What is Differentiated Gas?
Differentiated gas, also known as certified gas, is natural gas that is marketed and sold based on its verifiable environmental properties, particularly the intensity of methane emissions throughout the value chain. In a world looking to reconcile climate change and the continued use of fossil fuels, energy products with smaller greenhouse gas footprints will have a competitive advantage.
Creating a market for differentiated gas serves many purposes:
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According to the International Energy Agency, oil and gas operations are responsible for one-third of global methane emissions. During the process of producing, processing, transmitting, and distributing natural gas, methane is emitted in normal operation and by accident. Routing flaring, venting, and fugitive leaks are the main causes of methane emissions in the industry. Yet, most of these emissions are avoidable simply by tracking and stopping leaks as they occur, minimizing flaring, or identifying problematic equipment and replacing it.
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A differentiated gas market rewards those who are not only making the necessary cuts to methane emissions but going above and beyond to create a cleaner natural gas product. In a world concerned about climate change, lower greenhouse gas fuels will have a competitive advantage in the market. An uptake of certified gas transactions can better link environmental performance data with financial environmental, social, and governance (ESG) metrics. While other aspects of climate mitigation focus on mandating cuts and making changes, a differentiated gas market creates incentives for companies to voluntarily reduce their emissions and achieve their ESG goals.
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In light of the recent Russian aggression in Ukraine, the United States has the opportunity to increase the energy security of Europe, reduce dependence on Russian natural gas, and promote U.S.-based industries through differentiated gas. The United States is a world leader in data collection and methane monitoring technologies that track and mitigate emissions. Furthermore, U.S.-based companies produce some of the most low-methane gas in the world. In contrast, satellite data estimates that Russia is responsible for one-eighth of global annual emissions due to major plume incidents detected on major pipeline routes extending southeast from the Arctic. In markets like the European Union, natural gas with lower emissions attributes is sold at a premium. The United States can take some of Russia’s market share, particularly if it offers what Europe clearly wants: an energy supply that certifiably minimizes climate damage. Thus, a clean energy strategy can deliver strategic, economic, and environmental benefits—to both the U.S. and our allies.
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Although carbon dioxide (CO2) emissions make up a greater mass of anthropogenic greenhouse gases, methane emissions are much more potent. Methane had over 80 times greater radiative forcing per ton than carbon dioxide over two decades but, unlike CO2, methane decays rapidly. By prioritizing methane, governments and businesses can reach their climate goals more quickly and with fewer changes to their everyday operations.
What enables differentiated gas?
New Measurement Technologies
Moving from monitoring and detecting leaks and estimating emissions to direct measurement of methane emissions.
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Voluntary market certifications can verify to others that your differentiated product is truly differentiated. This verification is vital in a voluntary market, where bad actors may claim fraudulent climate accounting data. Certifiers signal trust and legitimacy in a burgeoning market with little oversight.
Certifiers like Project Canary, Equitable Origin, and MiQ push beyond the lowest standards for methane emissions set by regulators and allow companies to demonstrate mitigating efforts that go above and beyond local, national, and international requirements.
Certifiers guarantee the reliability of a product by using “top-down” data–emissions data collected at the industry site and in the atmosphere–and “bottom-up” data–the aggregate amount of emissions is based on engineers’ estimations of gas-loss rates per unit of activity–in harmony.
Voluntary Market Certifications
Third-party certifiers verify the validity of methane emissions data and create a common standard for data reporting.
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Transactability refers to the ability of actors in the differentiated gas or voluntary carbon market to trade emissions credits.
Stakeholders, rating agencies, registries, and standards bodies are increasingly establishing criteria or best practices for differentiated gas markets—enabling contracting standards.
To promote the transactability of products based on emissions data, regulations should support—or at least not harm—the development of data that is interoperable across multiple systems and the development of uniform, secure certification processes for differentiated gas and related products.
Distributed Ledger Technology (blockchain technology) and digital registries like EarnDLT and others are poised to become a major enabler of transactability in differentiated gas, as they prevent fraud, ensure data harmonization, and increase access to the market.
Established Transactability
Rating agencies, registries, and standards bodies legitimize the market and digital ledger technology builds trust across transactions.
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Data is the backbone of differentiated gas. The development of advanced technologies such as aircraft surveillance and site-level direct measurement utilizing continuous monitoring technology is already helping reduce methane emissions throughout the oil and gas value chain.
Leak detection is the most established technology related to differentiated gas. Optical gas imaging (OGI) cameras on satellites, drones, aircraft, and handheld or stationary devices provide a visual of spot-specific methane leaks. Once detected, methane leaks in the oil and gas sector can be remediated using simple engineering solutions, such as replacing a valve or tightening bolts.
New technologies, including hand-held and drone-based optical gas imaging, manned aircraft, satellite, etc., have substantially expanded the capabilities and availabilities of direct measurement and continuous monitoring services. Sensor technologies have expanded rapidly in recent years and promise to enable increasingly cost-effective methane solutions.
While much of the technology needed to scale differentiated gas already exists, it is important to encourage investment in methane measurement technologies and other innovations that may make these technologies more efficient or accessible.