Curbing methane emissions: How five industries can counter a major climate threat

Methane accounts for about one-third of global warming. New McKinsey research shows how five industries can cut emissions with proven technologies and at a reasonable cost.
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As global temperatures continue to rise and physical climate hazards become increasingly frequent and intense, more and more organizations are committing to lower their greenhouse-gas (GHG) emissions. Carbon dioxide commands much of their attention, but methane emissions from human activity are the second-largest driver of global warming, accounting for roughly 30 percent of the temperature increase from preindustrial levels. Curbing emissions of methane, therefore, will be critical to solving the net-zero equation—that is, reducing GHG emissions as much as possible, and counterbalancing any remaining emissions with GHG removals—and stabilizing the climate.

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The bad news is that methane emissions have risen by about 25 percent in the past 20 years. The current trajectory is far off the 2 percent annual decline that would be required to meet the 1.5°C or 2°C warming objectives of the Paris Agreement. 1 However, there are reasons for cautious optimism. New McKinsey research shows that five industries could reduce global annual methane emissions by 20 percent by 2030 and 46 percent by 2050—enough for a significant shift toward a 1.5°C warming pathway. What’s more, these reductions could be achieved largely with established technologies and at a reasonable cost.

The five industries, which together account for 98 percent of humanity’s methane emissions, are agriculture, oil and gas, coal mining, solid-waste management, and wastewater management. In each of these industries, there is a solid economic case to take abatement action. In this article, we look at methane’s impact on the climate, potential ways to reduce emissions, and steps that companies can take to begin managing methane effectively.

Reducing methane emissions is essential to stopping climate change—but some barriers stand in the way

Global temperatures in 2021 are 1.1°C higher than preindustrial levels, with anthropogenic methane emissions responsible for 30 percent of that warming. 2 As temperatures continue to rise, there is a danger that climate feedbacks could accelerate the warming impact of methane from sources in the Arctic, wetlands, and landfills. In the Arctic, permafrost releases methane as it thaws. On the current emissions trajectory, permafrost release alone could add an incremental 5 to 20 percent to long-term methane emissions. 3

In 2018, the Intergovernmental Panel on Climate Change (IPCC) estimated that the world’s budget to keep warming below 1.5°C was 570 gigatons (or 570 billion tons) of carbon dioxide (GtCO2). 4 Human activities currently emit about 41 GtCO2 a year, which suggests the budget will be exhausted by 2031. A core element of the IPCC’s analysis is that pathways to limit global warming to 1.5°C are accompanied by deep reductions in emissions of methane. This means that the more methane that gets emitted, the less “room” there will be in the atmosphere for other GHGs. Put another way, if methane emissions stay high, the world’s carbon budget will soon be spent. The IPCC analysis assumes curtailment of methane emissions of more than 2 percent a year, reaching 37 percent below 2017 levels by 2030 and 55 percent by 2050. 5 If these targets aren’t met, the 1.5°C objective will effectively be beyond reach. On the other hand, if methane emissions can be cut quickly, there will be a sufficient carbon budget remaining for the global economy to reduce CO2 emissions to net zero in an orderly transition (Exhibit 1).

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While methane and CO2 have similar warming effects, they are contrasting in several aspects. Methane stays in the atmosphere for just a decade, compared with the centuries-long persistence of CO2, but traps many times more heat. Methane emissions are much more irregular, emitted intermittently from oil wells, cattle, landfills, and coal mines. 6 Another challenge is that sources of methane emissions are highly dispersed across and within the five industries that account for the majority of methane emissions from human activities (Exhibit 2). Agriculture creates 40 to 50 percent of global methane emissions, but these emissions come from millions of farms of different sizes and farming practices around the world.

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As a result of these challenges, and despite recent technology advancements, methane emissions are notoriously difficult to track and measure. In addition, abatement solutions are rarely cut and dried. Across sectors, abatement measures vary widely in terms of cost per metric ton of methane abated, feasibility, and ease of implementation. Most measures require trade-offs, either between costs and benefits or in terms of environmental impact. Dry seeding in rice farming, for instance, will cut emissions associated with flooding but may boost emissions of nitrous oxide, another GHG. The cost of methane abatement in coal mining is four to five times higher than that of leak detection and repair (LDAR) in oil and gas, because the concentration of methane in released from coal mines is much lower. 7 This creates an uneven playing field that may challenge the business case for methane abatement at individual companies.

It is also important to note that reducing methane emissions in time to achieve a 1.5°C warming pathway would require both shifts in demand for commodities and technical solutions (Exhibit 3). The need for action on multiple fronts makes it all the more important to understand the feasibility of technical solutions, which we explore below.

Exhibit 3

Industries could reduce methane emissions with proven technologies at a manageable cost

Despite practical hurdles, technical abatement solutions are available now across the five industries, and many rely on existing technologies and would support companies as they progress toward their net-zero targets. Moreover, on a 30-year timeline, our analysis shows that more than 90 percent of the potential emissions reductions associated with these solutions could be achieved at a cost of less than $25 per ton of carbon-dioxide equivalent (tCO2e)—a price sometimes paid in the voluntary carbon markets (Exhibit 4).

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Full deployment of the abatement measures described here would cost an estimated $60 billion to $110 billion annually up to 2030, $150 billion to $220 billion annually by 2040, and $230 billion to $340 billion annually by 2050. These estimates include capital investments, operational costs and savings, as well as potential revenues from recovered methane. Cumulatively, the cost of adopting all technical levers would amount to $3.3 trillion to $5.1 trillion over a 30-year period (Exhibit 5).

