Why Methane, Why Now

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 sixth edition of our newsletter, The Overview: our biweekly dispatch on the world of methane and other super pollutants.

The topline

Overview Capital exists because the world of technologies, techniques, and solutions to reduce methane emissions is dramatically undervalued and underappreciated for its potential to reduce global warming quickly and yield economic opportunity. 

Despite having already caused 0.5°C of warming  – roughly ⅓ of anthropogenic greenhouse gas warming – methane receives only ~1% of all climate finance ($13.7B of an estimated $1.3T total). That said, these numbers are an 18% increase compared to 2020, when the level of financing for methane-focused solutions was only $11.6B. Still, if slowing the rate at which the world warms is a collective societal goal and responsibility, as many of us would likely agree and many leaders around the world often suggest, then an even more dramatic resource allocation to methane will be necessary. A minimum of $48B in investment in methane abatement finance is needed annually by 2030, a 3.5x increase over current levels. 

All that said, historical (and current) underallocation of capital to methane mitigation isn’t a predictor of the future. While we’re doing our part to move more money into methane, we’re not the only ones coming around to the opportunity. Raising later-stage deals (beyond Series A) remains a challenge for all climate tech companies, but there has been notable success for companies focused on methane. For instance:

• Last week, M2X Energy raised a $40M Series B. The company develops modular technology that allows oil and gas producers to divert natural gas that would otherwise be flared or vented (producing methane emissions) for methanol production. Overview portfolio company, Emvolon, converts methane to methanol and ammonia directly. 

• Earlier this year, LongPath Technologies raised $189M in conditional loan funding from the DOE’s Loan Program Office to scale its methane monitoring technologies in the Permian.

• GHGSat raised $44M in Series C1 funding last year for its satellite-based remote sensing technology, which is designed for monitoring methane emissions.

• Windfall Bio raised $28M in Series A funding earlier this year for its cross-industry methane-to-value solutions, which leverage methanotrophic organisms (ones that ‘eat’ methane) to transform methane. 

• CH4 Global raised $29M in Series B funding last year for its feed additive designed to reduce methane emissions from livestock. Overview portfolio companies, Alga Biosciences and ArkeaBio, are tackling this same problem.

• In 2022, Crusoe Energy raised a $350M Series C to take stranded gas (similar to M2X Energy) and use it for power generation. 

Zooming out, of the $13.7B invested in methane annually, here’s where it has historically flowed:

Policy tailwinds

Policy is accelerating how investors, entrepreneurs, and policymakers think about methane across many sectors.

Oil & Gas

• In our last newsletter, we covered the EPA's Waste Emissions Charge, which is one of the world's first, and certainly more prominent, punitive measures designed to 'price' greenhouse gas emissions, specifically methane. This opens up a significant opportunity for technologies that identify and mitigate leaks early, such as Overview portfolio companies, Highwood Emissions Management and Xplorobot.

• Last week, the EPA and the DOE made $850 million in grants available to clean up methane in the oil and gas sector. 

Agriculture

• Last week, Denmark became one of the first countries to institute a comparable 'tax' to Waste Emissions Charge on greenhouse gas emissions from its agricultural sector as a whole. Starting in 2030, Danish farmers will be taxed roughly $43 per ton of CO2-equivalent gas (including methane) they emit. In 2035, that tax will more than double. 

• New Zealand is the other jurisdiction, besides California, that has prioritized reducing methane emissions. As part of its Zero Carbon Act, which became law in 2019, New Zealand set both a short-term target to reduce methane emissions from livestock and organic waste by 10% from 2017 levels by 2030, as well as a long-term target to do the same by 24-47% compared to 2017 levels by 2050 supported by a tax. They have since backtracked on the tax in favor of practical tools and technologies for farmers to reduce their emissions fearing that a tax risks demand for domestic production and exports and that buyers would seek product elsewhere from nations without a tax. Similar feedback has been received on the Denmark tax.

  To meet the targets they’ve set, jurisdictions ranging from California to New Zealand and Denmark will require solutions like those that Overview portfolio companies, Alga Biosciences and ArkeaBio, are bringing to market.

• The U.S. is also home to ambitious policies designed to reduce methane emissions from livestock. Specifically, at the state level, California, often a pioneer in climate policy, whether with respect to setting targets on electric vehicle sales or methane mitigation, passed a bill, Senate Bill 1383 ("SB 1383"), in 2016 that stipulates California must reduce methane emissions across all its sectors 40% from 2013 levels by 2030.

