How Satellites Can Help Reduce Greenhouse Gas Emissions
How Satellites Can Help Reduce Greenhouse Gas Emissions
Senior Conseiller, changements climatiques et durabilité
Le travail de George Sutherland, Senior conseiller de l’Institut pour le climat de BMO, se situe au carrefour de la science du climat, de la politique et…
Le travail de George Sutherland, Senior conseiller de l’Institut pour le climat de BMO, se situe au carrefour de la science du climat, de la politique et…
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“We have a huge opportunity in voluntary carbon markets using our satellites, specifically of the industrial variety, not nature-based voluntary carbon credits, which is primarily used right now.”— Stephane Germain, President and CEO of GHGSat
George Sutherland, Senior Advisor, Climate Change & Sustainability, sat down with Stephane Germain to discuss the role of satellites in measuring, managing, and reducing greenhouse gas emissions and how this technology is being operationalized by the private sector and governments.
Listen to our ~12-minute episode:
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Stephane Germain:
The voluntary carbon market is really the Wild West right now. We have a huge opportunity in voluntary carbon markets using our satellites, specifically of the industrial variety, not nature-based voluntary carbon credits like is primarily used right now. But we do have a plan to enter that market at the appropriate time.
Michael Torrance:
Welcome to Sustainability Leaders. I'm Michael Torrance, Chief Sustainability Officer at BMO. On this show, we will talk with leading sustainability practitioners from the corporate, investor, academic, and NGO communities to explore how this rapidly evolving field of sustainability is impacting global investment, business practices, and our world.
Speaker 3:
The views expressed here are those of the participants and not those of Bank of Montreal, its affiliates or subsidiaries.
George Sutherland:
Hi, there. My name is George Sutherland from the BMO Climate Institute. In today's episode of Sustainability Leaders, we'll be talking about the role of satellites in measuring, managing, and reducing greenhouse gas emissions and how this technology is being operationalized by the private sector and by governments. To help me unpack this topic, I am joined by Stephane Germain, President and CEO of GHGSat Inc. Thank you very much for joining me, Stephane.
Stephane Germain:
Thanks, George. It's a pleasure to be here.
George Sutherland:
To begin with, can you provide some background on yourself and GHGSat as an organization?
Stephane Germain:
With pleasure. So I started GHGSat almost 14 years ago now, and the company uses its own satellites to monitor greenhouse gas emissions for industrial facilities around the world. So that means we can go monitor individual oil wells, landfills, coal mines, power stations, anything that has an industrial scale of greenhouse gas emission. Whether it's methane and now most recently also carbon dioxide, we can go measure that. And the reason that's important is because increasingly the operators of those facilities, governments and financial institutions really need to understand what the total emissions are from each of their facilities or each of those assets and how to control and reduce them. And so that's what we do, and that's been my mission for the last 14 years, and I'm really privileged to be able to be at the forefront of our exciting new capability to offer to the world.
George Sutherland:
And many governments, including those in Canada and the United States, have targets to reduce CO2 emissions in the neighborhood of 40 to 45% by the end of this decade. There's also parallel targets from those governments to reduce methane along the same timelines. So how does GHGSat support the private sector's response to the evolving regulatory and reporting landscape that's associated with these emission reduction targets?
Stephane Germain:
You can sort of summarize it into two broad areas. The first is that we help with materiality and best-in-class data. And the other one is that we help manage risk. So if I unpack each one of those just really briefly, on materiality and best-in-class data, that's a common theme across all of the regulations that are coming out literally around the world now. Measured emissions are different from estimated emissions. There are material differences between the two. And so a growing responsibility to incorporate that best-in-class data into emissions calculations for regulatory compliance, but also for efficient capital allocation.
And on the risk side, the underreporting of emissions, and methane in particular, has been highlighted by a number of studies over the last couple of years. Most recently in Canada here, Carleton University did a report on Alberta where the methane emissions from oil and gas were estimated to be off by a factor of two. So for companies, the risk relates to regulatory compliance and associated penalties, and that can be more and more significant now. And for financial institutions that risk relates to the global loan portfolio, the asset management business, and even transition taxonomy measurements. So there's all kinds of ways in which we can support these companies.
George Sutherland:
And how does that support translate to corporate decarbonization strategies?
Stephane Germain:
Well, our data and insights have multiple use cases with industrial emitters. In the simplest case, you can think of it as corporate customers having to find their big methane leaks fast. So you can think of that, for example, as oil and gas companies who have hundreds or thousands of operating facilities in the continental United States. So which one of those is leaking and how fast can I find out about it so I can fix it?
So that leads to operational cost savings because it's much less expensive to monitor using satellites, believe it or not, than by using many other types of technologies from the air or ground. And it also leads some industries, like that oil and gas example I just gave, to generate more revenue. They can sell that methane as natural gas rather than letting revenue vent to atmosphere. So there's lots of other use cases, for example, and I mentioned it earlier, efficient capital allocation. So measured emissions because they're different than estimated emissions. And because the magnitude and distribution of those emissions are different as measured versus estimated, our data can really help prioritize and identify the most capital efficient infrastructure upgrades.
