New EDF Economics Discussion Paper reviews the instrument options available to policy makers to address methane emissions from the coal sector during the coal phase-out. This paper complements previous EDF research focusing on instruments options for methane emissions from the oil and gas sector.
Coal use is one of the major sources of CO2 globally, but its extraction and handling also involves the release of a short-lived but potent greenhouse gas: methane. The coal sector is the 4th largest source of man-made methane emissions globally, despite many cheap solutions to reduce and capture these emissions. For some countries, including the Global Methane Pledge signatories, the coal sector remains the major source of methane, making it an attractive target for policy intervention.
What policy instruments can help reduce methane emissions from this sector? In our recent EDF Economics Discussion Paper “Policy Instrument Options for Addressing Methane Emissions from the Coal Sector”, we focus on the policy developments across six coal-producing and consuming countries: Australia, Canada, China, India, Poland (as a European Union member state) and the US.
We identified three categories of policies:
- First, policies stimulating the reduction in coal supply and demand, e.g. the coal phase-out policy in Canada and the de-capacity policy in China.
- Secondly, policies stimulating the reduction in methane emissions, involving the use of regulatory instruments e.g. the proposed EU methane regulation, economic instruments such as offset credits, or a combination of regulatory and economic instruments. For example, China’s policies combining coal mine methane (CMM) regulations, which set methane capture and use targets, with financial and fiscal incentives e.g. a feed-in tariff for CMM-based power generation.
- Lastly, we looked at enabling policies, which may support or undermine the impact of the first two categories of policies with a focus on the ownership rights related to the gas extracted at active and inactive coal mines (abandoned mine methane, AMM).
We found that so far, the coal phase-out policies have mostly focused on the reduction of thermal coal production and use, overlooking the emissions associated with metallurgical (or coking) coal used in iron and steelmaking. These policies have been mostly implemented in countries with relatively low coal dependency and with just transition policies in place. Another blind spot of both coal phase-out and phase-down policies are emissions from closed and abandoned mines, which usually remain out of the scope of these policies.
We also identified the most common policy challenges preventing the reduction in methane emissions:
- changing policy priorities;
- limited access to the electricity and gas markets for the captured methane;
- the complex institutional and legal framework e.g. at the intersection of coal and gas (Coalbed Methane, CBM) resources;
- the lack of a more robust Monitoring, Reporting and Verification (MRV) framework; and
- regulatory choices creating unintended consequences e.g. by incentivizing flaring instead of more beneficial use of captured gas.
More and more countries, including China, Canada and the US, are looking methane reduction to enhance their climate commitments as part of the Paris Agreement and the Global Methane Pledge. Our new paper outlining examples of both effective and ineffective policy interventions can help policymakers design better policies to realize methane emission reduction opportunities in the coal sector.