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Why is climate change policy a leaky mess?

I’ve just read a carbon abatement report for a natural gas pipeline that runs across hundreds of miles of continental Eastern Europe.  It’s leaking 2.4 millions of tons of methane (CH4) into the atmosphere every year.  The equivalent of about 60 million tons of CO2 (going by the standard equivalency measure).  And that’s just from one facility in one country. Multiply the issue across the natural gas systems of Europe alone, and the equivalent of billions of tons of CO2 is spewing out into the atmosphere for no reason other than faulty well valves and leaking low-medium pressure pipes.

You might assume it’s just a maintenance issue, but methane leaks are representative of a much bigger problem.  Not just because of the environmental damage they do, but because of what they tell us about the failure of most developed world government policies to reduce carbon emissions. It demonstrates that, whilst many countries have focused on commercially incentivising renewables, incentivising the reduction of greenhouse gasses – the core issue for climate change – is a mess. Globally speaking, carbon policies are leaking CO2 emissions like a sieve.  But why?

The methane leak problem:
In terms of the equivalency of methane to carbon dioxide as a greenhouse gas, the generally accepted rate is CH4 has 25 times the warming potential of CO2.  But that figure has been recently (and controversially) disputed. A 2014 study at Cornell University (see here) claimed over a 20 year period, methane is 86 times more potent for heating the climate, or to put it simply, the 2.4 million tons of methane from the plant report I read would equate to 206 million tons of CO2 between now and 2035.  Those figures are controversial because methane decays faster than CO2, so the overall impact over time might be less… but either way, leaking methane is a serious problem.

When coal is burned to produce electricity, it emits about twice as much carbon as burning methane to do the same job.  So methane (natural gas and shale gas) is seen as a cleaner fossil fuel.  However, the Cornell team argues that the leaks associated with natural gas pipelines and wells releases enough methane into the atmosphere to negate the benefit of switching from coal to natural gas.  Coal is twice as dirty, but doesn’t leak.

 In global terms, studies suggest maybe as much as 10% of all carbon emissions are from burning methane, and about 30% from burning coal.  Studies in the UK and US show something like 17% of that methane derived carbon is due to leaky natural gas pipelines and power station systems.  That’s a big leak.  For governments struggling to hit their emissions reductions targets, plugging the leaks could reduce global carbon emissions by between 1-2% with nothing more than repairs and maintenance on existing equipment.  

It sounds like an easy win.  Fix the leaks, reduce emissions.  But it’s not happening.  Why?

The policy mess:
Placing the debate over the climate warming impact of methane to one side, everyone from climate scientists to the owners and operators of shale gas fracking facilities agree the lack of subsidies for gas pipeline infrastructure is causing the leaks.  Natural gas wells aren’t like oil wells.  With oil, every drop is worth money once it’s in a barrel and can be sold, but with gas, it’s basically worthless until it’s delivered, via the pipe, to be burned in power station or connected to a domestic grid and metered.  But whilst it’s in transit, fixing the leaks costs more than the value of the leaking gas.  Without subsidies to maintain the gas pipeline infrastructure it’s argued (by both academics and gas companies) that plugging the leaks isn’t cost effective.

Putting the problem into context, consider the way green power sources have been subsidised in many countries.  Why? Because without subsidies and tax breaks to stimulate investment in solar, wind, bio-digestion and hydro, they wouldn’t have been commercially attractive enough to make economic sense.  A side effect of the drive to incentivise renewable growth has been, as you would expect, a reduction in the demand for fossil fuels to create electricity.  But the unintended consequences are bad for emissions reductions, fossil fuel prices have crashed, fossil fuel burners are selling power cheaply to compete and cut costs to remain profitable.  And cost cutting means the methane keeps leaking.

There’s no policy backed incentive to fix this obvious (and serious) problem.  Certified emissions reductions or CERs (also known as carbon credits) are so cheap to buy, it’s cheaper to buy carbon credits than fix the faulty equipment that is leaking carbon emissions. If carbon was priced higher, the leaks would get fixed.  By the same token, if gas producers were taxed on the carbon they release into the atmosphere, they’d have a financial incentive to fix the leaks. And if coal and oil burning power suppliers were taxed the same way, they’d have an incentive to switch to methane to lower their emissions tax bill.

At the heart of the problem, and the solution, is the price of carbon.  If governments taxed carbon emissions, it would stimulate the carbon trading market and raise prices, making it uneconomical to spew methane into the atmosphere, or burn coal instead of methane.

The subsidy paradox:
This situation leaves everyone facing a strange paradox.  It’s seems logical to subsidise renewable energy development to help reduce emissions.  But in fact, subsidising the supply of methane from natural gas pipelines and wells might reduce them even more effectively.  The value of incentivising renewable energy development is reduced by not similtaneously incentivising carbon abatement.

The paradox also partly explains why emissions in developed economies aren’t dropping proportionally to the renewable power supply they’re growing. A major percentage of the carbon saved by policies to grow renewable energy supplies is escaping into the atmosphere due to a lack of support for reducing methane leaks at the fossil end of the energy supply market.  It’s reducing emissions by subsidy whilst growing them with a lack of subsidies at the same time.

In the USA and Europe, this lack of joined-up carbon reduction policy resembles a curry house that serves its meals in sieves as opposed to dishes, i.e. Making an effort to create something tasty, but doing it in a way that wastes half of what you serve up. We need to fix the fossil industry leaks, not simply encourage more green power and ignore them.