Plugging leaks of methane—carbon dioxide’s lesser-known but more immediately destructive cousin—could be one of the most practical, cost-effective steps companies can take to shrink their climate footprint.
Cutting methane emissions from the US oil and gas sector by about half could cost as little as $6 per ton of carbon dioxide equivalent, according to an analysis of cost models conducted by Harvard Business School Professor Forest Reinhardt and Harvard Kennedy School Professors Robert Stavins and Joseph Aldy. This approach would be substantially less costly than many other options for reducing carbon dioxide emissions.
Methane, responsible for roughly 30% of global warming since the Industrial Revolution, escapes from cracks in aging pipes and during energy production. Governments and companies can capture the most abatement benefits for a fraction of the cost by targeting the cheapest opportunities first.
With global temperatures reaching record highs in the past two years, the analysis points to opportunities for companies to reduce emissions and address climate change. Even as the US is scaling back some incentives to reduce methane emissions, the European Union and global energy alliances are moving ahead with methane-reduction targets—and many companies remain eager to act as well, Reinhardt says.
“The price of natural gas is low at the moment, and the regulatory incentives don't seem to be a prospect in the United States for the next three years, but that doesn't mean that sensible firms are going to quit thinking about ways to reduce their methane emissions,” says Reinhardt, the John D. Black Professor of Business Administration at HBS, noting that detection costs are declining.
Reinhardt, Stavins, and Aldy examined real-world conditions, publicly available methane emissions, leak data, economic research, and emissions-related regulations.
Their findings, detailed in “Methane Abatement Costs in the Oil and Gas Industry: Survey and Synthesis,” were published online in February by the Economics of Energy & Environmental Policy Journal. Their project is a collaboration with the Salata Institute for Climate and Sustainability at Harvard.
How a potent pollutant escapes
Energy companies lose gas through leaks in pipelines, wellheads, and venting during extraction processes. Firms balance the cost of finding these leaks and investing in repairs, upgrades, and infrastructure against the price of natural gas because they can sell captured methane in that market.
“A big part of the cost of reducing leaks can be searching for and locating those leaks,” says Stavins, the A.J. Meyer Professor of Energy and Economic Development at HKS and director of the Harvard Initiative on Reducing Global Methane Emissions. “One of the realities is that repairing those leaks typically means keeping more of a merchantable product in the pipeline, namely, natural gas. And so there are benefits.”
Methane doesn’t last as long in the atmosphere as carbon dioxide, but it’s estimated to be 84 times more potent in warming the planet over a 20-year period. About 10 years ago, one of the largest methane leaks released more than 100,000 metric tons near a natural gas storage facility in California.
Under the Biden administration in 2024, the US Environmental Protection Agency finalized rules regulating methane emissions from oil and gas firms, including instituting a fee to penalize companies for leaks. But in March 2025, under the Trump administration, Congress prohibited the EPA from collecting the fee until 2034.
The cost of reducing emissions
The research team examined several methods of estimating abatement costs from academic literature and studies from non-governmental organizations, industry experts, and governments. They also surveyed publicly available comments on the EPA’s methane rule and fee proposals. Their analysis mined:
International Energy Agency (IEA) and EPA abatement cost models and opportunities. For example, an engineering cost analysis of the Canadian oil and gas industry found that reducing emissions by up to 80% could cost about $12 per ton, with the most expensive options costing over $40 per ton.
Scholarly abatement cost estimates tied to natural gas prices and regulations. One analysis exploits variation in natural gas prices to infer abatement costs, with a 60% reduction in emissions costing about $6 per ton.
The research also finds significant differences in abatement expenses between companies located near pipelines or those using newer infrastructure, compared to firms that operate more remotely or use older facilities.
“So if, in some future regulatory regime, you require everybody to reduce emissions by 60% because you think that's fair,” Reinhardt notes, “the costs are going to be distributed extremely unequally, and you're going to end up paying a lot more for emissions reduction than you need to.”
Fewer leaks, more revenue
The analysis indicates that imposing a methane fee is more cost-effective than creating complex regulations. That’s because a price signal allows operators to find the least expensive fixes first, whereas regulations force expensive actions on everyone, the researchers say.
For example, a 60% cut in emissions via a methane fee might cost the industry $60 million annually. But that amount is a fraction of the $1.5 billion estimated by the EPA under the 2024 rules, which aim to achieve an 80% reduction, the research suggests.
Plugging leaks could generate revenue to pay for some or all of the abatement costs, the authors note, though they caution that if it was easy to cover expenses, companies would already be doing it. Still, it doesn’t make financial sense for companies to avoid abatement completely.
“It's a misconception that Trump administration rollbacks have led [emissions] reduction to zero because it would be really short-sighted [for firms] to behave in that way,” says Reinhardt.
The next frontier for detecting leaks
Because satellite and newer remote-sensing technologies are becoming more precise, the authors say costs to detect leaks may come down.
They point to the MethaneSat satellite launched in 2024 and the Tropospheric Monitoring Instrument (TROPOMI) launched in 2017 as two sources of data on emissions.
“In the US, we may be underestimating the data when it comes to emissions. It's a big change, and one reason why we know that is because of the remote sensing data that can be used as a substitute,” says Aldy, the Teresa and John Heinz Professor of the Practice of Environmental Policy at HKS.
The authors say that in the next phase of their research, they will examine the satellite data more closely to see if they can identify additional ways to bring costs down.
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