Ökologische Finanzreform

Pricing methane: Implementing a methane pricing model for the EU gas market

The reduction of methane emissions from oil and gas is one of the most cost-effective ways to slow down global warming. To meet the goals of the Paris Agreement, the reduction is an indispensable requirement. In this study, we propose to implement a set of instruments to incentivize necessary measures to abate methane emissions arising from natural gas production in the EU and gas imports into the EU – a methane pricing model in combination with a performance standard. We discuss how such a pricing model should be designed – taking into account relevant aspects like the legal and political feasibility, an appropriate price level, the geographic scope, covered emissions as well as the use of revenues. In order to enhance its climate impact, we propose to combine the methane pricing model with a methane performance standard on all natural gas traded in the EU.