Why methane is becoming the next high-value climate commodity after CO2

Methane is getting a price premium because it hits warming fast. The climate impact of 1 tonne of CH₄ is commonly expressed as about 82.5 tCO₂e over 20 years versus 30 tCO₂e over 100 years (GWP20 vs GWP100), as highlighted in the IEA’s Global Methane Tracker. Buyers that care about near-term warming reduction have a rational reason to pay more for methane abatement than for “slow” CO₂ reductions.

Methane is also becoming more measurable than many buyers assumed. The IEA points to record super-emitting events in 2024 in the oil and gas sector, and that attention is shifting to leakage, flaring, venting, and fugitive emissions that can be detected via satellites and verified through LDAR campaigns. When emissions are observable and attributable, markets tend to form around performance.

Regulation is adding demand pull along gas and LNG supply chains. The EU Methane Regulation (EU/2024/1787) has applied since 4 August 2024 and introduces escalating obligations for importers, including requirements tied to reporting, MRV equivalence, and methane intensity. Even for companies that are not directly regulated, these requirements can flow into procurement as data and attribute demands.

Methane is now a risk management variable for gas buyers and traders. Utilities, LNG aggregators, and trading desks increasingly treat methane intensity as part of compliance eligibility, reputation exposure, and financing access, not just as an ESG talking point. The legal and policy discussion is also converging on concepts like methane intensity, certified gas, low-methane LNG, supply-chain emissions, and OGMP 2.0.

Economics makes the market easier to build because a lot of abatement is already “worth doing.” The IEA estimates that around 35 Mt of methane emissions from oil, gas, and coal would be avoidable at net zero cost at average 2024 energy prices. A certificate layer can accelerate CAPEX and OPEX decisions that are already economically rational, by turning “good operational practice” into a monetisable attribute.

Methane becoming a performance commodity changes what buyers need to ask. The key question is no longer only “how many tCO₂e is this worth?”, but “what exactly does this methane certificate represent?”, including MRV strength, boundaries, and what claims it supports.

What a methane certificate represents: MRV, additionality, and how it differs from carbon credits

A methane certificate is typically an environmental attribute tied to gas production, not a generic offset. A well-known example is the Methane Performance Certificate (MPC), described as a spot-traded certificate representing avoided methane associated with the production of a specific volume of natural gas, traded on Xpansiv CBL or bilaterally. The key idea is that the environmental attribute can be unbundled from the physical gas molecule.

This is structurally different from most voluntary carbon credits. A carbon credit in the VCM is usually issued as a tCO₂e unit under a methodology, recorded on a registry with issuance and retirement. A methane certificate is often closer to an environmental attribute certificate (EAC) that supports a supply-chain claim about the methane performance of gas purchased, using chain-of-custody logic such as trace-and-claim or book-and-claim.

MRV is the product, not a footnote. In practice, buyers should expect a methane certificate program to specify measurement at asset level, reconciliation to emissions inventories, and third-party verification. EU language is a useful reference point because it pushes toward MRV equivalence and, for oil and gas, alignment with OGMP 2.0 Level 5 style reconciliation plus independent verification.

Additionality is more nuanced than in classic offsetting. Some methane certificates are designed to reward best performers rather than prove “project additionality” in the offset sense. Buyers still need a view on whether they are paying for reductions beyond business-as-usual, and if so, what test is used: regulatory surplus, investment barrier, common practice, or another approach. The right test depends on the buyer’s goal, whether it is supplier engagement, procurement differentiation, or a beyond-value-chain contribution.

Units and boundaries can change the meaning of “one certificate.” Avoided methane can be expressed in tonnes of CH₄ or converted to CO₂e, and the conversion depends on whether GWP20 or GWP100 is used. The IEA’s GWP figures make the point starkly: the same physical methane reduction looks very different depending on the time horizon, which affects internal comparability and corporate target alignment.

