Abstract
Methane is the second largest greenhouse gas contributor to anthropogenic global warming, and reducing methane emissions quickly can significantly limit near-term global warming. Globally, the oil and gas sector is responsible for almost 20% of anthropogenic methane emissions.The Global Oil and Gas Market Model will includes supply, trade, and demand of crude oil and natural gas while accounting for upstream linkages in production-i.e., gas production associated with oil production. The model also computes upstream methane emission intensities for crude oil and natural gas at the supplier level, as an important first step in considering the global consequences of regional climate policies affecting the oil and gas sectors.This study simulates the effects of an EU price mechanism penalizing upstream methane emissions in domestic and imported oil and gas supplies. At a price of 2 €/kgCH4, methane penalty mark-ups would range from 1.5%−4% range for gas and 3.5-16\% for oil, depending on the supplier. Given that crude oil transport costs are much lower than for natural gas, a methane penalty is more likely to incentivize trade flow diversion for oil.