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GHG Emissions Regulations: Driving the Global Fight Against Global Warming

Updated: Aug 29, 2023

We’re halfway to 2030 since the 2015 Paris Agreement and the urgency to effectively tackle greenhouse gas (GHG) emissions on a planetary scale has never been more pronounced. Across the globe, heatwaves are shattering records and climate abnormalities have become the norm. Summer 2023 has seen a series of alarming climate events, from unprecedented heatwaves scorching Europe and North America, to extreme flooding in China and a rare tropical storm wreaking havoc in southern California with record-breaking rainfall.

These events serve as a stark reminder of the urgent need for emissions reduction. The climate crisis we’re facing underscores the critical juncture at which the global community and industries find ourselves.

The need for action has propelled governments to move forward with new greenhouse gas (GHG) emissions regulations — including both tax credits and grants, as well as new emissions fees — which are driving large-scale changes across industries and markets. The critical intersection of regulatory compliance and the development and implementation of necessary Monitoring, Reporting, and Verifying (MRV) mechanisms is emerging as the pivotal nexus in the journey towards emissions reduction. The Inflation Reduction Act and COP28: Reducing Emissions by 43% globally by 2030 It’s been one year since the Inflation Reduction Act (IRA) set out to ensure the U.S. upholds its renewed commitment to the Paris Agreement and reduces GHG emissions by 40% by 2030. The most prominent piece of climate legislation to date, the IRA embedded ambitious investments in clean energy, efficiency measures and emissions reduction into the U.S. federal tax code. These include nearly $400 billion in federal funding (the bulk of which is made up of tax credits) for nuclear power, clean electricity electric vehicles, climate-smart agriculture and energy efficient supply upgrades. Notably, the IRA also included:

  • $6 billion for a Department of Environment (DOE) program to accelerate decarbonization projects in energy-intensive industries.

  • $10 billion for the renewed 48C tax credit (applied to energy projects that produce energy from alternative sources or capture & sequester carbon emissions).

  • Over $5 billion for federal agencies to procure lower-carbon materials.

  • A first-of-its-kind program to propel deployment of emissions-reducing technology at U.S. manufacturing facilities

  • $250 million for grants and technical assistance to help manufacturers report their emissions in environmental product declarations

In addition to these tax incentives, grants and loans, the IRA included a substantial fee on methane emissions that will go into effect on January 1, 2024. The fee applies to a facility’s reported emissions exceeding 25,000 metric tons of carbon dioxide equivalent (CO2e) per year:

  • $900 per metric ton of methane in 2024

  • $1200 in 2025

  • $1500 in 2026.

To calculate their methane emissions, facilities must apply applicable emissions thresholds. For oil and gas production facilities, the threshold is emissions exceeding 0.2% of the natural gas sent to sale from the facility. An estimated 32 percent of methane emissions from oil and gas facilities will be subject to the methane fee by 2026.

Importantly, as the methane charge provisions in the IRA are amendments to the Clean Air Act, companies found in violation of reporting requirements could face civil penalties of $100,000 per day per charge, and up to $500,000 per offense for criminal penalties.

This means the energy sector must continue to develop compliance strategies and robust data management systems to ensure they accurately monitor, verify and report their emissions performance.

The IRA regulations build on the PIPES Act of 2020, which required all pipeline facilities with maintenance and inspection procedures to address the elimination of hazardous leaks and minimize releases of natural gas (e.g. methane) —whether fugitive emissions or intentional releases due to venting from maintenance and other activities.

In 2023, the Department of Transportation’s (DOT) Pipeline and Hazardous Materials Safety Administration (PHMSA) issued a long-awaited notice regarding the proposed implementation of the PIPES Act. The proposed regulatory provisions include requiring facilities to implement advanced leak detection technologies, conduct frequent and thorough surveys of their pipelines, and annually report the number and grade of all leaks detected and repaired (as well as the emissions related to those leaks). Combined with the fact that according to numerous estimates, wasted methane from leaks translates into roughly a total of $30 billion of lost revenue for the global gas industry, these regulations further compound the financial incentive for the energy sector to aggressively reduce emissions. Looking ahead, the upcoming Conference of the Parties (COP28) in Dubai will serve as a global platform to respond to the intensifying climate crisis and drive further emissions reduction investment and regulations like those in the IRA.

For the first time at a UN climate conference, an entire day at COP28 will be dedicated to discussions on trade. “Trade Day” will focus on international finance and trade’s potential as a catalyst for climate-smart development, value-chain decarbonization and emissions reduction. It will also highlight the need for national governments to adopt measures including tariffs, market-based mechanisms, subsidies and regulations to speed up energy transition, create markets for carbon-efficient products, strengthen voluntary carbon markets and phase out unsustainable economic activities.

An opportunity to “course correct on adaptation, finance and loss and damage” COP28 is set to emphasize the importance of emissions regulation for charting an optimized course to hitting the Paris Agreement goals and making emissions reduction by 43% a reality over the next 7 years.

Monitoring, Reporting, and Verifying (MRV): The Linchpin of Global Action

With increasing emissions reduction investment and regulation, MRV mechanisms have emerged as a linchpin in the battle against global warming. We know that reducing emissions is essential to slowing climate change and averting climate disasters, but reduction is only possible if governments and industries have robust, accurate and verifiable data about emissions.

Put simply, emissions intelligence. The multi-step MRV process — when done right — ensures transparency, accountability, and credibility in emissions reduction regulations and compliance.

For example, the EU’s MRV Regulation, which first came into force in 2015 and recently amended in 2023, established rules under which shipping companies are obligated to transparently report their emissions annually, and accredited, independent verifiers verify the reported amounts of GHG emissions to ensure accuracy and credibility. The regulation remains an essential step that continues to drive the decarbonization of maritime transport in the EU.

For industries, particularly the energy sector, navigating voluntary and involuntary emissions reduction efforts has produced the need for robust MRV processes on a global scale. By implementing these systems and processes, industries gain in-depth understanding of their emissions performance, allowing them to accurately report their emissions and implement data-driven and results-based strategies that align with national and international environmental regulations and goals. Notably, MRV plays a pivotal role in addressing methane emissions. The IEA estimates the energy sector was responsible for 135 million tonnes of methane released into the atmosphere in 2022, with 500 new, previously undetected “super-emitting methane events” at oil and gas operations. MRV processes are essential for detecting and stopping these leaks. The IRA’s methane fee, for example, requires companies to accurately report methane emissions from all of their facilities. MRV systems make it possible for both oil and gas companies and the federal government to correctly identify, monitor, and reduce emissions. This is especially important as massive amounts of methane emissions are clearly going undetected every year.

The Imperative of Collaboration: Industry-Government-Environmental Nexus The interplay between industries, governments, and environmental organizations is pivotal in shaping effective GHG emissions regulations.

In the midst of a changing climate landscape, GHG emissions regulations hold the key to driving international markets. They are already steering industries towards a more sustainable future. The collaborative efforts between industries and governments resulting from new regulation also foster innovation, facilitate technology adoption, and establish a unified approach towards emissions reduction.

Our current climate crisis underscores the urgency of the moment, driving industries to embrace emissions reduction as a shared responsibility with clear economic incentives. Through robust MRV practices and emissions intelligence on a global scale, industries like oil and gas — armed with data-driven insights that guide their emission reduction strategies — stand to gain a great deal from green accountability and credibility.



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