An abundance of insight on methane mitigation

Hi there,

We’re Overview Capital and we invest in the mitigation of methane and other super pollutants at the earliest stages. Welcome to the twelfth edition of our newsletter, The Overview: Our biweekly dispatch on the world of methane and other super pollutants.

Today’s newsletter will recap the event we hosted at New York’s Climate Week with Azolla Ventures in partnership with Spark Climate Solutions, the Environmental Defense Fund, and Goodwin.

On Tuesday last week, our team at Overview Capital convened a diverse audience of stakeholders across the methane landscape for an intensive on methane reduction needs and opportunities as they stand today in 2024. With panels, company presentations, and individual presentations covering all the sources of methane emissions—whether anthropogenic (human-caused) or naturally occurring—the event offered a wealth of insight and calls to action. Here are the highlights.

The top line

The event opened with Ilissa Ocko, Senior Advisor to the U.S. Special Presidential Envoy for Climate outlining the “The State of Methane Mitigation,” which she framed as equal parts challenges and opportunities. She outlined how monitoring and reducing methane and other super pollutant emissions is “Possible, Practical, Powerful.” On the ‘powerful’ front, Ilissa spoke about just how impactful methane mitigation could be to slow global warming with a chart adapted from her paper from 2021, “Acting rapidly to deploy readily available methane mitigation measures by sector can immediately slow global warming.”

In a subsequent panel with Ilissa that included Ben Ratner from J.P. Morgan focusing on “Strategies for Methane Reduction,” Ilissa identified how collaboration coupled with the concentrated nature of other super pollutant emissions sources spell opportunity: 

She then zoomed out again to crystallize that this concentration, or the approach, isn’t consistent across different greenhouse gasses or the sectors from which they stem. Ultimately, as Ilissa noted, mitigation approaches need to be tailored depending on geography, source, and more:

For his part, on the panel, Ben spoke to evolving opportunities introduced by advances in technology, like the recent surge in methane-tracking satellites that now orbit Earth:

What Ben reinforced here is a point akin to Ilissa’s on national cooperation but focused on the private sector. Startups and not-for-profit-funded sources of new methane monitoring data are advancing. Banks and other investors are coming to the table, too. Ensuring the two sides of the table are regularly convening and actually working together beyond conversation is a key next step for methane mitigation. While that’ll always be an open, evolving question, we welcome all ideas!

Enteric fermentation and agriculture

One of the later sessions during the day included several Overview portfolio companies and five total businesses working to reduce methane emissions across agriculture, whether from livestock or rice farming. Xavi Laguarta, CEO of Mitti Labs, discussed how to help farmers in India tackle operational challenges, whether in agronomy or using new data, like satellite imagery, to reduce methane emissions from rice farming while boosting yields and making money. Colin South, the CEO of ArkeaBio, had a strong opening quote that emphasized why he's bullish on the opportunity to create a vaccine to reduce methane emissions from livestock, which is what ArkeaBio exists to do:

As of two months ago, ArkeaBio posted its first promising results indicating a vaccine can indeed work to reduce methane emissions in cattle. Also on the panel, Alex Brown, CEO of Alga Biosciences, homed in on their research, development, and commercialization of their feed additive designed to reduce methane emissions from livestock while driving feed efficiency conversions that will provide farmers with an economic incentive to reduce emissions. Other participants included Steve Sibulkin, the CEO of BioLumic, and Dr. Yaniv Altshuler, the CEO of Metha.ai.

All participants underscored the need for solutions that don't introduce additional costs to farmers, whether that cost is financial or complexity in operations and added steps. Adding steps or extra costs to farmers' operations or processes was basically a non-starter in most panelists' opinion; farms are already businesses that run on thin margins and can't risk yield.

The panelists also discussed whether voluntary carbon markets can support the adoption of methane reduction technologies. While all panelists hoped the answer would be "Yes," they also emphasized that solutions need time in-market to prove themselves. For instance, for enteric fermentation solutions, trials at the level of 100,000 cows might be required, given that there can be a lot of noise in statistics, such as productivity gains from cow to cow and farm to farm. For entrepreneurs, carbon markets are relatively uncertain right now but will ideally provide another way to make money in the future as solutions commercialize and scale. As Alex noted and Xavi reinforced:

Finally, when asked "What's needed," whether for their business or mitigation on the whole, the panelists answered as follows:

• Xavi: More open source data for rice farming and methane emissions from it.

• Yaniv: Measurement, reporting, and verification. 

• Alex: Same as Yaniv; even for insetting, no one wants to spend too much on MRV.

• Colin: We need real value propositions for farmers and a real way to value emissions reductions.

• Steve: Anything that can help a farmer derisk a choice or their operations. You don't get many chances with them.

