Oct 27 2022

Is there method in this “Methane Madness”?

Over the weekend, the Australian Government joined over 120 countries in signing up to the voluntary Global Methane Pledge. An initiative of President Biden, signatories to the pledge promise to collectively reduce global methane emissions across all sectors by at least 30 per cent below 2020 levels by 2030.

The commitment has not been without political controversy, with interest groups from the most affected sectors – agriculture and mining – seeking assurances from the government they will not be negatively impacted, while the Opposition labelled it “methane madness”.

Here we take a closer look at what the pledge means for Australia’s decarbonisation journey.

Methane as a greenhouse gas emission

While carbon dioxide (CO2) is the largest source of greenhouse gas emissions, methane (CH4) also contributes to the warming of the planet. Methane is starting to receive more attention because it is much more potent than C02 – the US EPA states that one kilogram of methane released into the atmosphere is the equivalent of 25 kilograms of carbon. This calculation balances the high potency of methane (it absorbs heat about 84 times faster than CO2) with its short lifespan (methane only survives in the atmosphere for about 12 years, while CO2 can remain for many hundreds of years).

This short life span gives hope that measures taken to reduce methane emissions can have a quick and material impact on the planet’s warming. The challenge for Australia and other countries is that the two major human sources of methane are from sectors that are not necessarily easy to abate.[1] These two sectors are:

1. Agriculture: Responsible for about 75 million tonnes or 14 per cent of Australia’s total emissions, with this percentage projected to increase by 2030. About 50 million tonnes comes from methane belched by ruminant animals (cattle and sheep, as well as feral goats and camels).

2. Mining (Fugitives): Responsible for about 55 million tonnes or 10 per cent of Australia’s total emissions, though there has been some conjecture that the levels of methane emitted during coal and natural gas extraction and production might be higher.

Why are these sectors hard to abate?

The abatement challenges can be put into three categories: economic, technological, and political.

Agriculture and mining are integral to the prosperity of Australia’s economy. The Department of Agriculture, Fisheries and Forestry forecasts the value of agricultural exports to be over $70 billion in 2022-23, while mineral exports are forecasted at $450 billion. The value for these resources makes it important that any cost impost placed on these sectors (such as a tax on methane emissions) does not compromise their international competitiveness. These industries are called emissions intensive trade exposed industries (EITEs) and represent a conundrum for all countries with climate ambition. The European Union (EU) recently introduced a Carbon Border Adjustment Mechanism (CBAM) to address this conundrum – the CBAM places a levy on carbon-intensive imports proportionate to the carbon associated with its production. This is designed to protect European domestic EITEs who participate in the EU’s Emissions Trading Scheme.  

These economic concerns are compounded by the absence of proven, cost-effective technology alternatives for reducing methane in these sectors. Trapping fugitive methane from open cut coal mines has so far proven near impossible, though the deeper coal in underground mining is more suitable for capture (despite being more gassy).

Figure 1: Coal Mining CO2 equivalent methane emissions vs Other Resources

Source: Australian Mining Bulletin

The agriculture sector is currently holding out for prospective abatement technologies to reduce belching one day being viable on a commercial scale.

Sitting on top of all this is the political minefield any policymaker must trek when contemplating abatement. The Federal Government’s signaling that it would commit to the Global Methane Pledge prompted Nationals leader and Shadow Agriculture Minister, David Littleproud, to exclaim that the “Aussie barbeque is under threat. Prime Minister Anthony Albanese wants to take away the backyard barbeque”.

Consequently, previous governments have mostly sidestepped the issue. The Gillard Government’s Clean Energy Act (the ‘carbon tax’), for example, excluded the agriculture sector from coverage, while mining facilities received various exemption arrangements through their classification as EITEs.

So what can the government do?

It seems the Federal Government will rely on its Safeguard Mechanism reforms to reduce methane emissions from the mining sector, something that will be easier said than done. There is already splintering within the Labor Party about whether it should approve new gas projects, namely the proposed Scarborough and Beetaloo projects, which will contribute to Australia’s overall methane emissions. Resource Minister Madeleine King has so far remained committed to opening new gas fields.

Furthermore, like Prime Minister Gillard before, the Federal Government is facing pressure to provide carveouts to EITEs under the Safeguard Mechanism. EITEs represent almost 80 per cent of covered emissions under the Safeguard Mechanism so any carveouts will limit the ability of Australia to contribute to the methane pledge.

More promisingly for the government is the innovative – and proven – steps some companies have taken to curb fugitive methane at underground mines. Electricity generator, EDL, uses technology to trap methane gas produced at underground coal mines and convert it into a power generation fuel (as well as from biological processes, principally landfills). Other options include Ventilation Air Methane (VAM) technology, with the NSW Government recently providing funding to major miner, South 32, to establish a pilot VAM abatement project at Illawarra metallurgical coal mines.

As for agriculture, cost-effective abatement pathways seem reliant on the maturing of technology. After signing the pledge, the Federal Government committed $5 million in funding to support the research and development of low emissions feed supplements for grazing animals, and $8 million to support the commercialisation of a livestock feed supplement that reduces methane belching. Key agricultural lobby groups like the Cattle Council of Australia are highly confident about the capability of these technologies, stating that “the beef industry will reach carbon neutrality by 2030, whether Australia signs the pledge or not”. The Government will hope this confidence is well-founded because the remaining policy options are far less politically palatable.

One option is to follow New Zealand’s lead and introduce a tax on agricultural greenhouse gas emissions. Even putting aside the political pushback this would cause, it is unclear how effective such a tax is. Unless there are technological alternatives available, the only way farmers can materially cut their methane output (the desired response of a punitive tax) is to reduce their productivity and/or size of livestock. Countries like the Netherlands have gone one step further and enacted laws that directly compel farmers to reduce their livestock in return for compensation.

Alternatively, the government might need to breathe deep and test the public’s appetite for adjusting its diet. Promoting alternatives to the consumption of beef and lamb, as well as dairy products, seems inevitable at some point if the world is to reach net-zero, regardless of how much technology advances. There are common substitutes like chicken, pork and fish (as well as non-meat options and dairy substitutes like soy milk), and even kangaroo meat has been proffered for some time as a red meat alternative that is cheap and better for the environment. While this is all ultimately inconceivable as far as domestic politics goes, there are decent economic, environmental, and health reasons for promoting such dietary changes.  

Conclusion

Whichever policy pathway the government takes to meet the Global Methane Pledge, it will have flow on impacts for the electricity sector. Evidently any cost imposition on coal and gas extraction will influence their commodity price, which by consequence, will place strain on wholesale electricity prices for the generators that rely on these fuels.  

Affected industries may also turn to the Australian Carbon Credit Unit (ACCU) market to offset some of their methane emissions, creating increased demand which supply might struggle to meet.

As for the government, signing the Global Methane Pledge was arguably the easy part. Turning this aspiration into action will involve some hard and uncomfortable policy decisions having to be eventually made as decarbonising electricity alone won’t come close to getting Australia to net-zero by 2050.

[1] Natural sources (mainly the decay of plant material in wetlands) are also a major contributor of methane, though they are mostly offset by other natural processes (e.g. soil and chemical reactions in the atmosphere that help remove carbon from the atmosphere).

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