Lessons for regulating flaring and venting: Results from Alberta, Canada

Abstract

Regulating methane from the upstream oil and gas sector is seen as a low-cost method to reduce emissions. Yet, there is surprisingly little work studying the economic dynamics of flaring and venting, key sources of these emissions. We analyze data from Alberta, Canada, a jurisdiction that has regulated flaring and venting for more than two decades. We present five lessons for policy-makers. Paramount among these is that flaring and venting are each subject to different regulatory challenges, and thus require distinct regulatory approaches. The key to mitigating flaring is to encourage crude oil extractors to capture associated gases. The key to mitigating venting is to promote the development and adoption of alternative technologies for gas producers. We further estimate the relationship between production and emissions at crude oil batteries, finding elasticities of emissions with respect to production of 0.09 and 0.69 for oil and gas, respectively. While our evidence shows that both flaring and venting can be effectively controlled, regulation may also affect production and result in leakage across release-types and regions. These results inform policy-makers as they create rules to control emissions from upstream oil and gas.