Goldman Sachs recently served up a powerful case for action on methane in a stroke of market logic grounded in data. In a recent report, the investment bank argues that environmental regulation is more than a necessary evil when it comes to oil and gas development – it’s a vital enabler for economic growth.
There’s power in diverse groups coming together.
Goldman’s insight for the US oil and gas industry – that the current environmental policy vacuum is a major cause of investor queasiness – suggests that markets can help drive environmental progress.
Business, investors, policymakers can join forces
Among the policy priorities Goldman Sachs identifies in its report is the establishment of strong and stable rules to ensure companies follow safer development practices and reduce emissions of methane.
A highly potent greenhouse gas and the primary ingredient in natural gas, methane is leaking from across America’s natural gas supply chain. It’s now responsible for more than one-third of today’s greenhouse gas emissions worldwide.
With “timely cooperation among business leaders, investors and policy makers,” however, Goldman Sachs believes that strong methane policies are feasible in the not-so-distant future.
Investors need market certainty
As public controversy abounds over the environmental impacts of producing new supplies of American oil and gas and policy uncertainty persists, Goldman Sachs believes large would-be investors will keep their mega-checkbooks holstered.
Or, more likely, they will re-direct those checks to foreign competitors in countries where projects can proceed with more market certainty.
That means that although North America could add up to 2 million jobs in traditional manufacturing and other industries over the next decade, it’s far from certain to investors that policy and market dynamics will allow the United States to grab this opportunity.
Removing this uncertainty is where the investment bank sees a clear role for regulation.
Goldman’s report shows that, although investment surged in the North American upstream oil and gas industry, investment lagged foreign nations 15-to-1 in downstream industries such as chemical plants that use products developed in the fields for manufacturing.
This is partly because investors lack confidence that upstream supply will be stable over time given controversy and the lack of strong policy.