Outside the panel, Charles Brooke, the Program Lead for Livestock Enteric Methane Mitigation at Spark Climate Solutions, gave an insightful 'lightning round' discussion of challenges in enteric fermentation mitigation. Ever practical, Charles inserted a touch of levity and honesty in noting that discussing what's needed to advance methane mitigation in enteric fermentation can start to feel repetitive when you attend conference after conference and hear the same refrain, year after year. He likened it to the Latin phrase "Surdo oppedere," which means to belch before the deaf, a play on the methane belching cows that he spends much of his time thinking about.

Charles also pointed out other challenges that will make the deployment of new solutions harder, such as the fact that most of the world’s beef supply chain operates in cow-calf and pasture based systems, in which cows are not handled by humans regularly. For instance, there are some 75 million dairy farmers in India, most of whom have less than ten cows, even though together, they produce more milk than the entire European Union. . Hence, whether via vaccines, other slow-release technologies, like boluses, or entirely novel approaches, solutions designed to reduce methane emissions from livestock need to do more than work on a day-to-day, cow-to-cow basis. They need to offer flexibility in administration and will require creative deployment and commercialization strategies in developing countries. 

Oil and gas

According to BloombergNEF, around 80% of the oil and gas industry's methane emissions stem from upstream operations, meaning when operators work to identify, extract, or otherwise produce oil and natural gas (which is mostly methane). To understand why, it's worth noting that methane is often found alongside oil in geological deposits. This methane is frequently negligible compared to oil content, so producers focus on oil instead of gas. Even when the methane content is significant, monetizing both oil and gas simultaneously would require developing different sets of infrastructure. Hence, oil producers often vent or 'flare' (burn) methane gas instead of extracting it when they’re focused on oil production.

During the event, Oleg Mikhailov, the CEO of Overview portfolio company Xplorobot, reinforced this point and discussed how these facts complicate the adoption of methane reduction and monitoring solutions in oil and gas. The refrain that methane emissions in oil and gas represent a wasted economic opportunity is common, as methane is a product oil and gas companies can sell. Still, Oleg noted that operators are often disincentivized to focus on this economic opportunity because, for one, natural gas is relatively cheap in the U.S. right now, and it's often dissolved in oil, making separation and extraction challenging. Absent sufficient economic incentives, regulations, like the EPA's new Waste Emissions Charge, become even more critical to spur methane mitigation. 

New technologies, like Xplorobot's first-in-class methane monitoring technology for oil and gas, will help significantly. Currently approved OGI infrared cameras are expensive (think $142 per hour) and complicated for technicians to use; there's a 20+ page document outlining specific requirements for training and certification needed for someone to use them. Xplorobot's technology will be cheaper and easier to use and recently passed a determination of completeness post-evaluation by the EPA.

Oleg also spoke on a panel regarding oil and gas as well as coal mine methane emissions, moderated by Jon Goldstein of the EDF and including Thomas Fox, the president of Highwood Emissions Management, an Overview Capital portfolio company, Riley Duren, CEO of Carbon Mapper, Tim Brown, CEO of Tradewater, Desiree Plata, co-founder of Moxair and Associate Professor of Civil and Environmental Engineering at MIT.

Coal is not an area we've written about as much to date. Still, it's a significant contributor to methane emissions, as it's geogenic—methane often exists alongside coal underground and is released from mines whether they're active or not. As long as coal is consumed globally (and coal consumption remains at all-time highs, primarily driven by demand from countries like China and India), methane emissions from mines will persist absent the implementation of new solutions.

Coal mine methane is also as-of-yet an unregulated space, as Desire noted. Desiree continued to explain that absent regulations, coal abatement is…

Unlike oil and gas in the U.S., coal offers a perfect example of an area where incentives like carbon markets will be essential for solution deployment, even if those markets are not as supportive and catalytic today as we will need them to be. There are great opportunities to help build more supportive carbon markets, such as the offerings Overview portfolio company, Oka, is building to add assurance, insurance, and create value and stability in carbon markets.

Naturally occuring sources

One significant difference between carbon dioxide and methane (among many others) is that there are substantial naturally occurring sources of methane that rival human-caused emissions. Unfortunately, the warming that human-caused methane emissions drive risk accelerating methane emissions from naturally occurring sources, creating a destructive feedback loop.

David Mann, co-founder of Spark Climate Solutions discussed this idea, in his talk, distinguishing that it’s worth considering naturally occurring emissions that human-caused ones exacerbate as as a third category of emissions named “indirect anthropogenic emissions.” While rising indirect anthropogenic emissions represent a new, additional challenge, it’s also a great way to introduce a huge innovation opportunity, namely methane removal. 

As discussed in our most recent newsletter, published in collaboration with Spark Climate Solutions:

Further, the below graphic from Spark Climate Solutions, which David discussed, does an excellent job of visualizing the differences between carbon removal and methane removal and why methane removal could become a significant mitigation opportunity that deserves more attention.

Of additional note is that this week, the National Academies of Sciences, Engineering, and Medicine and several other organizations published a consensus study report on “A Research Agenda Toward Atmospheric Methane Removal.”

