The State of Methane in Q3 '24

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 tenth edition of our newsletter, The Overview: Our biweekly dispatch on the world of methane and other super pollutants. Today’s newsletter will catch you up on the most significant things happening in methane that also evidence considerable traction and maturation of the markets, companies, and technologies in which we invest.

The topline

For the tenth edition of this newsletter we’re taking a step back to give you an 'Overview' of the methane landscape in Q3, 2024. There's never been more excitement and movement around methane mitigation. In this newsletter, we'll highlight developments that showcase the latest progress and traction in the space as well as where focus and resource allocation to methane is needed. 

Technology

From methane emissions monitoring to emissions mitigation, the methane landscape has come a long way this year.

Measurement

Last month, SpaceX helped launch the Tanager-1 spacecraft on behalf of Planet Labs and the Carbon Mapper Coalition. Tanager-1 adds to a growing constellation of satellites from both the public and private sectors, like the EDF’s MethaneSAT, that are capable of monitoring methane and other greenhouse gas emissions to increase oversight and understanding of emissions sources. Tanager-1 is a hyperspectral satellite that can pinpoint methane sources to within 50 meters. Planet Labs and the Carbon Mapper Coalition plan to begin publishing data from the satellite later this year.

Technologies ranging from hyperspectral satellites, other satellite imagery, and other methane monitoring technologies allow analysts to pinpoint methane emissions from a myriad of sources, including landfills, that are often underreported and also emit other toxic environmental pollutants that harm residents and ecosystems. Methane leak rates in some U.S. oil and gas basins have been found to be as high as 8% via new satellite data. Updating previously understated emissions estimates with actual observations is critical to incent and regulate action across the universe of climate and energy work.

Mitigation

There are many new technologies and approaches to reducing methane emissions that are making significant progress.

Bovaer®, developed by DSM, was approved by the FDA for use at the beginning of this quarter. It is a methane-reducing feed additive designed for livestock and is now commercially available in major beef-producing countries from the U.S. to Brazil and more. It can reduce methane emissions from cattle by up to 30% with consistent application and under specific circumstances (mostly in feedlots). Bovaer® was the first methane-focused feed additive to receive FDA approval in the U.S.; other feed additives like Experior exist for applications like increasing nitrogen uptake in cattle. Overview portfolio companies Alga and Arkea Bio are working on feed additives and a vaccine, respectively, to accelerate livestock emissions reductions—Bovaer’s acceptance by the FDA sets a supportive precedent for a path to market for other solutions focused on enteric methane emissions.

Elsewhere in ag, Windfall Bio, a company developing technology based on “mems”—methanotrophic bacteria that “eat” methane and convert it to other compounds—to turn methane into valuable products like fertilizer, announced a pilot with Whole Foods’ dairy suppliers, offering a promising signal of tech commercialization and previewing a forthcoming boom in early stage methane focused solutions moving from lab to field.

Outside of agriculture, later-stage venture-backed companies like M2X Energy—which announced a $40 million Series B in June—Crusoe Energy, and Overview Capital portfolio company Emvolon are building innovative business models to reduce flaring in the oil and gas industry and to use the otherwise wasted methane for energy or to make versatile chemicals. Emvolon specifically uses otherwise wasted methane to produce methanol, a versatile chemical with an established global market. Methane is better used on Earth than lost to the atmosphere, where it’s a highly potent driver of near-term global warming.

Funding

Across the methane landscape, there has been a surge in public sector support for monitoring and mitigation. Last month, the DOE rolled out $775 million in funding to help plug old oil wells, which often continue to leak methane even when they’re no longer in operation.

Earlier this quarter, the EPA and the DOE also made $850 million in grant funding available for projects that promote other methane mitigation and monitoring opportunities in the oil & gas sector. Examples of work that this funding will accelerate include the adoption of monitoring technologies, like Overview Capital portfolio company Xplorobot’s, repair of methane leaks from oil and gas infrastructure and oil wells, and deployment of improved technologies that reduce methane emissions from equipment like natural gas compressors and gas-fueled engines.

