The Growing Market for Certified Natural Gas

This transcript is from a CSIS podcast published on March 18, 2024. Listen to the podcast here.

Georges Tijbosch: So that everybody can rally behind it and gets on with basically either buying lower methane gas, which will then drive more operators to lower their methane because that's what we're looking for. We are looking for this driving force of the markets.

Lisa Hyland: Hello and welcome to Energy 360, the podcast from the CSIS Energy Security and Climate Change Program at CSIS. I'm your host, Lisa Hyland.

This week, my colleague Ben Cahill talks with Georges Tijbosch about how certifying natural gas could help create a lower-emission energy future. George is the CEO of a company called MiQ.

MiQ, which stands for Methane IQ is a not-for-profit global leader in methane emissions certification. It aims to create transparency by providing buyers with information about the emissions associated with the natural gas they are purchasing.

The aim is to drive operators to lower their overall methane emissions by creating demand for certified lower-emission natural gas. By some estimates, as much as one-third of U.S. gas production is already certified, and Georges sees a growing interest for this natural gas from domestic and international buyers.

Here's Ben to kick off the discussion.

Ben Cahill: All right. Georges Tijbosch, thank you so much for joining us today on Energy 360.

Georges Tijbosch: Pleasure to be here on the podcast. Yeah, really looking forward to it.

Ben Cahill: So, Georges, thank you so much for joining us today. I wonder if you could just briefly describe what MiQ is, how it was created, and what you do.

Georges Tijbosch: So my name is Georges Tijbosch and I'm the CEO for MiQ. MiQ stands basically for methane IQ or methane intelligence. So we're all about methane. We were created in 2019. It's only only four or five years ago, it feels like a long time now, by two entities. One is called RMI, Rocky Mountain Institute, which is a not-for-profit in the United States and Systemic, which is a sustainability consultancy based in London. And the reason that it was created at that time is we believe there wasn't enough one attention around methane and it's only 2019. Methane was a very bit under the radar then. And secondly, how do we address this, but also what is a solution we can work towards? And so MiQ was then created after the initial project scoping, and the purpose of MiQ is basically to set up a certification scheme for oil and gas operators to create a transparency, the transparency around methane emissions, but transparency in a credible way so that the gas that's been certified can be transacted with the buyers who then know which types of emissions are attached to the gas they are purchasing.

So the reason we are setting this up is to allow the buyers to make that choice between lower methane gas, medium methane gas, and not so good methane gas. Just like in the private world, consumers can make those choices in the supermarket and choose on certain attributes. And that's how we've created this and it's been a four year journey into this. We've now since then operationalized it. We've created seven different standards. We've got about 20% of U.S. gas has been certified since then. So, it's been a huge growth and a huge success. And the next steps are getting the LNG players to come in and the utilities to start purchasing that lower methane gas so that more operators start to abate and lower their methane emissions.

Ben Cahill: Yeah, so the theory of change I think is that we need to measure, quantify methane emissions, but also have a way of tracking it throughout natural gas systems. And do you hear different labels for how people do this, certified gas, differentiated gas, responsibly produced gas? Is there a difference? Are those terms interchangeable? And let me take a step back. Can you just describe what the value is of doing this process of certifying natural gas for both buyers and sellers?

Georges Tijbosch: Yeah, no, absolutely. So, I think in the beginning of your question, you mentioned tracking. That is what certified gas is all about. It is all about enabling the tracking of the emissions between, and it's a long chain between the original operator where the gas gets produced, it then gets processed, then goes in pipelines, might go into storage, might go to a liquefaction plant to be exported on a ship and so on. So, there's about up to seven different segments in there before it gets to the buyer. And so, it is all about the tracking of the emissions and to provide the buyer that information. And another way of looking at it, for those who are familiar with sustainability jargon, what is the scope? One of the producers, which is their emissions from a buyer's perspective, that becomes their scope three because those emissions are actually part of the product they're buying and ultimately using, and that's why that information needs to be transmitted.