Drivers: capital and policy

Outside of solution and sectoral emissions-focused conversation, the Methane Reduction Intensive also convened experts to discuss drivers needed to accelerate innovation in and deployment of methane mitigation solutions. One such panel focused on the intersection of capital and methane. The panelists unified different perspectives on investing in methane to accelerate mitigation and promote long-term scale, ranging from the non-profit side, represented by Erika Reinhardt, co-founder and Board Director at Spark Climate, and Kelly Levin, the Chief of Science, Data and Systems Change at the Bezos Earth Fund, to the for-profit side with Johanna Wolfson, the co-founder and General Partner at Azolla Ventures.

As Erika discussed, scaling any set of solutions to complex challenges always requires a patchwork of financing options and markets. Venture capital is essential, but it’s by no means the only slice of the capital stack needed to advance different solutions and approaches in methane mitigation. Philanthropic capital, for instance, can be significant for early-stage R&D in areas like atmospheric methane removal, where there may not yet be sufficient scientific evidence of efficacy, let alone a market. 

A perfect example is the Bezos Earth Fund’s philanthropic support of MethaneSAT. Kelly noted that the Bezos Earth Fund is now working with the Global Methane Hub to evaluate solutions in enteric methane and is also looking at early-stage methane removal. 

Similarly, there are other market-making options, such as regulations like the EPA’s Waste Emissions Charge, that can stimulate economic activity and that capital actors can actively advocate for. As Johanna noted, venture capitalists bet on whether there will be markets and mechanisms in the future that can support businesses. Venture capitalists need proof points to make those decisions. For oil and gas-focused-methane investments, regulations like the Waste Emissions Charge can act as that proofpoint. Additionally, on the venture side, Johanna spoke to the fact that Azolla Ventures hasn’t made a methane investment yet but did note, “We’re very close to doing so.” She then extended that observation to draw parallels to much of the climate venture ecosystem, highlighting that the same is true for the majority of early-stage venture investors who also have not invested in methane but should be considering doing so. 

Building off Johanna’s observation of the untapped opportunities in investing in methane, all panelists closed the conversation by highlighting the size of the opportunity in this space:

Erika: “There are still missed and underpriced opportunities here. This area is not yet abuzz with so much capital, whether on the non-profit side of things or, hopefully, also on the for-profit side. “There’s so much mitigation potential here, particularly when you think about temperatures. There’s a really large gap for philanthropists to make a difference in discovering new solutions, advancing policies, and helping to create markets in a variety of ways.”

Kelly: “There is starting to be some real government commitment that is starting to show where this is going. We’re in a very different space than we were a few years ago; today, more than 50% of methane emissions globally are covered by collective and voluntary pledges.” 

Johanna: “On the investment side, the time is definitely now. It’s very clear to me this is an area of growing interest and market attention. Early-stage investors do well when they’re before the market. Methane is a totally asymmetric impact opportunity–between the outsized near-term global warming impact and the under-funding of this area, in net, what needs to be funded, our analysis shows we need 1:1 focus on methane as on CO2.”

P.S., EQT Foundation opened a call for proposals for methane mitigation via its ‘Breakthrough Science’ grants program, which awards €25K–€100K to scientists to accelerate their work.

On the policy front, Zerin Osho, the Director of the Institute for Governance & Sustainable Development (IGSD)’s India Program, Jon Goldstein, who leads the EDF’s efforts to improve regulation of the oil and gas industry, and Pamela M. Franklin, the Chief of the EPA’s Methane Partnership branch, covered the diverse range of policies accelerating methane monitoring and mitigation globally. In particular, they highlighted the diversity of regulations percolating pertaining to methane monitoring and mitigation across markets. 

While new policies that we’ve covered, whether the EPA’s Waste Emissions Charge or European taxes on methane emissions from livestock, help advance methane mitigation efforts in specific sectors and countries, other sectors across other geographies don’t necessarily have similar policies. While policies tested and instituted in one geography can often spread to others, policies aren’t one-size-fits-all. Zerin, in particular, focused on how approaches can’t be one size fits all. For rice farming in India, for instance, policies designed to regulate methane emissions from oil and gas in the U.S. may well not work as well. On the whole, however, the landscape of regulations has matured considerably in a short amount of time, supplementing the financial capital landscape as an incentive and “proof point” for investors and entrepreneurs.

The bottom line

There was a lot more stellar content and conversation than we could cover in this newsletter. Hopefully, however, this newsletter helps illuminate how much work is being done (and still needs to be done) in the methane universe and underscores the abundance of opportunities, both from a climate impact and economic return perspective. Further, while approaches to methane mitigation will vary by emission sources and application, there’s plenty of overlap in needs, ranging from more capital and resource allocation to better MRV, validation and commercialization of new products based on time in-market, and incentives ranging from regulations to carbon markets. 

We hope to see you at future events of ours, whether you made this one or not.

Thanks for reading the twelfth edition of The Overview. If you are a methane or super pollutant focused company or want to connect on our investment work, please reach out to [email protected]. We appreciate you taking the time to read and engage.

– Team Overview