Global gas market implications of methane emission reduction policies

Abstract

Methane is the second-largest contributor to global warming due to anthropogenic greenhouse gas emissions. Reducing anthropogenic methane emissions quickly can significantly reduce global warming within just a few decades. The oil and gas sector is responsible for almost 20% of anthropogenic methane emissions. Yet, there are hardly any policies in place that address oil and gas sector methane emissions. We investigate two policy types: a) a global cap on methane emissions from the oil and gas sector; and b) a methane price implemented by a Clean Buyers Coalition. We extend a detailed global gas market model to allow investment in methane emission abatement measures. We find that the regional contribution to global reductions vary due to different mitigation potentials and associated abatement technology cost. Clean Buyers Coalitions can trigger major investment in methane abatement measures and much reduced emissions. However, a methane price must be balanced against available abatement potentials, as upstream suppliers lacking abatement options rather avoid abatement investments and, instead, re-direct their exports to non-Coalition importers.