Why? Because the buyers, what we want to do with our theory of change, as you correctly said, is to enable the buyers to choose gas based upon its missions and we're working towards oil as well from that perspective. We think that, and there's so many precedents on this by the way, and including in the energy world where if markets are well designed then they can work very, very efficiently because that's what people in the oil and gas industry do. When there is a number they have to deal with, they have to plan for, they have to discuss in an executive committee, then people will make the investments. And so what we're trying to do or actually really doing already is transmitting that information from the operator to the buyer. Now the key here is that information needs to be credible. If that information is not credible, then the whole thing kind of disappears more or less then okay, we're just pretending that somebody is buying a lower methane gas versus the average given.

And so the credibility is key. And that's all been in the design of MiQ in its initial stages. That was where our key drivers, which is what we call certified gas, all of the principles that need to go in there. First of all, maybe let's take a step back. We haven't invented this specifically for certified gas. This comes from other sectors. So for example, there are other sectors of renewable electricity where this concept called REC’s uses very similar principles as what we're doing here. There is a sector called in the U.S. it's called RNG, renewable natural gas, where they also use the concepts and then even going a step back, if you look to health and safety standards or if you look even to financial standards or if you look how banks are being regulated, the key here is to have segregation of duties within the design so that there is no conflict and that is what certified gas is doing.

So MiQ creates the standard of framework design stat, but we don't do the audits. The audits are separate parties from us, we qualified them, we check that they can do the work using our standards. That's key, but it's separate parties so that conflict isn't there. For example, we don't provide the technology because a key part of looking at methane is to measure the methane, and I'm sure we'll get to the subject of how to measure it, but in a shortcut here, that can be drones, that can be laser mounted towers, that can be handheld. There's different variety. But if we were to sell the technology and then give the certificates, well clearly have a conflict. There have been cases in the past where that all went a bit wrong, auditor and consultancy being in the same company. And so that's what certified gas does. Certified gas is key that it follows those principles.

From that perspective, there are two companies that are doing this and that's MiQ and a company we work with a lot called Equitable Origin. Equitable Origin, they look more at the rest of the ESG parts of attributes whilst we are specialists on methane and on GHG now. Then there have been other systems around and one of them is called Responsibly Source Gas. And in my view, that's been a marketing claim much more than a system. And I believe it's unfortunate that that has been around because it's created confusion, and it has created different expectations and where we think the markets should end up. But I think also that's kind of disappearing already. We don't see that a lot around anymore. We're not hearing that. And so I think the market has already decided on this that this needs to be robust and that's kind of what we've always foreseen. If this is not robust, it's going to be criticized. So that's the key element that I think makes the difference between doing certified gas or some of the other non-couture.

Ben Cahill: Yeah. So let's talk about how demand is developing for certified gas or gas with certain environmental attributes. This market has grown pretty quickly. Can you talk about the level of interest among different types of gas buyers in the United States, including utilities and industrial.

Georges Tijbosch: Gas consumers? Yeah, no, so I think you stated the right thing there that the market's grown very quickly. So we did the first certifications and that was I think with a company called EQT, obviously actually one of the largest gas producers if not the largest gas producer in the United States. And that was either late 21 or early 22, so it's kind of two years and a bit ago. So it's very recent, all of this. And since then we've been certifying many more assets in the United States in total. We are now certifying around 20% of U.S. gas production, which is an enormous volume. The U.S. is producing a lot of gas and it's increasing actually of course. And that 20%, which has been certified over those two years is now available for purchase by the buyers. And so what we're doing now over the last year or so is rolling this out. 

