{"id":1812,"date":"2024-03-28T14:03:03","date_gmt":"2024-03-28T19:03:03","guid":{"rendered":"https:\/\/blogs.edf.org\/markets\/?p=1812"},"modified":"2025-12-03T15:47:49","modified_gmt":"2025-12-03T20:47:49","slug":"how-economists-can-leverage-methanesat-data-for-climate-action","status":"publish","type":"post","link":"https:\/\/blogs.edf.org\/markets\/2024\/03\/28\/how-economists-can-leverage-methanesat-data-for-climate-action\/","title":{"rendered":"How Economists Can Leverage MethaneSAT Data for Climate Action"},"content":{"rendered":"

This blog was co-authored by Maureen Lackner (Senior Manager of Economics and Policy Analysis, Environmental Defense Fund) and Lauren Beatty (High Meadows Postdoctoral Economics Fellow, Environmental Defense Fund).<\/em><\/span><\/p>\n

Climate change is a pressing issue, partly fueled by methane: a greenhouse gas responsible for about <\/span>30% of today\u2019s global warming<\/span><\/a>. Reducing methane emissions will slow down the rate of near-term warming and help avert the worst climate damages. To tackle this problem, Environmental Defense Fund launched MethaneSAT, the world’s first satellite developed by an environmental non-profit. MethaneSAT aims to quantify regional emissions of methane across more than 80% of oil and gas production in the world, while disaggregating diffuse area emissions and high-emitting point sources.<\/span>\u00a0<\/span><\/p>\n

MethaneSAT will generate publicly available data allowing stakeholders to track emissions and hold polluters accountable. This data will empower various actors \u2013 governments, companies, and investors \u2013 to make informed decisions about emission reduction strategies. It will be an invaluable resource for economists and public policy researchers aiming to analyze and design effective climate policies.<\/span>\u00a0<\/span><\/p>\n

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Data Available from MethaneSAT<\/span><\/b>\u00a0<\/span><\/h2>\n

While MethaneSAT is not the first satellite designed to measure methane emissions, it fills a unique niche between the two existing satellite types: global mappers and point source imagers. This makes it an invaluable tool for tracking the overall changes in emissions both at high resolution and at regional levels and thus effectively informing policies and reducing emissions. <\/span>\u00a0<\/span><\/p>\n

Global mappers such as TROPOMI and GOSAT were designed to provide global resolution of methane concentrations but have large pixel sizes and high detection thresholds. TROPOMI has a point-source detection threshold of many tons of methane per hour, making it capable of identifying only the most extreme emissions events (<\/span><\/span>Laveaux<\/span> et al., 2022<\/span><\/span><\/a>)<\/span><\/span>.<\/span>\u200b<\/span>\u200b<\/span><\/span> Point source imagers are designed to detect emissions from point sources and have smaller detection thresholds and pixel sizes. Moreover, since they are limited to narrow viewing domains, point source imagers do not provide regional or global emissions characterization (<\/span><\/span>Jacob et al., 2022<\/span><\/span><\/a>)<\/span><\/span>.<\/span><\/p>\n

MethaneSAT will map and quantify emissions from the global oil and gas producing regions, while also spatially disaggregating diffuse area emissions at high resolution within individual regions, as well as detecting high-emitting point sources. Importantly, the data produced by MethaneSAT will be freely accessible for non-commercial applications, processed in an operational data pipeline, transforming methane concentrations to quantitative methane emissions through atmospheric inversion. MethaneSAT will provide area emissions, which will be diffuse emission heatmaps at high spatial resolution and high-emitting point source emissions.<\/span>\u200b<\/span>\u200b<\/span><\/span>\u00a0 <\/span>The combination of global coverage with a much finer resolution than global mappers will provide unique opportunities for research and emissions abatement.<\/span>\u00a0<\/span><\/p>\n

A Brief Overview of the Economics of Methane Emissions<\/span><\/b>\u00a0<\/span><\/h2>\n

Methane emissions from the oil and gas sector are a classic example of what economists call an \u2018externality.\u2019 Externalities occur when individuals or firms cause harm (or benefit) to others that do not affect their own decisions. Methane emissions from oil and gas are primarily leaked natural gas. However, the price of natural gas on the market is far less than the social cost of methane emissions.\u00a0<\/span>\u00a0<\/span><\/p>\n

For context, for the past ten years, the Henry Hub spot price of natural gas has typically varied been between $2 and $4 per Mcf but the social cost of methane emissions from leaking natural gas is around ~$35 (see footnote 1).<\/span>\u00a0That means that operators do face some incentive to abate emissions, but their incentive is many orders of magnitude too low \u2013 methane emissions are \u2018too cheap.\u2019\u00a0\u00a0<\/span>\u00a0<\/span><\/p>\n

Moreover, <\/span>methane<\/span> emissions from individual sites are expensive to measure and there are millions of oil and gas facilities across the globe. Environmental economists typically favor taxes to sensibly balance the benefits and costs of regulating pollution. However, when measurement is expensive, or emissions estimates are inaccurate, alternative measures like technology mandates may offer a more cost-effective means of pollution reduction.\u00a0<\/span>\u00a0<\/span><\/p>\n

Designing effective policy requires understanding firm incentives and considering all relevant costs, benefits, challenges, and opportunities.<\/span> Economists have already thought long and hard about how incentives affect emissions and about effective ways to use policy to reduce methane emissions.<\/span>\u00a0<\/span>\u00a0<\/span><\/p>\n

For example, a recent study on the provision of information on leaks to operators found evidence that informing operators of their small leaks made them <\/span>less <\/span><\/i>likely to fix them (<\/span><\/span>Lewis et al., 2023<\/span><\/span><\/a>)<\/span><\/span>.<\/span>\u200b<\/span><\/span>\u00a0 This is likely because the value of lost gas from small leaks is less than the cost of fixing them. Other research has demonstrated that constrained midstream capacity and\/or market power may be an important cause of methane emissions from flaring (<\/span><\/span>Agerton et al, 2023<\/span><\/span><\/a>)<\/span><\/span>.<\/span>\u200b<\/span><\/span>\u00a0<\/span><\/p>\n

These results highlight the need for thoughtful regulation that considers the relationship between policies and incentives. To that end, economists have proposed solutions to improve the effectiveness of a methane emissions price, even in the absence of perfect measurement data. Such measures include targeted audits or built-in incentives for operators to report empirically measured and verified emissions <\/span>data<\/span> (<\/span><\/span>Cicala et al., 2022<\/span><\/span><\/a>; <\/span><\/span>Dunkle<\/span> Werner and Qiu, 2020<\/span><\/span><\/a>)<\/span> <\/span>To<\/span> encourage coordination across countries <\/span>and ensure that <\/span>ambitious countries <\/span>aren\u2019t<\/span> put at a competitive disadvantage by their own policies<\/span>, economists have <\/span>proposed<\/span> a methane border adjustment<\/span> (<\/span><\/span>Clausing et al, 2023<\/span><\/span><\/a>)<\/span>.<\/span><\/span><\/span><\/p>\n

However, there are still many outstanding questions on how to effectively regulate methane emissions given these measurement challenges and on how to operationalize these theoretically great ideas into actionable policy.\u00a0<\/span>\u00a0<\/span><\/p>\n

Using MethaneSAT Data for Better Policy<\/span><\/b>\u00a0<\/span><\/h2>\n

MethaneSAT will offer unique opportunities for public policy and economics researchers to build on this work by providing a new data source to inform policy design, evaluate policy effectiveness, and create new opportunities for policy implementation.<\/span>\u00a0<\/span><\/p>\n