Policy Instrument Options for Addressing Methane Emissions from the Oil and Gas Sector

Abstract

Policy makers around the world are increasingly recognizing the need to drastically reduce methane emissions in parallel with carbon dioxide emissions. More than a hundred countries have signed the Global Methane Pledge and made a collective commitment to reduce global methane emissions by 30% by 2030 from 2020 levels.

Methane emissions in the oil and gas sector are considered particularly promising, not only because of low or even negative net abatement costs for many emission sources, but also because most of these solutions involve mature existing technologies and work practices. Still, methane-reduction efforts in this sector have not yet been realized extensively due to a combination of informational, structural, financial, and regulatory barriers. This paper therefore lays out regulatory and policy instrument options available to strengthen the incentives to address methane emissions in jurisdictions that produce oil and gas as well as in those that import oil and gas.

The objective of this paper is to give policy makers, regulators, and other stakeholders a description of the main policy and regulatory levers available to realize the significant methane mitigation opportunities in the oil and gas sector. It aims to provide an overview of the different policy instrument options and thereby help policy makers assess which option is most attractive given regional circumstances and the relevant regulatory and political constraints.

Keywords: Climate policy, methane emissions, oil and gas sector, environmental policy instruments, environmental policy design

JEL Classification: Q01, Q35, Q38, Q58