Developing an optimization model for a cap and trade system to control methane emissions in the oil and natural gas industry : application to the Permian Basin
MetadataShow full item record
Development of unconventional oil and natural gas in the U.S., particularly the exploitation of shale gas, has been highly controversial with significant geopolitical implications. It is unquestionable that this so-called “golden era” of natural gas has brought not only significant new technologies and economic growth but has also raised important environmental concerns, including air pollution from methane emissions. Methane (CH₄) emissions from the oil and natural gas industry have been of critical and increasing concern for public policy. New evidence (Zeebe, et al. 2016) has confirmed record high levels of carbon dioxide (CO₂) in 66 million years, with CH₄ emissions considered a significant risk for global warming and climate change. For this reason, the U.S. Environmental Protection Agency (EPA) issued in 2016 a new “methane rule” to control emissions from the oil and gas industry by obligating the use of specific abatement measures to reduce pollution. This study analyzes the application of an optimization model to represent a market-based strategy of a cap and trade system as an alternative approach to regulating emissions. This option is more efficient than traditional command and control regulations at achieving the same levels of methane reduction in the oil and gas sector, and this hypothesis is verified by applying the optimization model to a sample of oil and gas production facilities operating in the Permian Basin. In spite of all the political-scientific efforts and discussions, we are still far from the knowledge needed to achieve a public policy strategy that balances sustainability with economic development, and I hope this research helps to reduce that gap.