Outside of national funding efforts, other stakeholders have been active in providing non-dilutive funding to solutions targeted at methane emissions. For instance, the Pirbright Institute and the Royal Veterinary College recently received a $9.4 million grant from the Bezos Earth Fund to work on a vaccine to reduce methane emissions from cattle. The Bezos Earth Fund was also previously instrumental in funding MethaneSAT, the EDF’s methane-tracking satellite. Similarly, the High Tide Foundation, Bloomberg Philanthropies, and the Grantham Foundation all participated in providing non-dilutive funding to launch Tanager-1, the methane monitoring satellite discussed at the beginning of this newsletter. 

Elsewhere in grant funding, Spark Climate recently announced the first reward recipients for its Atmospheric Methane funding opportunities. The carbon removal industry has come a long way over the past five years and has attracted a lot of capital and attention. Like so many other things “methane,” methane removal research and commercial work is at an earlier stage and deserves more attention and resource allocation. Spark Climate allocated a total of $1 million in research funding to four different research teams and companies that will research biological and chemical methane removal approaches and advance our collective understanding of the Earth’s methane cycle and how methane is broken down in the atmosphere.

Turning to the private sector, this quarter has also seen several significant deals in venture capital as well across mergers and acquisitions. As noted previously, M2X Energy announced a $40 million Series B in June to make low-carbon methanol via modular sites that can be co-located with oil and gas operations. Towards the end of last quarter, ArkeaBio, an Overview Capital portfolio company, announced a $26.5 million Series A to develop a vaccine to reduce methane emissions from cattle. M&A in the legacy oil and gas industry has also been up considerably in 2024, which portends ripple effects for companies focused on keeping methane on Earth and out of the atmosphere.

Policy

In the U.S., the progress of the EPA’s Waste Emissions Charge (“WEC”) program remains one of the most notable regulatory developments to watch, whether domestically or worldwide. First proposed as part of the 2022 Inflation Reduction Act, the EPA’s methane rule, instituted this year and updated in May, will charge oil and gas companies for excess methane emissions from operations. Fees start at $900 per metric ton in 2024, increasing to $1,500 per metric ton by 2026. Mind you, the rule is ‘at work’ as we speak; oil and gas companies that emit more than 25,000 tons of CO2-equivalent emissions from their operations will owe $900 for each additional ton of methane they emit in 2024 in 2025. This is a watershed moment and precedent that other jurisdictions may well learn from or copy directly in their policymaking.

As the EPA continues to develop and begin enforcement of its new methane emissions penalties for oil and gas, it is also currently updating its standards for what methane monitoring technologies can be used by oil and gas companies to comply with new rules. The EPA recently released a final set of performance standards and emission guidelines for oil and gas operations, providing “the opportunity to use advance monitoring technologies to meet certain requirements in the final rule.” Overview portfolio company Xplorobot applied for acceptance with these standards; decisions are expected by mid-September.

Other notable U.S. policies that continue to influence the market for methane solutions include two laws out of California, namely SB 1383 and SB 485:

• California, often a pioneer in climate policy, passed Senate Bill 1383 ("SB 1383") in 2016, which stipulates that California must reduce methane emissions across all its sectors by 40% from 2013 levels by 2030. 

• Similarly, California's SB 485, passed in 2023, requires the state to implement a "comprehensive short-lived climate pollutant strategy… to achieve a reduction in the statewide emissions of methane by 40%, hydrofluorocarbon gasses by 40%, and anthropogenic black carbon by 50% below 2013 levels by 2030."

Both of California's bills are ambitious and could eventually catalyze other policies domestically and globally. At the same time, it's unlikely California has made sufficient progress towards the desired emissions reductions stipulated in either bill; the state and all stakeholders impacted by the rules will need to invest a lot more human and financial capital and work with technology solution providers to meet their targets.

Also on our radar is a bipartisan U.S. bill making its way through the House that could accelerate efforts to mitigate methane emissions from agriculture. The Enteric Methane Innovation Tools for Lower Emissions and Sustainable Stock (EMIT LESS) Act was introduced in June by Republican representatives. It would be a significant boon to many of the companies and efforts discussed in this newsletter so far.

In Europe, this quarter saw landmark policy developments as well. Denmark instituted a rule penalizing methane emissions for its agriculture sector. The tax is estimated to cost around €100 (~$110) annually per cow but won’t take effect until 2030. Still, this law should drive demand for solutions designed to reduce methane emissions from cattle cost-effectively, without which Danish livestock farmers will struggle to stay in business once the tax goes into effect. 

