Eliminating routine gas flaring and venting is at the core of the growing imperative of minimizing greenhouse gas (GHG) emissions in oil and gas production.
Since the early 2000s, many jurisdictions have made significant efforts to eliminate this wasteful practice. This report pulls together the main findings of a review of the laws, regulations, decrees, standards, and other relevant government documents in 21 oil-producing countries—including analysis of subnational jurisdictions in Canada and the United States—through September 2021. The review takes the form of 28 case studies published in a companion volume (GGFR 2022). It draws lessons about the effectiveness of the legal and regulatory framework, fiscal incentives and disincentives, contractual arrangements, institutional governance, monitoring and enforcement practice, and public-private partnerships across a range of scenarios and operating environments. These lessons aim to provide guidance to jurisdictions planning to establish new, or improve on existing, laws and regulations to eliminate flaring and venting. Most of the principles and lessons learned from the effort will also apply to broader measures to reduce GHG emissions, particularly fugitive methane emissions.
Despite considerable progress, the global reduction of gas flaring and venting has been much slower than what is attainable and has fallen short of government commitments.
The Global Gas Flaring Reduction partnership (GGFR) estimates that the total volume of natural gas flared globally decreased by 14 percent from 1996 levels to reach 144 billion cubic meters in 2021. Over the same period, oil production increased by a fifth. Despite these volumes, few oil-producing countries set specific gas flaring and venting reduction targets in their Nationally Determined Contributions (NDCs), made as part of their commitments to curtail overall emissions under the 2015 Paris Agreement on Climate Change.
Across the 28 case studies, there is significant variation in the legal and regulatory approaches applied. All of the reviewed jurisdictions ensure that flaring and venting, though often not explicitly mentioned, fall under the responsibility of one or several dedicated authorities.
Twenty-three jurisdictions have set measurement and reporting standards for the oil and gas sector that encompass flaring and venting, even if they are not always explicitly mentioned, as a core element of capturing relevant data that can be used to identify the need for corrective action. However, despite the increasing recognition of the need to eliminate flaring and venting, only 21 jurisdictions have put in place outright bans on routine flaring or venting. Just 14 of the 28 jurisdictions reviewed impose monetary fines or use market-based solutions, signaling reluctance to follow through with corrective action. The table at the end of this executive summary identifies the levers available for effective legal and regulatory framework to reduce flaring and venting.
About half of the 21 countries analyzed have reduced both flaring volumes and flaring intensity since 2012.
This finding indicates that legislative and regulatory approaches to combat routine flaring and venting can vary widely from one country to another but still be effective. The top performers deploy different regulatory instruments, but all of them use an array of strong monetary and nonmonetary incentives and disincentives, and all grant enforcement powers to their regulators. Poor performers typically lack (i) clearly defined and fit-for-purpose laws and regulations that impose material penalties or (ii) the willingness and capacity to enforce the rules effectively.
Flaring and venting regulations must consider the capabilities of and resources available to the authorities responsible for enforcing them.
Adequately resourced and trained institutions are key to ensuring effective reporting and enforcement. Where these capabilities are under-resourced, underdeveloped, or selectively applied, policy, legal, and regulatory commitments fail to achieve the desired reductions in flaring and venting. Countries with a national oil company often delegate de facto regulatory functions and responsibilities for controlling gas flaring and venting, constraining the regulator’s authority and independence. It is good practice for regulators to consult with key public and private stakeholders on the development of new regulations.
Development of an effective regulatory framework requires monitoring, measuring, and enforcement capabilities that may need to be phased in over time.
Accurate and timely data are essential for designing efficient regulations. Absent monitoring and enforcement capacity, a comprehensive regulatory framework cannot achieve the desired results. Where such capacity is weak, setting different deadlines for bringing new projects and existing facilities into compliance with new regulations can be effective. Jurisdictions need to establish fit-for-purpose methods for measuring the volume of gas flared and vented (by metering or using engineering estimates) and to require reporting and disclosure. Except for Nigeria and countries in North America and Europe, few countries have provisions requiring producers to measure or estimate all flaring and venting volumes and submit the information to the regulator on a regular basis. The quality of public disclosure of data on flaring and venting volumes varies widely across jurisdictions, and relevant information is often missing. Disclosure of the requisite information can help strengthen existing regulations and build trust in the industry with the affected communities, civil society, and the public at large.
