Conference Agenda

Methane mitigation is increasingly recognized as a critical lever for achieving near-term climate goals. In August 2024, the European Union adopted the Methane Regulation (EUMR), the first comprehensive framework addressing methane emissions from both domestic fossil fuel operations and imports. A cornerstone of the regulation is the introduction of a methane intensity standard for fossil fuels (crude oil, natural gas and coal) which take effect on August 5, 2030, but only for contracts concluded or renewed after that date.

This paper examines the implications of implementing the EU methane intensity standard for natural gas using a partial equilibrium economic model. Our analysis finds that the intensity standard would reduce upstream methane emissions embedded in EU gas production and imports by approximately 40%. This corresponds to a 1.4% reduction in global methane emissions from natural gas production when accounting for trade diversion and associated emission leakage of approximately 10%. At the same time, the intensity standard would have negligible effects on EU gas prices and gas import volumes. Eliminating the exemption for pre-existing long-term supply contracts could nearly double this impact.

These results underscore the potential of methane intensity standards as a cost-effective policy instrument for global methane mitigation, offering significant climate benefits without imposing substantial economic trade-offs.

When farmers in cooperatives make joint investments in new technologies, they are exposed to both strategic uncertainty (i.e. behavior of other farmers) and market-price risk (i.e. stability of remunerative conditions). To better disentangle their impact on farmer coordination, we model the interaction between strategic uncertainty and market-price risk in an adapted stag hunt game, where cooperation exposes individuals to payoff variability but remains beneficial in expected value terms. Our 2x2 experimental design varies across treatments: low vs. high price volatility, and social vs. individual conditions. The design was motivated by cooperative biomethane investment but presented as an abstract game. Our sample includes Costa Rican coffee farmers (n = 222), a relevant group because biomethane development in the coffee sector depends on collective participation. We find that cooperation declines significantly when high price risk is combined with strategic uncertainty. In contrast, price risk alone does not significantly affect individual decisions, and strategic uncertainty under low price risk does not reduce cooperation. This suggests that farmers are able to tolerate payoff variability when decisions are individual, and they appear able to coordinate with others when returns are relatively stable. The findings suggest that price stabilization may be particularly relevant for collective investment projects, where participation depends on both expected returns and confidence that others will also participate.

The 2022/2023 inflationary episode highlighted the importance of natural gas shocks as a driver of inflation. Some countries, notably the UK, experienced even more severe bouts of inflation, due to their heavy reliance on natural gas, and the pivotal role of natural gas in setting electricity prices. The latter is driven by the use of the 'merit order' electricity pricing system, where gas is typically the marginal generator, setting prices. We embed a stylized merit order electricity pricing system into a canonical New Keynesian framework to show the amplification of gas shocks and how monetary policy responses need to be more contractionary under this electricity pricing system. The substantial rise in renewables production has increased the disconnect between the price setting power of gas, relative to its smaller role in producing electricity. We show that during the transition to a greener electricity system, the merit order could substantially amplify renewable intermittency and increase the impact of electricity price shocks. However, in the long term, a green electricity system should deliver greater price stability.