The European Commission also approved a €700 million initiative from the Dutch government to compensate farmers who voluntarily shut down livestock farming operations to help the Netherlands meet decarbonization targets. While certainly a viable strategy to reduce emissions, the fact that the Netherlands, a very advanced agricultural market, can’t find alternatives to shutting down operations to reduce livestock emissions again signals the urgency with which the world needs solutions like those being developed by Overview portfolio companies ArkeaBio, Alga Biosciences, and metha.ai to commercialize and scale.

Finally, in Asia, China—the world’s largest greenhouse gas emitter, as well as the world’s largest emitter of methane from sources like coal mining, which contributes 40% of China’s methane emissions—has its own methane action plan. The Methane Emission Control Action Plan, released last year, stipulates a significant, cross-sector push to reduce methane emissions.

Research

Last but certainly not least, as much as progress has been made, we’re constantly learning more about persistent and pernicious methane emissions challenges. For example, a recent coal mining fire and accident in Australia produced a massive methane leak that took more than a month to get under control. Further, increasing data and analysis across several publications shows that as the planet warms, methane emissions from natural sources are rising. Wetlands are already the largest natural source of methane emissions, and emissions from wetlands may be intensifying as we speak. In addition, methane releases are being spotted in other geographies, ranging from Alaska to the Amazon and the Arctic, that are worrying insofar as they represent new, additional methane that had previously been sequestered safely in previously stable ecosystems.

In general, across natural methane emissions, many more worrying signs abound. See here and here for instance. The list goes on. What this means is that on the whole, as our understanding of these emissions crystallizes, the need to dramatically increase resource allocation to methane emissions monitoring and mitigation comes into greater and greater focus, too.

Elsewhere in research, The Harvard Salata Institute recently published new research on the EPA’s existing landfill methane regulations as well as opportunities to update them. Especially as better monitoring technologies reveal the extent to which landfills emit more methane and air pollutants than previously estimated, more stringent oversight of landfills is a big opportunity for climate and local health benefits across the world. 

In other sectors, such as rice cultivation, research out of Harvard Salata also finds that methane emissions across geographies, especially Africa, likely exceed past estimates, highlighting the opportunity for companies like Overview Capital portfolio company Mitti Labs, which is tackling rice emissions with smallholder farmers, starting in India.

The bottom line

The only constant across the entire methane landscape is evolution, which holds whether you look at emissions measurement and monitoring technology, technological innovation and deployment, our understanding of methane emissions sources themselves, and public and private sector efforts to mitigate them. The other consistent throughline across all the information summarized in this newsletter is that spurring additional resource allocation to measure, manage, and mitigate methane emissions is of utmost criticality. Despite having caused 0.5°C of global warming (roughly a third of human-caused warming), methane receives only ~1% of all climate finance ($13.7 billion of an estimated $1.3 trillion total in 2023). We’re excited to continue to beat the drum of this story, to build the audience to whom we tell it, and to make sure that the 1% figure referenced above grows dramatically—starting now.

Join us!

For those of you attending NY Climate Week, we will be hosting an intensive on opportunities, challenges, and more inherent to methane reduction work. Located at the Jacob Javits Convention Center, the event will take place from 1 pm to 5 pm EST on Tuesday, September 24th. It will explore key questions to provoke action and spur cooperation for further methane solution implementation. Conversation topics will include:

1. How can the private sector play a more substantive role in reducing methane emissions? 

2. How can we create more enduring pathways for capital, innovation, and policy to align for methane reduction? 

3. How can we incorporate further methane mitigation into existing climate and nature commitments?

Overview Capital will host alongside The Astra Project and Azolla Ventures in partnership with FullCycle, Environmental Defense Fund, Project Drawdown, and Spark Climate Solutions.

Odds and ends

For additional worthwhile reading, this recent Washington Post article crystallized how action on another major source of methane emissions, namely food waste, is possible and profitable by highlighting how South Korea recycles 98% of its food waste, up from just 2% twenty years ago. Compared to the U.S., where 60% or so of food waste goes unrecycled and turns into methane in landfills and wastewater treatment, South Korea’s process illustrates how a lot of methane mitigation opportunities are questions of attracting capital and innovating new business models; they don’t always depend on technology that doesn’t exist yet or that can’t pencil economically.

Thanks for reading the tenth 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