Gas into gold: The waste-to-energy opportunity

Introduction

In transitioning the global economy towards a low-emissions future, a portfolio of tools is needed to overcome challenges posed by sectors that have traditionally been hard-to-abate. Renewable natural gas (RNG) is an alternative fuel that can help industries lower emissions, improve waste management and create more circular economies.

While we believe RNG has long been recognised as an investment with burgeoning potential, increasing demand from end users and growing awareness of methane’s relative impact on global warming has led to an acceleration of interest and capital in the sector.

A 'drop-in fuel'

Renewable Natural Gas shares many of the same attributes as fossil natural gas and the same basic chemistry – greater than 95% methane, or CH4. RNG is compatible with existing natural gas infrastructure and industrial processes, and it is directly interchangeable with fossil natural gas, rendering it a 'drop-in fuel' (similar to renewable diesel and sustainable aviation fuel).

However, while fossil natural gas involves the extraction of carbon sequestered beneath the earth’s surface, RNG is produced from the natural decomposition of organic matter, through a process commonly known as anaerobic digestion. The source of organic matter giving rise to methane emissions can vary, from landfills, to dairy farming (and the associated decomposition of manure), waste water processes and organic consumer waste. All are significant generators of methane emissions, with the source of these methane emissions often referred to in the RNG industry as the 'feedstock type.'

Methane emissions are widely known to have significant adverse environmental impacts. The United States Environmental Protection Agency (EPA) points to methane as being “more than 28 times as potent as carbon dioxide at trapping heat in the atmosphere”. Against this backdrop, RNG projects can deliver significant methane emissions reductions – not only by displacing fossil natural gas (and thereby avoiding the release of carbon sequestered in the earth) but also by capturing naturally occurring methane emissions that would otherwise be released into the atmosphere.

Market growth spurred by regulatory support

In the United States, the Renewable Natural Gas industry has long been supported by regulatory programs, including the Renewable Fuels Standard (RFS). Introduced in 2005, the RFS program requires a certain volume of renewable fuels be used to replace or reduce the quantity of fossil fuels used as a transportation fuel, and in the heating of homes. For each molecule of renewable fuel injected into the interstate pipeline system, the RFS program provides for the generation of a regulatory credit, which is then purchased by obligated parties (such as refiners, importers and blenders) who produce fossil fuels (and specifically, gasoline) for consumption in the United States.

For more, please read the full paper, Gas into gold: The waste-to-energy opportunity.

This article is part of IFM Investors' 2025 Infrastructure Horizons trends report.