• California is no stranger to methane emissions. While most people familiar with agriculture know California as the source of a significant share of the nation's fruit and nuts, California is also the nation's largest producer of milk. Whether due to the cows themselves or the lagoons of cow manure dairy farms often produce, California's dairy industry, and beef industry, is accountable for a lot of methane. So far, California has been assiduous at investing in and deploying technologies like anaerobic digesters, which take organic waste, from cow manure or other sources, and turn it into energy while mitigating methane emissions. For enteric methane emissions, California passed another bill, SB 485, designed to create a program run by the California Air Resources Board to help livestock farmers adopt feed additives to reduce methane emissions once they’re proven effective.

Voluntary commitments

Alongside concrete policy, countless countries and companies have made voluntary commitments to tackle methane emissions. 

Notable national commitments include:

• The Global Methane Pledge, which some 150+ countries have signed, targets a 30% reduction in methane emissions by 2030 from 2020 levels by 2030. The countries that have collectively signed on to the pledge represent more than half of all anthropogenic methane emissions. 

• Argentina, a major beef producer, has established a “Nationally Determined Contribution,” which includes commitments to reduce methane emissions from agriculture through improved livestock management practices, feed additive adoption, and anaerobic digestion for manure management. 

• The E.U. has a “Methane Strategy” and independently reaffirmed the Global Methane Pledge’s target (to reduce methane emissions by 30% by 2030 compared to 2020 levels) as part of its European Green Deal objectives and focuses on the O&G sector.

• The U.K. has a “Methane Action Plan,” which includes goals such as capturing methane from slurry stores, reducing organic waste volumes, and reducing methane emissions from oil and gas flaring and pipeline leaks by 50% by 2030.

• Canada aims to reduce methane emissions from its landfills by 50% by 2030 from (2019 levels) and from its oil and gas sector by 75% by 2030 (from 2012 levels). 

• The U.S. Government, in addition to its status as a leader of the Global Methane Pledge, has been busy launching more specific initiatives recently, including a strategy announced in June to keep edible food out of landfills and reduce methane emissions by extending the shelf life of foods and creating more composting facilities.

Corporate commitments:

• Late last year, several major oil companies, including both the world’s largest privately owned oil company (Exxon) and the world’s largest state-owned oil company (Aramco), signed the Oil and Gas Decarbonization Charter (OGDC), signaling they aim to reduce methane emissions from their operations to near zero by 2030 and to end routine flaring. 

• Over 140 companies operating in more than 70 countries have joined the Oil and Gas Methane Partnership 2.0 to transition toward measuring and reporting emissions across their operations.

• The Dairy Methane Action Alliance, a partnership between the Environmental Defense Fund (EDF) and the Bel Group, Danone, General Mills, Kraft Heinz, Lactalis USA, and Nestlé has a goal to reduce and account for methane emissions in dairy supply chains.

• Significant suppliers of beef, like JBS, the world’s largest meat packer, and Tyson Foods, one of the “big four” beef processors in the U.S. that sell ~$20B in beef products annually, both have holistic greenhouse gas emissions reduction targets. JBS, for instance, aims to reach ‘net zero’ by 2040, whereas Tyson Foods aims to accomplish the same by 2050.

Many of these commitments target reductions by 2030, which is five and a half years away. A lot more investment and tech deployment will be required if these various stakeholders intend to make good on their commitments in a short amount of time, offering tailwinds for methane investment and startups, as well as acting as urgent catalysts for the fields we invest in.

The bottom line

The key takeaway from this newsletter is that while methane has been an underserved category historically, whether from a capital investment or climate impact perspective, the methane opportunity has never been bigger or more primed for success. Buoyed by rising recognition of how integral reducing methane emissions is both to ecology and economics, as well as by policy, corporate and country-level commitments, and considerable technical innovation, the methane moment is now. We’re excited to be the fund with a singular focus on supporting early-stage founders working on methane mitigation and near-term warming.

News and policy

• The EPA and DOE opened up $850M in funding for projects that promote methane mitigation and monitoring opportunities in the oil & gas sector.

• According to new EIA data, natural gas flaring and venting in the U.S. has dropped to new record lows, though it’s worth noting that this data set involves a lot of estimation. The proliferation of methane measurement technology will either validate or prove these types of claims wrong.

• An Australian proposal to allow open-pit coal mines to self-report methane emissions could be a step backward for methane monitoring and reporting globally.

• Denmark plans to introduce a new tax on farmers for their greenhouse gas emissions by 2030. Whether that will benefit the globe or just shift imports to places like Brazil, which has a high emissions footprint associated with its beef and dairy production, is a bigger question.

• McDonalds binned a plant-based burger it tested in two cities, citing weak demand. Demand reduction doesn’t appear to be a pathway to reducing methane emissions from the beef sector. It seems that the opportunity lies in anti-methane tools and technologies if we won’t be consuming any less beef.

Thanks for reading the sixth edition of The Overview. If you are a methane or super pollutant focused company or want to connect on methane or our investment work, please reach out to [email protected].

– Team Overview