George Sutherland:
And beyond regulatory compliance, it strikes me that this technology would also be relevant to monitoring and reporting and verification processes in voluntary carbon markets. And so is this also a space that you've seen satellite monitoring deployed?
Stephane Germain:
Not yet. The voluntary carbon market is really the Wild West right now. We have a huge opportunity in voluntary carbon markets using our satellites, specifically of the industrial variety, not nature-based voluntary carbon credits like is primarily used right now. But we do have a plan to enter that market at the appropriate time.
George Sutherland:
What are some of the challenges that need to be overcome for the potential of this technology to really be deployed in those voluntary carbon markets?
Stephane Germain:
Well, first, the voluntary carbon markets themselves have to become a bit more predictable and a bit more stable. As it is now, there's really a wide variation in what customers for the markets, people who buy the credits, will pay for various credits. And so when you compare, for example, nature-based credits to industrial credits, right now, there's not much, if any, of a market for industrial credits. And that's really all we would do. We don't see emissions from natural source because they don't tend to be big enough to be able to be detected by the satellites. We really focus on the industrial sources.
And then the rules around quality carbon credits, such as materiality, such as additionality, all those have to be respected in a way that industry's not used to monitoring right now from their own emissions. There's a lot of dimensions to voluntary carbon credits and in particular industrial voluntary carbon credits, that have to evolve and solidify before we feel the conditions are right for us to really aggressively enter that market. For now, we're keeping a sharp eye on it, and it certainly seems like a huge opportunity, but we think it needs to mature a bit more before we dive in.
George Sutherland:
And more broadly speaking, how can GHGSat's technology inform the allocation of private capital?
Stephane Germain:
Well, so GHGSat's data and our insights, so the analytics we apply to the data, can support private capital and financial institutions in many ways. So a couple of quick examples. One is validating asset level carbon footprints and the associated regulatory risk for mergers and acquisitions due diligence, for project financing, or even for private equity investing. Another example is in evaluating reputational risk related to investment and loan portfolios, and that's both for existing capital commitments and for the deployment of new private capital.
George Sutherland:
Our discussion has focused on the relevance of this technology to private markets, but it seems that this also has relevance to the public sector. Can you share your thoughts on how this technology supports the allocation of public capital?
Stephane Germain:
Data and insights are equally applicable to the public capital markets as they are to the private capital markets, but just in different ways. So if I, again, pick a couple of examples. Public market issuance, for example. The verification and validation of asset level regulatory reporting is really important for strengthening public market confidence. And in turn, that impacts both risk and cost to capital. With a global green bond market approaching over a trillion dollars in 2023, green bonds are rapidly evolving asset class, and the success of that in part, will depend on the accuracy and the precision of emissions data that are used to evaluate those assets. Another example is how we can govern public capital. So government monitoring of policy action and government monitoring and measurement of policy impact are also really important for the allocation of public capital.
George Sutherland:
And what do you view as the greatest opportunity for this technology going forward?
Stephane Germain:
Ultimately, we can support global transparency and emissions, and that means literally everywhere and all the time. For businesses, that means that we can help track their own emissions. Emissions from energy suppliers and even energy from supply chains anywhere in the world. That's huge. And it can have a huge potential impact. For financial institutions, GHGSat can support regulatory and policy compliance, risk reduction, and cost of capital pricing across many different product groups. And finally, if we take it to really the end point, the kind of data we generate can be distilled to a carbon footprint even by product or service at the consumer level, which is an even larger market, and again, could have a huge climate impact. So we're very excited for the opportunity and we think it's got a fantastic potential for us and for our broader market. So it's a great time to be in this business.
George Sutherland:
Well, thank you very much, Stephane, for joining me to discuss the role of this technology in advancing decarbonization strategies.
Stephane Germain:
Well, thank you, George. I appreciate the opportunity.
George Sutherland:
That's Stephane Germain, President and CEO of GHGSat Inc. Stay tuned for more episodes of Sustainability Leaders where we will host leading experts and continue to explore the impacts of climate change on our social, financial, and natural systems, and the technologies that are leading the way in shaping the future of climate solutions.
Michael Torrance:
Thanks for listening to Sustainability Leaders. This podcast is presented by BMO. You can find our show on Apple Podcasts, Spotify, or your favorite podcast player. Press the follow button if you want to get notified when new episodes are published. We value your input, so please leave a rating, review and any feedback that you might have or visit us at bmo.com/sustainabilityleaders. Our show and resources are produced with support from BMO's Marketing Team and Puddle Creative. Until next time, thanks for listening and have a great week.
Speaker 5:
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