Transactions have started, so there are utilities that have started to buy this. There is also being good interest from big industrial users, for example, who creates fertilizers, ammonia, those type of products. And we've also seen interest from smaller buyers about where they want to be leading the charge on helping to address climate change. The key here is that a lot of the certified gas, as it's been certified by MiQ currently, and we have a grading system, but we'll come to that, but all the certified gas that's available is either an A or a B or a C grade, which means it's less than 0.2% of emissions. Now that needs to be put in perspective with what is the average in the United States or globally, and there's a variety of measures for it. And last year we conducted a very large study together with another company and together using flyovers and drones and in total about 400,000 measurements were taken across the United States. And the conclusion of all of that, and a lot of calculations using a lot of existing government data from the EPA, the conclusion of that is the average emissions in the United States of upstream only are about 1.0%, and so the gas that's available is much lower. And I think that's the key here that where we want to take, this is that these buyers, they can actually buy lower methane gas if they decide to do so. 

Ben Cahill: Yeah. And that 0.2% upstream methane intensity figure is significant because under the Inflation Reduction methane fee or waste emissions charge, that's the threshold that exempts you from the fee. That 0.2% target has also become kind of a defacto performance target for upstream companies around the world. So the oil and gas climate initiative companies agreed to that 0.2% target. It was also adopted at COP28 with the oil and gas decarbonization charter with lots of companies more than 50, I believe, aiming to meet these by 2030. So it's kind of become the defacto stretch target for the industry I think in terms of methane intensity.

Georges Tijbosch: Totally correct. And when we came up with our, what we call grade bands, where did we put the cutoffs that we took some of these data points into account because there was already starting to be a consensus around that 0.2%, but we didn't think it was necessarily the stretch targets. We think in many cases company can go lower. And so for example, the A grades are below 0.05%, and B grades are below 0.1%, but again, the average is 1.0% for the U.S., the average across the total supply chain according to the same study, now we're going to include pipelines and so is around 2.2% for other parts of the world. There's not as much data available. But I think if you run back to these 80 million tons that I talked about in the beginning, the number you end up with is one and a half percent.

And we think, and other NGOs think this as well, that the number is more like 2% plus on a global scale as well. And here is the key at around 3%. So if gas leaks across supply chain around 3% in total than actually purely from adding the burning of the gas with the methane leaks from the gas, you're now in the equivalent of if you burn purely coal. And so it's really key to see the differences that the averages might not all be that good, but the positive part of the story is there's a clear trend already where there is availability of lower methane gas and that's what we want to accelerate and that's where we can get that biggest bang for buck basically this decade. Again, coming back to the existing technologies. And so we are keen that a more producer join this and work towards those better performance grade because you used the word performance, MiQ is a performance standard. Ultimately it drives people to improve, but ultimately, it's the buyers and buyers can be importing nations. By the way. It's not necessarily utilities can vary and that's how it all holds together. And so this year we think that demands will pick up further. We are also speaking to many LNG importers outside of the U.S. who have shown a keen interest, and it is available now that information whilst call up even more than a year ago, it was hardly not available.

Ben Cahill: Okay. Your last point about international demand for certified gas is interesting. There are a lot of efforts underway around the world to understand the methane intensity of traded gas better including pipeline gas and LNG. And there are a lot of efforts that are kind of moving in parallel to understand emissions intensity and there are various proposals for how to do this. So, the U.S. Department of Energy and European Commission and some 15 other countries are working on what's called a measurement monitoring reporting and verification or MMRV framework. We also have the EU methane legislation, which should be finalized this spring, and we'll introduce on a series of steps, new rules on purchase gas and understand the emissions intensity of that gas. And eventually by 2030 an import standard. You also have gas buyers and markets like Japan and Korea starting to look at the methane intensity of purchase gas. So, there are a lot of things happening here and I wonder how MiQ and more broadly the certified gas universe fits in this framework of emerging demand for lower emissions gas around the world.

