Research Brief: Methane and Trade: Paving the Way for Enhanced Global Cooperation on Climate Change

The Salata Institute’s Initiative to Reduce Global Methane Emissions released its second Research Brief in July 2023, titled “Methane and Trade: Paving the Way for Enhanced Global Cooperation on Climate Change.” The paper on which the brief is based – also posted on the Salata-Institute site here – was published recently by Catherine Wolfram, an External Collaborator of the Initiative and William F. Pounds Professor of Energy Economics, Massachusetts Institute of Technology; Kimberly Clausing, Eric M. Zolt Professor of Tax Law and Policy at the University of California, Los Angeles School of Law; and Luis Garicano, Non-Resident Fellow, Bruegel.

The Brief begins:

“Cutting methane emissions from the extraction, processing, and transport of oil and natural gas is widely viewed as key to achieving global targets for limiting the magnitude and pace of climate change this century. This is both because methane is a highly potent, albeit short-lived, greenhouse gas, and because the oil and gas sector offers significant near-term, low-cost methane abatement opportunities.

Recognizing these opportunities, the United States and the European Union have recently introduced new policies to reduce oil- and gas-related methane emissions. In the United States, the Inflation Reduction Act (IRA), passed in 2022, includes a methane emissions fee as a backstop to new methane regulations. The European Union, meanwhile, is also introducing new methane regulations and considering proposals to penalize imports from countries that do not implement similar methane measuring, monitoring, and reporting requirements.

Building on these parallel approaches, coordination between the European Union and the United States to implement a common border adjustment policy for energy imports with upstream methane emissions could promote enhanced international cooperation on climate-change mitigation, encourage global efforts to reduce methane emissions, and model an effective strategy for reducing trade frictions over divergent approaches to climate policy.”

Read more here about the Salata Institute’s Methane Initiative.