Regulatory developments

The IEA attributes the large portion of vented (as opposed to fugitive) emissions to (1) the broad definition of venting and (2) poor regulatory and enforcement standards in some countries, which result in operators deliberately venting rather than flaring, despite the former’s much higher impact on global warming. Vented emissions, in the definition adopted by the IEA and this study, also include emissions resulting from equipment design; fugitive emissions are defined as, in essence, the result of unforeseen events. In addition, examining methane leakage rates for different types of oil and gas production facilities globally, the IEA has observed higher rates in countries with poor regulation, oversight, and enforcement—for example, in Central Asia. Some of the lowest leakage rates are in advanced oil economies such as Norway.

Similar to flaring, projections of future methane emissions are subject to a great degree of uncertainty. Long-term projections depend on a wide range of variables. In the IEA’s Sustainable Development Scenario, global oil and gas methane emissions in 2040 would fall to less than 20 Mt (more than a 75 percent drop). This scenario, however, relies primarily on the assumption of a significant fall in oil and gas consumption by 2040, which would drive methane emissions down even without explicit abatement policies and measures. The IEA recognizes that relying solely on demand trends would be a “huge missed opportunity” in the efforts to mitigate climate change (IEA 2020a).21

REGULATORY DEVELOPMENTS

Review of gas flaring and venting regulation

A World Bank study of gas flaring regulation and regulatory practices in 28 oil-producing countries has produced the following key lessons of what constitutes an effective regulation (GGFR, forthcoming):

• The key approaches toward developing an effective gas flaring and venting regulation are prescriptive and performance-based: – The prescriptive approach is based on specific and detailed gas flaring and venting regulations, using detailed prescriptions of regulatory procedures and operational processes to make clear what is required. – The performance-based approach sets objectives and targets, leaving it to the operator to achieve these targets and demonstrate compliance. • The effectiveness of the regulatory approach suitable for any given country depends largely on – The suitability of the methods and targets considered for the curtailment of routine flaring and venting, which result from an up-front consultation process with public and private sector stakeholders; – The availability and quality of measured results; and – Adequate enforcement capabilities. • The relevance of flaring and venting across ministerial responsibilities can lead to unclear reporting lines, conflicting mandates, and reduced effectiveness of the regulatory agency. These issues apply particularly in countries with a dedicated ministry for oil and gas, but with flaring and venting falling under the responsibility of the ministry responsible for the environment.

For example, in the US state of Colorado, a liaison officer has been put in

place for areas of joint interest between the various government agencies dealing with flaring and venting. • The regulatory agency’s monitoring and enforcement capabilities are key determinants for the eventual effectiveness of any regulation. A key element is to allocate monitoring and enforcement powers under one single agency, and to ensure that adequate measurement requirements are in place to provide the necessary data to enable targeted action from the regulator. To avoid these challenges, countries such as Norway have put in place a consultation process leading up to the development of their regulations, involving feedback loops from the agencies involved on the one hand and, where necessary, private sector participants on the other. • Market-based solutions can be a valuable complementary measure to support the overall targets, because they use commercial considerations as an additional incentive. Several approaches have been implemented, some of which are still being assessed. Examples include – Kazakhstan’s emissions trading system enabling oil and gas producers with emissions exceeding 20,000 MtCO2/year to obtain the required emission quotas; and – Russia’s preferential access of associated gas to the pipeline system, and preferential access of electricity produced from associated gas to the wholesale market.

Consequently, the regulatory approaches adopted, and their effectiveness, can vary widely, as illustrated by the examples in box 1.2.

Effective regulation can play a significant role in further curbing the wasteful practices of flaring and venting. To do so, it must create the right incentives to deploy the full spectrum of innovative technical or commercial solutions, and to collaborate across the industry.

Flaring and venting reduction and nationally determined contributions

The Paris Agreement is a legally binding international treaty on climate change, which entered into force at the end of 2016. Its goal is to limit global warming to well below 2.0 degrees Celsius, preferably to 1.5 degrees Celsius, compared to preindustrial levels. To achieve this long-term temperature goal, countries aim to reach global peaking of GHG emissions as soon as possible, according to their capacity, to achieve a climate neutral world by midcentury.22 Participating countries set their emissions reduction targets in the form of commitments known as Nationally Determined Contributions (NDCs). To date, only 13 countries have included gas flaring or methane reduction in their NDCs (table 1.7). Of those countries, 11 have endorsed the Zero Routing Flaring by 2030 initiative (see map 1.1 in the next subsection on international initiatives and voluntary standards).

An analysis of flaring volumes (figure 1.10) and flaring intensities (figure 1.11) for the countries listed in table 1.7 shows that progress in the last five years has been challenging across the board, although for different reasons. For example, República Bolivariana de Venezuela’s sharp rise in flare intensity evidences the country’s difficulties in dealing with ailing infrastructure, and Nigeria, which steadily reduced its flaring volumes by some 70 percent over the past 15 years, is now dealing with the challenge of bringing small flares to the market (GGFR 2021).23