#1: Fixing The Methane Problem:

Abatement, Distribution Modernisation, and Easements

A strong case for transitional fossil finance is fixing the leaks and failure-prone segments in existing infrastructure. Methane’s 20-year global warming potential (GWP) score is approximately 83, meaning that one ton of methane released into the atmosphere traps roughly 83 times as much heat over a 20-year period as one ton of carbon dioxide, the most abundant greenhouse gas. This is why methane leakage from wells, pipelines, and compressors is so potent and mitigating that a high-impact opportunity. The IEA’s 2025 Global Methane Tracker estimates that roughly 25 Mt of upstream oil and gas methane emissions and approximately 35 Mt across the full fossil fuel sector could be abated at no net cost worldwide. 

The U.S. gas distribution network offers a clear case for targeted replacement. Much of the cast and wrought iron infrastructure, installed before 1950, has materially higher failure and leakage risk than modern alternatives. Although cast iron mains represent only about 1% of U.S. distribution main mileage, data from the Pipeline and Hazardous Materials Safety Administration (PHMSA) indicate they account for 8% of all distribution main incidents and 33% of all fatalities involving distribution mains. 

Replacement programmes therefore deliver dual benefits within a single capital allocation: the same segments that pose safety risks are also persistent sources of fugitive methane, allowing operators to capture measurable emissions reductions alongside upgrades. Baseline and post-intervention leakage data strengthen attribution, while investments in detection, efficiency and retrofit improves system resilience.

Crucially, such capex does not necessarily expand fossil fuel demand. Midstream easement diversions, for instance, reroute flows around sensitive or congested areas without increasing capacity or throughput. The effect is risk reduction and emissions mitigation on existing infrastructure, positioning capex as a tool for optimisation rather than growth.

#2: Gas For Coal: Pairing Peaker Plants with Renewables

As coal exits and renewables scale, system reliability is emerging as a key constraint. Wind and solar remain inherently intermittent, while current battery deployment supports only short-duration storage, leaving multi-day gaps in cloudy or low-wind periods. Coal is valued for its ability to provide baseline generation, but gas “peaker” units – power plants that are built to ramp-up fast and run only during short term demand and supply gaps – pair naturally with renewables and provide the flexibility to reduce reliance on coal. Coal-fired generation emits roughly 2,250 lb CO₂/MWh on average, against 870 lb CO₂/MWh for a modern combined-cycle gas plant and 1,000 to 1,400 lb CO₂/MWh for a simple-cycle gas peaker. Importantly, a peaker operating at sub-10% capacity generates only a fraction of the absolute emissions of the baseload coal unit it replaces and improves overall system economics.

The dynamic is already visible in practice: a Western U.S. cooperative has accelerated the retirement of approximately 1.8 GW of coal capacity by 8 to 12 years, replacing it with a portfolio of wind, solar, storage and a smaller block of fast-ramping gas capacity sized to cover residual reliability need. The principal risk is reversibility. Through 2025, coal retirements have already been delayed in some cases, driven in part by incremental energy demand from data centres and regulatory intervention. Two key actions can be taken to address this. First, peaker financing should be paired with legally binding coal-retirement dates, ideally embedded in regulator approved investment resource plans (IRPs) or settlement agreements, and where possible securitised through ratepayer-backed bonds that convert retirement promises into hard debt service. Secondly, contractual limits on peaker utilisation are essential to prevent drift into routine generation. Taken together, these actions ensure the peaker is funding a coal exit, not extending a coal plant’s life.

#3: The Switching Solution in Hard to Abate Sectors 

Switching from coal to gas in industrial heat can deliver immediate, measurable emissions reductions while preserving the option to convert to hydrogen or electrification as those technologies mature.

The case is the strongest when the switch is explicitly structured as a bridge, not a permanent fuel choice. In steelmaking, the dominant blast furnace-basic oxygen furnace route emits roughly 1.9-2.3 tonnes of CO₂ per tonne of steel, largely from coking coal whereas direct reduced iron using natural gas lowers intensity by roughly a third on a cradle-to-gate basis. Using hydrogen as the reductant drops it by over 95%, though green hydrogen at the scale and cost required is not currently commercially available.

Recent capital plans among European producers illustrate these provisional arrangements. A major integrated European steelmaker announced in 2023 an approximately €1bn investment to convert a site to green hydrogen-DRI with a hybrid electric arc furnace and a binding hydrogen procurement ramp. A northern German producer is constructing a 2.5 Mt/yr DRI plant scheduled to start on natural gas in 2026 and convert to hydrogen on a dated milestone schedule. A Swedish first-mover is building a greenfield hydrogen-DRI plant, structured around fully renewable inputs from commissioning.

The bigger risk is path dependency. An industrial fuel switch without a credible ramp to hydrogen, electrification, or another zero-carbon endpoint is not transition credit. Analysts have flagged this risk directly, noting that gas-based DRI, for example, cannot itself deliver steel decarbonisation, absent a credible hydrogen pathway . Financeable transactions in this category share three features: a dated electrification timeline or hydrogen ramp specifying minimum percentage of feedstock by year, a meaningful capex commitment to electrolysis and renewable power procurement, and covenant restrictions against extending the gas-fired phase past the conversion milestone. 

A Bridge Too Far

A bridge that does not arrive at the other side is not a bridge. Renewables remain the best option to power economy-wide decarbonisation initiatives, and a portfolio committed to climate alignment should continue to prioritize them accordingly. 

But the thrust of this article is that in a narrow set of real life case studies, the cleanest available substitute for a high-emitting incumbent is itself a fossil asset, and refusing to finance that substitute on principle leaves the dirtier asset in service longer.

The three different examples thread a common logic. It is a vote for the displacement of a higher-emitting incumbent on a faster timeline than the renewables-only path could deliver. The cleanest path to the cleaner grid is rarely a straight line, and savvy money managers can distinguish the bridge that arrives from the one that does not.