In another step to progress its decarbonisation efforts and 2050 zero-pollution ambition, the EU has recently delivered its strategic plan for reducing methane emissions, the EU Methane Strategy.

The focus of the Strategy from an energy sector perspective is twofold: first, reducing methane emissions within the EU and importantly, second, reducing methane emissions associated with EU gas consumption. The EU is once again seeking to lead from the front in this area and looking to use its position as the largest importer of oil and gas (in 2017, the EU consumed 47% of internationally traded gas) to gain support for a multilateral coalition to reduce methane emissions globally. At this stage, the EU has not set any binding targets for methane emissions, however it has left the door open for such initiatives to follow if the current measures proposed do not bring about the necessary methane emissions reductions.

In this post, we take a closer look at the actions being proposed under the EU Methane Strategy in the energy sector.

EU Methane Strategy

On 14 October 2020, and as part of its decarbonisation efforts and its 2050 zero-pollution ambition, the EU Commission delivered a strategic plan for reducing methane emissions. The EU, which accounts for 5% of global methane emissions, focuses in its strategy on combining cross-sector, sector-specific and international actions, with a particular focus on the energy sector where, in the Commission’s view, methane emissions can be cut fastest with the least costs.

Cross-sectoral actions
  • Improving measurement and reporting of methane emissions by companies across all relevant sectors
  • Establishing an international methane emissions observatory, an independent body anchored in the United Nations and which would collect, verify and publish methane emissions data at a global level
  • Using aerial monitoring and satellite detection (through the EU’s Copernicus programme) to monitor methane emissions and global super-emitters
  • Reviewing and possibly revising relevant environmental and climate legislation to more effectively address methane-related emissions (including the Industrial Emissions Directive, and the European Pollutant Release and Transfer Register) from 2021 onwards
Energy-specific actions (the EU Methane Strategy also proposes actions for the agriculture and waste sectors)
  • Delivering legislative proposals in 2021 on: i) compulsory measurement, reporting and verification for all energy-related methane emissions, building on the Oil and Gas Methane Partnership (OGMP 2.0) methodology, and ii) obligations to improve leak detection and repair (“LDAR”) on all fossil gas infrastructure
  • With respect to LDAR, the Commission emphasises that upstream gas companies have a certain incentive to implement LDAR programmes, as they can sell the gas that they prevent from leaking. However, this benefit does not apply for transmission, storage and distribution systems operators (including LNG terminals), which do not own the gas, and the Commission therefore plans to promote in that respect the recognition by National Regulatory Authorities of LDAR as allowed costs for regulated entities in transmission, storage and distribution, including through possible guidance to regulators
  • Considering legislation on eliminating routine venting and flaring covering the full supply chain, complementing and supporting the 2030 objectives of the World Bank’s Zero Routine Flaring initiative and the World’s Bank Global Gas Flaring Reduction Partnership
  • Extending, in cooperation with the United Nations Environment Programme and the Climate and Clean Air Coalition, the OGMP framework to companies in the coal and gas and oil upstream, midstream and downstream sectors
International actions
  • The EU aims, as the largest importer of oil and gas, to reduce methane emissions associated with EU fossil gas consumption (i.e. emissions released outside the EU to produce and deliver fossil gas to the EU) which are estimated to constitute between 3 to 8 times the quantity of emissions occurring within the EU
  • Stepping up the contribution to the work of international organisations
  • Addressing methane emissions with partner countries in all relevant sectors through the EU’s diplomatic and external relations, including:
    • a closer cooperation with the US, Canada and Mexico, which already have methaneregulation and country-level methane reduction targets; and
    • reaching out to China, South Korea and Japan (which, together with the EU, account for more than 75% of the global trade in fossil gas) to create a coalition among fossil fuel buyer countries to support an ambitious international monitoring, reporting and verification (“MRV”) standard
  • Seeking increased transparency in the energy sector by working with international partners to develop a Methane Supply Index, as part of the proposed international methane emissions observatory, which will report data from countries’ emissions inventories as submitted to the UNFCCC
  • Incentivising accurate measurements globally, by proposing to use a default value for volumes that do not have adequate MRV systems in place to incentivise MRV on fossil gas until a compulsory MRV framework for all energy-related methane emissions building on the OGMP 2.0 methodology is implemented
  • Considering methane emission reduction targets, standards or other incentives for fossil energy consumed and imported in the EU
Our assessment
  • The EU Methane Strategy shies away from setting binding targets for methane emissions, but it is an ambitious proposal that anticipates putting in place robust monitoring, reporting and measuring standards and potentially far-reaching EU legislation in the future
  • The Commission’s strategy is in fact a “wait-and-see approach”, pursuant to which it will start implementing initiatives to instigate reduction of methane emissions and aim to gain support for a multilateral coalition to reduce methane emissions globally. In the absence of significant commitments from international partners, the Commission will then consider in due course, through carrying out impact assessments, taking concrete steps to reduce methane emissions globally through its leverage as a leading destination market for natural gas

For further information:

Lewis McDonald

Lewis McDonald
Partner, Global Head of Energy
+44 20 466 2257

Reza Dadbakhsh

Reza Dadbakhsh
Partner, London
+44 20 7466 2679

Silke Goldberg

Silke Goldberg
Partner, London
+44 20 7466 2612

Eliza Eaton

Eliza Eaton
Senior Associate, London
+44 20 7466 2469