Developing countries should leverage their huge methane abatement potential in the energy sector

Cutting methane emissions from the oil and gas production is critical to reach net-zero by 2050. According to Methane abatement in developing countries: regulations, incentives and finance, a new OECD Development Centre report launched today during COP29, cutting methane emissions in upstream oil and gas projects in developing producing countries can potentially achieve massive reduction wins while enhancing energy security.

Since the beginning of the Industrial Revolution, human-caused methane emissions are estimated to have been responsible for more than 25% of the rise in global temperatures. The warming potential of methane in its first 20 years in the atmosphere is more than 80 times greater than that of carbon dioxide.

In 2023 alone, the global oil and gas sector was responsible for over 78 million tonnes of methane emissions, representing the second highest source of human-caused methane emissions after agriculture and ahead of waste, coal, bioenergy, and biomass burning.

Global methane emissions are not reducing at the scale and pace needed to limit warming to a level consistent with Paris-aligned 1.5°C pathways, as global demand for natural gas is growing and expected to reach new all-time highs in 2024 and 2025 according to the International Energy Agency (IEA). In the absence of concerted, Paris-aligned action on climate, current government plans and projections will lead to an increase in global oil and gas production until at least 2050.

Oil and gas producing developing countries would significantly benefit from adopting upstream oil and gas methane abatement regulations, according to the report. The IEA estimates that around 70% of methane emissions from fossil fuel operations could be reduced with existing technology, and about 40% of those emissions at no net cost because the amounts for the abatement measures are less than the market value of the additional gas captured.

Methane emission regulations can help developing countries retain the competitiveness of their exports as natural gas importing requirements tighten. They are also key to the effective implementation of cooperative frameworks for reducing emissions associated with internationally traded fossil fuels, wherever they are still needed in the energy transition.

Regulatory requirements consistent with international standards on measurement, monitoring, reporting and verification can create a favourable environment across public and private actors to avoid shifting emissions to developing countries, says the report. International harmonisation is also essential to international coherence in climate mitigation, enabling cost-effective corporate compliance across jurisdictions and reducing green washing concerns.

The report identifies the main measures oil and gas producing developing countries could implement to accelerate methane abatement:

·       Set sector-specific methane emission reduction targets in Nationally Determined Contributions and embed these within Long-term Low Greenhouse Gas Emission Development Strategies.

·       Build national inventories and baselines and set methane measurement, monitoring, reporting and verification requirements consistent with international reporting standards, such as the UNEP’s Oil & Gas Methane Partnership 2.0.

·       Combine prescriptive and performance-based equipment and technology standards and design robust leak detection and repair programmes.

·       Establish policies and regulations to eliminate routine flaring - incomplete combustion of natural gas also releases methane - and venting of natural gas - intentional release of gas into the atmosphere.

·       Establish a reward-penalty system to make it cost-effective for public and private companies to comply with methane emission reduction requirements.

·       Introduce methane reduction requirements at the licencing and planning stage to align any new oil and gas projects with climate objectives.

The report also highlights the need to strengthen upstream methane abatement finance to help largely-indebted or fiscally-constrained oil and gas producing developing countries accelerate methane emission reductions. In addition to industry finance, emissions trading schemes, sustainability-linked bonds, and debt-for-climate swaps, sovereign and strategic investment funds represent a further potential avenue of financing with no or fewer restrictions with regard to investing in the fossil fuel sector.

Media queries should be directed to the OECD Development Centre’s Press Office: Bochra.Kriout@oecd.org; tel.: +33 145 24 82 96.