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On 2030 and 2050 horizons, estimated emissions reductions by industry are as follows:

Agriculture

The agriculture sector, which emits an estimated 40 to 50 percent of anthropogenic methane, could achieve a 12 percent reduction in these emissions by 2030 and a 30 percent reduction by 2050. Agricultural emissions are primarily the result of ruminant animals (principally cows and sheep), farming practices, and rice production. Ruminants create methane during digestion, along with CO2 and other gasses. The impact is significant: ruminants account for almost 70 percent of agricultural emissions. They are responsible globally for more carbon-dioxide-equivalent (CO2e) emissions than every country except China. 8 Elsewhere in agriculture, biomass burning is a moderate source of emissions, driven by the expansion of land for pasture and crops, while rice farming produces methane via mechanical flooding, which is used in many countries to manage pests. A large proportion of the emissions from agriculture could be addressed with existing technologies. Several companies are already commercializing feed additives for cattle, for example, while alternative approaches to water, soil carbon, nitrogen, and land management provide proven options to rice and crop farmers.

Oil and gas

Oil and gas accounts for an estimated 20 to 25 percent of anthropogenic methane. Our analysis suggests that the sector could achieve a 40 percent reduction in sectoral emissions by 2030 and a 73 percent reduction by 2050. The oil and gas industry emits “fugitive methane” through venting, leaks, and incomplete combustion during flaring. Since methane is the primary constituent of natural gas, these emissions are an untapped source of value, contingent on the necessary infrastructure being put in place. Moreover, there are numerous options to prevent losses in upstream production, including LDAR, equipment electrification or replacement, instrument air systems, and vapor-recovery units.

Coal mining

Coal mining produces an estimated 10 to 15 percent of anthropogenic methane. According to our analysis, the sector has the potential to achieve a 2 percent reduction in its methane emissions by 2030 and a 13 percent reduction by 2050. The vast majority of coal-mine-methane (CMM) emissions emanate from either working or abandoned deep mines. There is a significant challenge in measuring and recovering these emissions. However, established technologies can capture CMM and use it to generate power. The investment case is probably strongest for companies in China, which account for about 70 percent of CMM emissions and which have invested in coal gasification for the industrial sector.

Solid waste

Accounting for an estimated 7 to 10 percent of anthropogenic methane, the solid-waste sector could achieve a 39 percent reduction in sectoral emissions by 2030 and a 91 percent reduction by 2050. The majority of methane emissions from waste originates in landfills and open dumps, where anaerobic organic material generates methane over time. Through biogas markets and other incentives, authorities could capture these emissions and either sell the methane as renewable natural gas or use it in the production of fertilizer. However, revenues may not be sufficient to offset the costs.

Wastewater

The wastewater sector now emits an estimated 7 to 10 percent of anthropogenic methane. These emissions could be reduced 27 percent by 2030 and 77 percent by 2050. Wastewater emits methane from the breakdown of organic material in wastewater streams. The primary method of reducing emissions would be to build out modern sanitation infrastructure and technology. However, capital costs and policy requirements would be a significant burden in many countries. Where there is funding and access to technology, alternative abatement approaches could include the use of covered lagoons or the application of microalgae to prevent gas formation. Biosolids responsible for producing methane could be collected and sold as fertilizer or bioenergy.

Companies can take three no-regrets actions to begin reducing methane emissions

To begin reducing methane emissions and meeting the goals of the Paris Agreement, some essential groundwork is required, comprising three no-regret actions:

  • Expand monitoring, reporting, and verification. First, there must be a concerted effort to expand monitoring, reporting, and verification. To get there, governments and industries would need to upgrade data collection, moving from estimates to observed measurements. Satellite, drone, and sensor monitoring, the costs of which are falling sharply, would be one way to help achieve this. Currently, methane emissions are reported in tandem with CO2 emissions. That needs to change, with methane described under its own methodology. Better measurement would offer the potential to create incentives for rapid methane reduction across industries. It could also support efforts to develop global tradable goods markets that value the carbon intensity of products along a traceable value chain.
  • Support sustainable consumption. Stakeholders could develop mechanisms to differentiate assets and score products based on their methane footprints. If every kilogram of rice, million British thermal units (MMBtu) of natural gas, ton of steel, pound of meat, barrel of oil, and ton of coal came with a methane-intensity label, the market signals could support a more orderly decarbonization transition. With this, retailers and consumers could make more informed purchasing decisions, producers could define new foundations for competitive advantage, and investors could better understand portfolio risk.
  • Increase innovation. Many solutions are sufficiently developed to be effective but are not adopted at scale because of excessive costs or a lack of awareness of available technology. In the oil and gas industry, innovation in methane monitoring—for example, leveraging flyovers and on-ground detection—could help businesses pinpoint leaks and cut mitigation costs. The beef industry is in the early stages of adopting feed additives, genetic breeding, and methane capture. These technologies would benefit from support to move more speedily from lab to field.

The insights here demonstrate that abating methane emissions will be critical to achieving a 1.5°C warming pathway and avoiding the worst effects of climate change. The good news is that there are many practical solutions available. Feed additives for cattle, new rice-farming techniques, advanced approaches to oil and gas leak detection, coal methane capture, and modern water and waste facilities can all be effective. Still, these solutions face implementation challenges.

The priority, therefore, is for action where it is practical. Many of the solutions can be implemented at a relatively low or net-negative cost, and these should be a priority. Where costs are prohibitive, there is a need for coordinated action to create the infrastructure and fiscal conditions that would support further action. Across the board, there is a need for more monitoring, reporting, and verification, more support for consumer choices, and more dedication to funding technical solutions. Without these efforts, it is likely that current initiatives will fail and the planet will continue on its collision course with an uncertain and dangerous future.

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