Georges Tijbosch: I think those three are initiatives that you mentioned and it is indeed interesting. They're in the different regions of the world. We think it fantastic those ones are being worked on because that's exactly the kind of regulatory pushes that MiQ has been preparing for, designing and demonstrating and actually operationalizing. So, all of those initiatives are going to need that quality of data, that ability to transmit the credible data between the sellers and the sellers again is this whole supply chain towards the buyer. And especially once you start to put hurdle rates or fines or taxes on top of it, it needs to be credible, then it can't just be a fuzzy report because it clearly will be challenged. And so that's what MiQ has been preparing for those regulators in a way that they can adopt the principles if they would like to regulate MiQ fine by us too, if they would want to set norms where we've already kind of led the way to kind of show what's out there works too. If other versions, and there's lots of precedent in this, and I'm going to refer again to renewable electricity certificates, for example, is a similar system, IREC it is called, and then many countries decide to adopt it and put their own kind of specific stamp on top of it. So, all of that is possible. We've kind of developed this to provide the regulators that kind of insight of what is possible. So totally welcome it. And with all three parties we are in conversations actually.

Ben Cahill: Yeah, yeah, that's really interesting. I feel like we're kind of in a stage where market innovation has happened. Clearly there was demand emerging for some time for certified gas and obviously the market has grown quite a bit and companies sort of had mandates and directives to go and figure this out and the market responded and through were these new innovations and now regulations are developing quickly. And the question is how do the regulations and the emerging rules interact with the market developments that are already underway? And I think there's probably pros and cons to each approach. I mean, the fact is that a lot of gas around the world will be produced in places that don't really have those firm rules and regs in place. By contrast though, you want the same set of rules to apply to everyone in lots of jurisdictions. So kind of a macro question, but I wonder if you could just talk about how the interaction between voluntary market led schemes is fitting into the scheme of emerging rules and rags around the world.

Georges Tijbosch: It's kind of we again, why we did this approach to create this approach that basically it can be adopted in, for example, the EU or exports from the U.S. or within the us, any kind of region or country. But you're right, it is key that the industry, which is ultimately a global industry and especially LNG is a totally a global industry, has an instrument through which it can compete on an international basis. And I'm not a believer, I don't think this will happen that one day we'll have a perfect international regulation. I'm now saying, not saying voluntary initiative, but regulation how methane has to be dealt with in whatever, a couple of dozen producing countries and couple of dozen or more importing countries. I think that's utopia to believe that that's going to happen. But the industry is going to be much more efficient if there is a yardstick through which they can compare themselves.

So that if you can compare the export from the U.S., the same yardstick as the export from Qatar or from Australia, and that if a European buyer wants to look at the emissions, they can do it with a similar system as what the Japanese ones can do or what a U.S. utility can do because that will allow much faster transactions, much more efficiency transferring of information. And so what we are looking to do is we've created this system and happy to adopt it to the specifics for specific regulators if they want to use it as a tool. That is all it will be ultimately from a regulatory perspective, but there are going to be loads of areas where the regulator won't have that influence on a global scale. So whether we talk about some of the NOC areas or maybe smaller producers or smaller buyers, and I think that's why you need that system that can provide that information across all those different combinations.

Ben Cahill: Georges, I think that issue you just mentioned is really significant. It's about supply chain emissions. So upstream rules and regulations are really important. We saw that the U.S. Environmental Protection Agency last December passed new rules on upstream and midstream segment in the United States, but the EU methane legislation and this MMRV framework, the U.S. and other countries are working on is really about emissions across the entire supply chain from production through delivery. So how does MiQ fit in that picture?