Once the “what” is clear, the next practical question is “how does it trade?” Spot exchange trading and OTC deals create very different outcomes for price discovery, liquidity, and delivery risk.

Spot exchange trading vs OTC deals: price discovery, liquidity, and counterparty risk

Spot exchange trading exists because buyers want standardisation and benchmarks. An exchange or marketplace can impose contract specs, settlement rules, and consistent documentation expectations. That makes it easier to compare offers and to build internal pricing, especially when procurement teams need repeatable decision rules.

OTC deals exist because buyers often want custom specs. Bilateral contracts can pin down basin, operator, measurement technology, delivery window, and bespoke MRV requirements. The trade-off is less transparency and harder price discovery, since each term sheet can be slightly different.

Liquidity is still fragile, and the market has already shown that. S&P Global notes that Platts discontinued its MPC assessments after the underlying contracts were delisted from Xpansiv CBL on 11 July 2025. The lesson is simple: spot markets help, but they do not guarantee continuous liquidity unless standardisation and participation keep pace.

Benchmarks matter even when they are imperfect. When assessments exist, buyers can use them to set an internal transfer price for methane attributes, or to structure commercial clauses such as a “methane attribute adder” on LNG cargoes. When benchmarks disappear, buyers often fall back to bilateral price discovery, which can widen bid-ask spreads and introduce a liquidity premium.

Counterparty and delivery risk looks different in OTC versus exchange. In OTC, the buyer carries more risk around MRV quality, registry validity, and title to the attribute, including protections against double issuance and double claiming. Exchange rulebooks can reduce some of these risks through standard processes, but they cannot remove the need for auditability and clear ownership rules.

Hybrid chain-of-custody models are likely to expand because gas supply chains are complex. Approaches like trace-and-claim and mass balance are designed for systems with hubs, swaps, and multiple transactions, and policy discussions around the EU Methane Regulation recognise the need for guardrails when attributes are bundled or unbundled.

As trading mechanics mature, adoption will be driven by who has the strongest immediate incentive. The early buyers are likely to be those facing procurement pressure, tender requirements, or compliance-adjacent reporting needs.

Who will buy methane certificates first: utilities, LNG traders, oil and gas majors, and corporate Scope 3 programs

Utilities and importers with EU-facing exposure have a clear compliance-driven reason to move early. The EU Methane Regulation sets a timeline where importer obligations ramp up, including reporting in the mid-2020s, MRV equivalence expectations later, and methane intensity reporting requirements for relevant contracts signed after 4 August 2024. Even when a certificate is not legally required, procurement teams may use certificates and verified data to operationalise contract clauses and supplier expectations.

LNG traders and aggregators have a product differentiation incentive. Certificates can act as an attribute layer for spot and term cargoes, especially when physical molecules are commingled through hubs and swaps. This is also practical for responding to tenders that ask for methane performance evidence, where a portfolio approach can be easier than tracing every molecule.

Producers and oil and gas majors have a monetisation and market access incentive. The IEA’s estimate that a large share of methane abatement is achievable at net zero cost suggests that certificates could help accelerate deployment and reward operational discipline. Producers also face increasing public benchmarking and stakeholder scrutiny, which can make premium access for lower-methane supply more valuable.

Corporate Scope 3 programs are a natural next wave, but only with careful claims. Buying supply-chain specific methane attributes for purchased gas or energy can be more defensible than generic offsets in some contexts, because it links to supplier engagement and product carbon intensity. Companies still need internal policy clarity on whether the purchase supports Scope 3 accounting, a market-based claim, or beyond-value-chain mitigation.

Finance teams may also pull demand forward. The Climate Bonds work on methane finance highlights how methane abatement is becoming a financing topic, and certificates could become KPI-linked evidence in sustainability-linked loans or bonds, provided MRV and governance are strong enough for assurance.

More buyers also means more ways for integrity to fail. Before volumes scale, the market needs clear guardrails on leakage, double counting, baselines, and what claims are allowed.