As part of the approval process for new projects, countries are advised to require plans for eliminating routine flaring and venting.
These plans should employ a thorough technical and economic evaluation of alternative uses of associated gas and include the costs of reducing flaring and venting in assessing the viability of new oil field developments. The application and approval procedures for intermittent flaring and venting of associated gas should be an integral part of the overall license (or contract) for upstream oil field development and subsequent production plans. Routine gas flaring and venting should be avoided by using or monetizing associated gas.
Penalties should be established at a sufficiently high level to make the alternative of investing in flaring and venting reduction more attractive than paying the penalty. They should not be so high that ceasing oil production becomes the only viable option for many operators.
Mandatory payments such as fines, penalties, and sanctions for noncompliance appear to have a limited effect on improving compliance mainly because they tend to be minor compared with the commercial value of oil production and are often not evenly enforced for fear of losing oil production. Few jurisdictions have explicit rules prescribing accurate gas flaring and venting records and regular reporting requirements. Few regulators have introduced detailed auditing procedures or enforce sanctions for noncompliance.
The carbon taxes, royalties, and fees imposed by some jurisdictions on gas flared and vented appear to be effective at curbing emissions—provided they are fully collected.
Governments are encouraged to levy these charges on all gas flared and vented, or at least on levels above certain limits or outside specific situations authorized by the regulator. An essential step is the collection of material payments from all producers, including national oil companies and small domestic companies. Market-based approaches (such as emissions trading systems and offset credit schemes) can also create incentives for the internal use or commercialization of associated gas. Several emissions trading schemes have been developed, but it is too early to assess their effectiveness at this time.
Regulatory and governance problems outside of the upstream oil sector may substantially affect the degree to which oil producers can reduce flaring and venting.
The regulator in charge of the midstream gas sector can take steps to facilitate the commercialization of gas, such as regulating nondiscriminatory third-party access to gas processing and transportation infrastructure. But even where the cost of gathering, treating, and transporting gas is “manageable” by the standards of well-functioning markets, oil producers may not be able to recover the investments made to commercialize gas if gas tariffs in the domestic market are kept artificially low or large volumes of gas “purchased” are not paid for on time or at all. A prime example is a financially nonviable power sector. It is typically the anchor customer for gas, but it may owe significant arrearages to gas producers, and rectifying this situation is often outside the oversight of the ministry in charge of oil and gas. Balancing reforms in sectors outside oil and gas and imposing sensible regulations on gas flaring and venting requires policy alignment and coordination across several line ministries and different levels of government.
The elimination of routine flaring and venting should be a core component of the net-zero-emission and energy transition plans of oil-producing countries and companies.
Endorsement of the World Bank’s Zero Routine Flaring by 2030 initiative by 34 governments, 53 oil companies, and 15 institutions (as of April 2022) holds the promise of reducing this significant source of GHG emissions in oil-producing countries. The 2030 goal is also needed to meet the temperature goals of the Paris Agreement. Toward that end, clear and implementable national roadmaps for action are critical. Most countries have yet to develop workplans through 2030 to achieve zero routine flaring and adopt legislation to make new greenfield projects free of routine flaring and venting. Many international oil companies have announced net-zero emission goals and plans, launched initiatives to monitor and reduce routine flaring and methane emissions, set internal targets, and expanded emissions reporting in their sustainability reports. However, many national oil companies are struggling to raise the capital required to curb gas flaring and venting; they are falling behind in meeting the 2030 target. Increasing awareness among consumers regarding the carbon footprint not only of combustion of oil and gas but also of flaring and venting could put pressure on producers and resource holders to free up the required funding to remain competitive in global commodity markets.