levels by 2030. You had the big industry initiative, the Oil and Gas Methane Partnership, which we've talked about on the show in the past. That's a lot of big oil and gas companies, I think 150 companies or so, working together on reporting and reducing methane emissions.

14:57So, as I say, there has been a lot of international activity. However, it seems pretty clear that climate action has been deprioritized globally over the past few years, in part because of change of administration in the US and current US administration very much not focused on climate action. There's also been a general global shift towards concern about energy security and affordability, in particular in the wake of Russia's invasion of Ukraine and now because of the crisis in the Gulf. That's got everyone worrying about where their energy is coming from and how much they're going to have to pay for it and much less about the associated emissions.

15:42Do you think we're in a world now where it's more difficult to make progress on emissions reduction, particularly the methane in this context, because, as I say, climate action has been deprioritized globally? Yeah, that's a great question. You did a very good job of laying out some of the most important developments over the last few years. But I also like to think back over the last decade. And if we think back 10 years, methane was not on the radar. We didn't have the technologies that we do today. The concept of a super emitter, for example, which is a major factor in overall methane emissions, really was not well known.

16:23Yeah, sorry, just jump in there. What is a super emitter then? What does that mean? So a super emitter is defined as a source of methane emissions that meets a particular emissions threshold of 100 kilograms per hour or more. And research done around 10 years ago showed that super emitters could account for upwards of 50 % of total methane emissions. So this is a very important factor and consideration for dramatically reducing methane emissions as we need to. And what has been very important in this space is advancing satellite technologies that are better able to detect super emitters and address them, especially addressing them in short order.

17:09And so that's been a critical priority. And we really didn't know much about them until about 10 years ago. So that's just an example of the type of progress that we have seen, where technologies like satellites were part of the Carbon Mapper Consortium, which launched a satellite in 2024 to detect point source emissions, particularly super emitters. That technology is now helping us have a much better understanding of where emissions are and how we can best tackle those emissions. And technological advancement, I think, is a good place to start in thinking about the momentum that I think is continuing to build in this space, because as we are getting a better and better understanding of the extent of the emissions, where they're coming from across supply chains, that enables action in a way that is in some ways independent from the political or policy context in any particular moment.

18:09And just coming back to the fact that because methane is at once a super pollutant and a commodity, at a moment when there is a need to secure supply and resources, this is a valuable commodity that can help to improve energy security. Right. So that's a really interesting point in the sense that that distinguishes attempts to reduce methane emissions from other emissions reduction strategies. Very often if you think about something like, let's say, carbon capture, the point of that is to capture the carbon dioxide and store it that's entirely aimed at climate impacts whereas if you're reducing methane emissions you're both helping the climate in the sense of reducing greenhouse gas concentrations in the atmosphere but you're also then creating this product you're capturing this product that can be used as you say for commercial purposes to support energy security and so on so that is quite an important distinction, is it?

19:18Yeah, it really is. And I like the visual in my head of what is called a marginal abatement cost curve, right? When we think about an abatement cost curve, you know, cost is in the name, it is the implied cost for that additional lever of abatement. And what's fascinating about the marginal abatement cost curve for methane is half of it is negative, meaning that it's profitable to make investments in methane mitigation. What is key is to have a better understanding of the emissions and where they are, and to strengthen and better align incentives across stakeholders so that they can take advantage of those opportunities.

19:56And when I kind of was talking about sort of the action component and engaging with a range of stakeholders, much of that work is really trying to better align and strengthen those incentives for action. because, you know, as I continue to say, it makes business sense. It makes sense from an energy security standpoint. But sometimes the opportunities are just not well-known or as transparent as they need to be.

20:41buildings, transportation and heavy industry, RMI helps scale emerging technologies, reduce energy waste and accelerate investment in clean energy systems that work well in real markets in the real world. With teams active in more than 50 countries, RMI focuses on pragmatic market-driven solutions that strengthen energy security, improve resilience and support long-term economic growth. Right, so where is the energy industry on this then? Because something I quite often hear in the oil and gas industry is people would absolutely accept your point that there are circumstances where cutting methane leakage and flaring is commercially viable has in fact a positive return rather than a negative cost and therefore is worth doing but people will say okay well if that's the case where that is the case then the industry is going to do it anyway because it has commercial payback the investments make sense and where it doesn't have that payback it's not going to happen but then it didn't make sense anyway so people shouldn't do it and so question where is the role for policy and the role for organizations like RMI in terms of trying to advance these kinds of initiatives because because there are a lot of people in the industry who would say, if it makes sense, it'll happen.

22:04And if it doesn't, it won't. And it's actually counterproductive to try and kind of force it in some way through policy. Yeah, fantastic question. So we have seen that industry has set some important emissions reduction targets. Take, for example, the oil and gas decarbonization charter that was announced at COP28. That includes over 50 companies that have set a goal of reducing methane emissions to near zero, as well as reducing routine flaring to zero by 2030. We also, as you mentioned, have the OGMP 2.0 that includes over 150 companies altogether covering about 50 % of production. Sorry, that's the Oil and Gas Methane Pledge, right?

