New Ally in Climate Change Battle: Digital Natural Gas

As the world accelerates efforts to cut carbon emissions and address climate change, it faces an invisible yet formidable adversary: the methane in natural gas used to heat and power millions of homes and businesses.

Jeff Cohen sees a potential solution that merges commodity markets with modern computing power: Digital Natural Gas (DNG) and Methane Performance Certificates (MPCs). Cohen is co-founder and Sustainability Director of Xpansiv, the largest global spot exchange for environmental commodities. Xpansiv recently launched MPCs—tradable contracts that enable natural-gas producers to differentiate and markets to incentivize responsible production that controls methane emissions.

“Natural gas is recognized as a relatively clean transition fuel, but methane losses due to leaks, venting, and uncontrolled flaring negate its climate advantages,” said Cohen. “The data exist, but until now markets have not provided incentives to reward responsibly produced natural gas. Xpansiv is unlocking the value in current production with verified, empirical data that authenticates and registers operations with low methane emissions; we’re differentiating a commodity that’s been traditionally undifferentiated.”

In other words, one batch of natural-gas molecules is not necessarily like another.

The shale boom of the past 15 years led to a near-doubling in U.S. natural gas production, providing an abundant domestic energy source that burns “cleaner” than other fossil fuels, such as coal. Natural gas now accounts for more than 40% of U.S. electricity generation, compared to just 16% two decades ago.

Oil and gas drilling is the largest industrial source of methane in the United States. Methane, the biggest component of natural gas, accounts for about 15% of greenhouse-gas emissions. One-third of the warming from greenhouse gases happening today is due to human-caused emissions of methane, which traps more than 80 times as much heat as carbon dioxide within the first 20 years of its release to the atmosphere, according to the International Panel on Climate Change. At the recent COP26 in Glasgow, the U.S., along with more than 100 other countries, agreed to cut methane emissions by 30% by 2030 under the Global Methane Pledge.

Most methane emissions during the natural-gas lifecycle happen at the drilling rig well pad, Cohen said. The initial versions of the MPC contracts are designed to provide incentives for gas producers who demonstrate superior performance by controlling fugitive methane emissions. Like renewable energy certificates, MPCs provide a data trail back to the point of production.

Once natural gas is pumped from the well pad and processed, pressurized, and sent into the interstate pipeline system, the actual molecules are impossible to trace back to a specific well. That means downstream users in the past had no way of knowing how much methane may have leaked into the atmosphere before the gas they purchased was consumed, Cohen explained.

“Until now, the gas being consumed by a utility or industrial user was impossible to trace,” Cohen said. “What MPCs allow is for an end-user to invest in and support the production of responsibly produced natural gas, with auditable data back to the specific facility and time it was extracted.”

DNGs, the basis for the MPC contracts, provide “digital representations” of a specific quantity of natural gas (one MPC contract represents 1 million British thermal units, or MMBtu), including well location and age, basin-gas composition, and methane-emissions intensity.