Georges Tijbosch: Yeah, no, I totally agree. It's all about supply chain. If we want to connect the information between the operator and ultimately the buyer, it is about complex supply chains. Now I hear there's a lot from people that supply chains are complex, and I actually don't think supply chains are complex if you want to pass the emissions data across them, the key is you need to start at the right level of granularity to build the system. You need to start at the level of assets or sometimes called facility. So the information for the emissions need to be available at either a production facility or a processing facility or an LNG liquification facility, not at a country or a company or even a basin level. That information is just not precise enough to build a supply chain. And it's not that complicated just to visualize that if the gas travels through a supply chain and there's hundreds or even thousands of permutations of our supply chain can be built, but as long as at each node, let's call it each assets, you have the relevant emissions data available that you just add up all the emissions, and then there's a concept, we'll get to that, and then you need to avoid double counting here, which you do through digital registries, but the design of MiQ or certified gas in general term is all built for that so that you can pass that information across a supply chain.

And so that's why the certifications need to take place at asset level. They need to be audited and they need to be on a registry so that the certificates, i.e., the digital representation of the emissions can be passed through. I think that's a really important point. Can you explain as simply as you can how registries and certificates work and how it's passed from one actor to another and then retired or removed from the system to avoid that double counting? Yeah, no, it's a good point because the double counting is, and this is again based on experience of many other markets such as, again, renewable electricity or even in carbon offsets, people have been looking into this is what you don't want is double claims and double claims. It could be, oh, there's a very good producer somewhere in the US and I'm just going to claim that I bought from them.

Everybody can claim now unless you have a concept called a digital registry with certificates and that those certificates have been issued to the really low methane or certified producer, I'm just going to use, I dunno, a BP one of their assets in the U.S. or actually all of their assets. We certified by, let's say one of their assets has been certified and a buyer wants to buy from those assets. They then have to speak to a BP or via intermediate marketers to receive those certificates which represent the emissions of that produced gas moment. Somebody gets those certificates. And the way certificates are issued is we do this on a monthly basis, so there's monthly checks on all the data and the emissions data that we get from those producers, monthly, quarterly, yearly checks. And so the process is actually quite operationalized and that on a monthly basis, all our certified facilities get issued into the digital registry basically once a certificate per M and BTU, they have produced in that specific month.

And the certificate will say that, so we're now in the month of March, Chesapeake for arguments, another facility that has been certified will receive X certificates for their production of March, and the certificate will say in March, Chesapeake in the specific facility, and it will show the grade that information digitally can now be passed to the utility or the LNG buyer. The LNG buyer, the utility wants to say, Hey, I have bought that. That's what you alluded to it called retired. That certificate then gets canceled, it's now theirs. They have approached that, so it can't be used again anymore. And so that's how it would work across the supply chain. The certificates kind of amalgamate the numbers because we show numbers on there as well. So typically for top of my mind, a certificates is around nine grams of methane perm and B two, that number is shown on there and it's 17 or 18 gram I think for a B certificate and so on.

So if you have a thousand certificates, it's not complicated to calculate how much methane emissions there were. And again, that helps the buyers to calculate their scope three. So everything is tracked digitally, everything is checked on a monthly basis and the information is passed so that no double counting can happen. And I believe that's what a lot of these frameworks are going to need because if you want to set import standards and you want to say, oh, it can't be more than, for example, we spoke about the 0.2%, that's our C grade. I think it's 34 grams from MB two. Well, you need to check that effectively they have bought that gas, but that can't be a report of a company or a country. It needs to be at the asset level with the certificates being transmitted across.

Ben Cahill: Yes. Got it. Thank you for that explanation. So what you're describing is a pretty sophisticated market, and I want to bring this back to perceptions of certified gas. There are a lot of people who are concerned about the emissions footprint of natural gas and who are highly skeptical of certified gas or responsibly produced gas. In February, Senator Markey of Massachusetts and six other senators asked the Federal Trade Commission the FTC to investigate false or misleading claims by the certified gas industry, and they basically said this amounts to greenwashing. So, there is some scrutiny of the certified gas space. How do you respond to that?

