Public Finance and Agricultural Methane Emissions: A Cross-National Panel Analysis

Agricultural methane, from livestock, manure, and rice cultivation, is the largest human source of the second most important greenhouse gas. Because methane is potent but short-lived, reducing it is one of the fastest available levers on near-term warming. The obstacle, however, is widely understood to be institutional and fiscal rather than technological: these emissions are diffuse and difficult to observe, and governments can reach them only through extension services, monitoring, and regulation, all of which must be paid for. We therefore ask whether a state’s fiscal capacity is associated with lower agricultural methane, using a panel of 27 countries observed from 2014 to 2022 and comparing four governance attributes: trust in government, public employment and representation, control of corruption, and public finance. Only public finance is consistently associated with lower per capita agricultural methane, and the association holds within countries over time as well as across them, so that periods of stronger public finances coincide with lower emissions. No other governance attribute shows such a relationship. Several features of the data are consistent with a fiscal-capacity explanation rather than simple affluence: public finance is essentially uncorrelated with national income in our sample and, unlike control of corruption, bears no relation to consumption-driven emissions such as carbon dioxide and waste. The pattern is also specific to methane rather than to environmental performance in general, and it survives an extensive battery of robustness and reverse-causality checks. The results suggest that money for methane abatement works only through the state’s capacity to spend it well, a consideration that matters for the design of methane finance under the Global Methane Pledge, where funds flow to countries whose fiscal and administrative capacity to deliver agricultural change varies widely.