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A group of 50 organizations including the International Energy Agency and the Climate Bonds Initiative has set up a scheme to fund oil and gas companies committing to methane emission reduction, Bloomberg reported, noting the funding will take the form of so-called transition bonds.
The group will release its recommendations on the idea at the next COP event and illustrate it with two demonstration deal, the report said, citing Climate Bonds Initiative chief executive Sean Kidney.
Regulators have started paying a lot more attention to methane emissions lately, preparing new requirements for oil and gas operators aiming at reducing the amount of leaks on the grounds that methane is a much more potent greenhouse gas over the short term than carbon dioxide.
Last month, the Environmental Defense Fund published a report saying that methane emissions from the U.S. oil and gas industry were eight times above the target that the industry had set for itself.
The report cited data showing that some 1.6% of gas produced in the U.S. was released into the atmosphere in methane leaks, which was eight times higher than what oil and gas operators had pledged in the Oil and Gas Climate Initiative and the Oil & Gas Decarbonization Chapter. The Environmental Defense Fund is also a member of the group devising methane reduction financing rules.
Whether the end result is a bond or another type of security, it would have to be consistent with the International Energy Agency’s Net Zero by 2050 Roadmap, which the agency published two years ago and which predicted a sharp decline in oil and gas consumption over the next decade. This suggests that companies signing up for the financing would need to reduce their total output as a means of reducing their methane emissions.
The IEA has estimated that in a scenario where the global average temperature increase is successfully limited to 1.5 degrees Celsius methane emissions from oil and gas production would need to go down by 75% by 2030.