22:49Oil and Gas Methane Partnership 2.0. As always in this business, a lot of acronyms. Exactly. There's acronym, yes, acronym soup for sure. But yes, so we have companies that have set targets that constitute a significant share of total production. Those commitments remain. And I think that there's still strong commitment and incentive to continue along those pathways. There are a couple of different ways to kind of think about the question you asked. And certainly one way is in policy. What I like to think about is, you know, we want there to be incentives across this range of actors. And those incentives need to be incorporated into decision making, right?

23:30There needs to be a strong desire for a strong reason for a company or a buyer to make a decision, a transaction based on methane intensity. And so what's been really interesting, let's say in the context of the European Union Methane Emissions Regulation or EU MR, as well as some of the work that is being done on a more voluntary basis in the United States, is that we're shifting from solely focused on supply side solutions to buyer solutions as well. Because to make a market, we need to have both suppliers and buyers coming together to transact based on methane emissions or what we would consider as a sort of an attribute of that commodity.

24:20And we've seen significant progress there in the market development and market creation over the last few years. Right. That's really interesting. So in other words, then there's a critical factor here is the demand pull as well as the supply push. And so if you're thinking about the value proposition for reducing methane emissions, there is on the supply side, well, if you capture more gas and don't waste it, then you get more gas that you can sell. But there's also the point that the gas that you are selling or the oil that you are selling, if that has lower associated emissions, then you can get a premium price for that.

24:58Yes, there's value attached to methane mitigation. And that's been an obstacle or sort of a set of obstacles over in recent years that we are, I think RMI is very focused on working through. You can take, for example, on the voluntary side, let's say that you're a utility or an industrial buyer and you actually would want to purchase low methane gas, lower leakage gas, over higher leakage gas. What ultimately a buyer would want to do is be able to include that purchase in their inventories, in their accounting inventories. And they don't necessarily have sufficient guidance and clarity that they need to do that today.

25:39So that's an area of focus. And then, you know, the EU methane regulation is an example where on the regulatory side, the EU policymakers have come together to say any oil, gas or coal that is sold within the European market should satisfy a methane intensity threshold that will be defined. But in order for this to function, as importers of oil, gas, and coal, we want to ensure that the methane leakage from those products that are coming from other markets to satisfy that threshold. And so the EU methane regulation is a demand-side policy or demand-oriented policy as well that is sending a signal to global markets that methane mitigation is a priority in order to access that market.

26:24And if these types of demand side approaches are applied at scale, this can have a meaningful impact on overall methane emissions reduction and the development of a market where commodities, oil and gas are differentiated by this critical attribute of methane intensity. Yes, I want to come on to that question of the EU methane emissions regulation in just a moment, because I think it's really an important part of the story we're worth digging into. Before we do there, just as a general point, you say then it's going to be important for markets to recognize the value of oil and gas that has a lower carbon intensity.

27:06And as you say, there is a lot of interest in differentiated gas. Sometimes I guess you could talk about differentiated oil or oil products, gasoline and diesel and so on. How much of an actual market, though, is there for them now? I feel like I have looked into this issue from time to time, and it still seems to be really pretty hard to get any kind of price premium for your lower carbon product. Is that still true? Great question. I would say that it's changing right now. I think we're at an inflection point in this area. And let me elaborate. So if we incubated the methane performance standard called MIQ earlier in this decade and spun it out in 2023, MIQ has had a lot of success early on in certifying gas on the supply side to the point where about 25 % of US supply is now certified by MIQ.

28:06At the same time, that supply for lower leakage gas has expanded, or the certification of lower leakage gas has expanded, had not been the same focus on the buy side. And for that reason, there's an imbalance in the market where it's hard to identify a clear market premium. But that's changing because we're starting to see more demand in the context of regulation, like with Europe, And because, as I mentioned before, buyers are realizing that they can significantly reduce the product carbon footprint of the products that they sell by mitigating methane emissions. So they see the value there in the abatement that is attached to that.

28:50So I would say that we're on the cusp of the development of a market here. And that hopefully will lead to stronger incentives for methane mitigation in the coming years. And on the private sector side, then, you're arguing that companies will be prepared to pay a premium for lower carbon intensity differentiated gas because they can then charge a premium for products made with that gas to their own consumers, whether they're generating electricity with it or making products out of plastic or selling the gas direct to consumers. In some way, ultimately, the end user has got to be prepared to pay a premium, presumably.

29:32That is definitely a factor. And I think the question is, what is that inherent premium? If the goal is to mitigate methane emissions, and kind of we go back to that question of the marginal abatement cost, the premium should be related to the cost to mitigate those methane emissions. But it can be done so in a way that remains where it's not significantly cost prohibitive. right that's really interesting i got it so yes there's a premium but it does not need to be enormous to make these kind of investments in emissions reduction viable yes yes yeah got it got it any examples you can point to in terms of companies or sectors that are making real progress here anything that's particularly interesting perhaps that rmi has been working on or not that you would say this really shows what can be done?