Georges Tijbosch: Yeah, so when I started this, I didn't expect there wasn't going to be scrutiny. And I think great, there is actually scrutiny around this. And again, that's how we have designed MiQ the way we did. So we actually welcome that scrutiny in the sense that this needs to be of high quality data and principles. That's how MiQ has been set up. That's why we call it also certified gas and not the other terms that we spoke about earlier. We don't think that's necessarily certification in the proper sense. And we think that as MiQ, what we do, again with the principles of having third party auditors independent technology, what we've created is a system that does fact finding, and it's a system that does fact finding at the different facilities of the methane emissions. At the moment, I believe it's amongst the highest quality data available on methane emissions on those specific facilities.

So I would argue that when the letter was written by Markey and the other Senators where ultimately they're asking for investigation, potential regulation, we're totally ready for that as MiQ. And in a way we welcome it because we have seen what we believe lesser credible initiatives around. I don't think that is what we should be doing. There is no time to waste to address methane and GHG in general. And the only way this is going to work, again, from my earlier point is if this is credibly done so that everybody can rally behind it and gets on with basically either buying lower methane gas, which will then drive more operators to lower their methane because that's what we're looking for. We are looking for this driving force of the markets.

Ben Cahill: So it's all about urgency. There were a lot of commitments around methane reductions made at the last conference, and actually in the last three conferences, we already mentioned the oil and gas decarbonization charter, some of the corporate commitments to cut methane. We have new rules and regulations emerging. Obviously the market for certified gas is growing. All these promises are nice, but it's all designed to meet our 2030 reduction goals, which are pretty significant. And 2030 is around the corner. So maybe you could just to round things out, talk about what signs of progress you're looking for, how we will know if we're making real steps to cut methane emissions by 2030 and meet those goals.

Georges Tijbosch: That's a very good question. And I'm also, sometimes I see all these promises and pledges around us, and they're not contracts, are they now or they're not concrete regulations? Some of them, and we spoke earlier around the EU, for example, with potential import fees in 2030. It's kind of interesting, it's 2030, whilst most of the goals that we're talking about are 2030. So it's like, okay, is that too late? Actually some of those goals, but I believe that's where the voluntary action, what we are seeing is actually already starting. So I think what we need to see is more buyers to join this fast, what we need to see, and actually starting to buy and push that demand for lower methane gas, which they can now do more operators starting to lower their methane emissions, or there's other systems out there as well, such as, for example, OGMP to kind of be transparent around their methane emissions.

Then I'm actually a believer that we will still get there by 2030. We were probably the first one who said, no, we can do this by 2030. Contrary to the classical COP goals of 2050, honestly, we were like, I'm Dutch by then. My country is probably underwater in some form of, well, we're good engineers, so we'll build the dikes a bit higher and hopefully, but 2050 so far away, I'm not a big fan of those type of targets because by then the average CEO in a company has changed seven times over. The average prime minister or president has changed 10 times over. It's too far out whilst 2030 is a real target. And that's kind of what we set ourselves in 2021. We've started to communicate about it and everybody's starting to pick that up. And I think it's galvanizing that I now see when we speak to the operators and also the buyers, that's a reasonable timeline within a manager's let's say, or decision makers or a regulator's job. And so this is a real goal and people are starting to calculate back from there, and I think that's the power that we've seen over the last couple of years for me, so I stay with my same goal in 2030. We're done. I need to retire again, by the way, by then. So, I think we can do this by 2030. There is enough momentum going, and whether it's voluntary or regulatory or NGO side or operator side, I think that momentum is going now. I'm very hopeful there.

Ben Cahill: I share your optimism and I like the way you summarized things. I think that's a great way to round things out. So Georges, thank you so much for joining us today to talk about MiQ.

Georges Tijbosch: Pleasure. It's been my pleasure. Thank you.

Lisa Hyland: Thanks to George and Ben for joining us this week. If you would like to know more, there is a link in our show notes to the work that MiQ is doing.

You can find more episodes of Energy 360 wherever you listen to podcasts, find us at CSIS.org and follow us on social media for the latest updates from our team. Thanks for listening.

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