Integrity and greenwashing risks: leakage, double counting, baselines, and claims guidance

Leakage risk is real in gas systems because boundaries are easy to game. Reducing emissions at one asset can shift emissions elsewhere in the chain, for example by moving compression or processing, or by tightening LDAR in one segment while flaring increases in another. The IEA’s discussion of accelerating industry action reinforces why buyers should insist on explicit system boundaries, such as upstream-only versus upstream plus midstream, and clarity on whether transmission and distribution emissions are included.

Double counting and double claiming are the biggest risks when attributes are unbundled from molecules. When gas is traded through hubs, the same “low-methane” story can be sold multiple times unless registries, transfer rules, and retirement mechanisms are robust. CATF’s recommendations in the EU context emphasise registry governance and retirement rules, and the need for interoperability or mirrored systems to prevent cross-system reuse.

Baselines and over-crediting are not theoretical problems. The broader VCM has seen methodology debates and actions, including the reported suspension of issuances and listings for a key rice methane methodology by Verra, which illustrates that “methane reductions” are not automatically high-integrity. Conservative baselines, direct measurement, and credible verification matter as much here as in any offset category.

Claims guidance needs to separate market-based attribute claims from offset claims. A buyer can often justify language like “we purchased low-methane gas attributes via certificates,” if the chain-of-custody and retirement are clear. A buyer should be cautious with claims like “carbon neutral LNG” if the underlying instrument is only a methane attribute and not a full neutralisation framework aligned with recognised claims guidance.

Data quality must reflect the reality of super-emitters. The IEA’s note of record super-emitting events in 2024 is a reminder that annual audits alone can miss the events that dominate emissions. Buyers should push for continuous monitoring elements and rapid response expectations, not only periodic reporting.

Once these risks are on the table, procurement teams need a concrete way to screen offers. A due diligence checklist is the fastest way to avoid buying an attribute that cannot survive audit, assurance, or public scrutiny.

The minimum documentation pack should be non-negotiable. Buyers should require (1) an MRV report that states methodology, instruments, and measurement frequency, (2) an independent verification statement, (3) a clear unit definition, including whether the certificate is in CH₄ or CO₂e and which GWP time horizon is used, (4) system boundary and allocation rules to volumes, and (5) vintage and delivery period definitions. Without these, comparability and internal pricing discipline break down.

Registry and title checks should be treated like financial settlement controls. Buyers should ask for a verifiable registry record with issuance ID, current owner, and status, plus the program’s transfer rules. Buyers should also require proof of retirement or cancellation in the name of the claiming entity, with protections aligned to best practices discussed for EU-facing integrity needs.

Chain-of-custody must be explicit when hubs and swaps are involved. Buyers should require a statement of the model used, such as trace-and-claim, book-and-claim, or mass balance, and the allocation rules that prevent multiple claims on the same attribute. An end-to-end audit trail from issuance to retirement should be available for assurance and for importer-style reporting readiness.

Contract terms should reflect real-world invalidation and dispute scenarios. Buyers typically need representations and warranties on MRV and title, a right-to-audit clause, remedies if a certificate is invalidated, substitution or true-up mechanisms, and disclosure obligations for data subcontractors. OTC deals should also specify governing law and dispute resolution clearly, since the value is often in the documentation rather than in physical delivery.

Operational integrity screening should look for evidence of ongoing performance, not just a one-time score. Buyers should check whether the program requires or incentivises frequent LDAR, super-emitter response protocols, and transparent disclosure, and whether it is compatible with OGMP 2.0 style expectations or MRV equivalence concepts used in EU policy discussions.

The final deliverable should be buyer-ready for audit and communications. A practical output is a one-page approved claim statement plus an annex pack containing MRV and verification documents, registry evidence, retirement confirmation, and an audit log. That package is what procurement, compliance, and external assurance providers will actually rely on, especially as importer-style reporting expectations ramp up through 2025 to 2028.