EU “Fit for 55” package: proposal to reduce methane emissions in energy sector

On 15 December 2021, the European Commission published the second suite of its “Fit for 55” package, with a number of legislative and policy proposals to enable the EU to meet its new 2030 target - i.e. a package that is "fit for" delivering a 55% reduction in greenhouse gas emissions by 2030.

This blog post focuses on the Proposal for a Regulation to reduce methane emissions in the energy sector. See also the accompanying Q&A, Factsheet and press release.

For more information on the rest of the package, see the Linklaters “Fit for 55” microsite.

The details 

The proposal builds on the EU Methane Strategy 2020 and the Global Methane Pledge, which is a joint EU / US initiative launched at COP26 in which over 100 countries committed to reduce their collective methane emissions by 30% by 2030 (compared to 2020 levels).

The proposed Regulation will establish a new EU legal framework for the measurement, reporting, and verification (MRV) of methane emissions. The new rules would require companies to measure and quantify their asset-level methane emissions at source and carry out comprehensive surveys to detect and repair methane leaks in their operations. This will involve a shift from estimates to direct measurements, checked by independent verifiers. The proposal would also ban venting and flaring practices, except in very limited circumstances. The draft Regulation proposes to allow individuals and organisations to submit complaints to the relevant national authorities if they suspect methane leaks.

In addition, Member States would be required to establish mitigation plans for methane emissions from abandoned coal mines and inactive oil and fossil gas wells. Member States would be required to establish an inventory of inactive and closed or abandoned assets for all three sectors. The inventory will serve as a base to prepare and implement mitigation plans. Where such assets do not have a company that is legally responsible for them, and ownership or liability cannot be ascertained, Member States will be the responsible parties.

The proposal covers:

• oil and fossil gas upstream exploration and production, fossil gas gathering and processing, including inactive oil and fossil gas wells;
• gas transmission, distribution, underground storage and liquid gas (LNG) terminals operating with fossil and/or renewable (bio-or synthetic) methane; and
• underground and surface coalmines in operation, and closed and abandoned underground coal mines.

The Commission is also proposing to tackle methane emissions from EU energy imports in two steps:

1. Importers of fossil fuels will be required to submit information about how their suppliers perform measurement, reporting and verification of their emissions and how they mitigate those emissions. The Commission will then establish a methane transparency database, where the data reported by importers and EU operators will be made available to the public. The intention is to inform the purchasing decisions of importers and provide transparency to other stakeholders and the public. The Commission will also establish a global monitoring tool (based on satellite technology) to show methane emitting hot-spots inside and outside the EU.
2. The Commission will engage in a diplomatic dialogue with international partners and review the methane regulation by 2025 with a view to introducing more stringent measures on fossil fuels imports once all the data is available.

What does it mean in practice?

Methane is the second biggest contributor to climate change after CO2 and is thought to be responsible for about 30% of current global warming. Methane is several times more potent than CO2 but since it breaks down in the atmosphere faster, it has the potential to produce rapid results and so is seen as a relatively quick win in the battle against climate change. In the EU, 53% of anthropogenic methane emissions come from the agricultural sector, 26% from waste and 19% from energy (excluding imports).

According to the Commission, in most cases methane from the energy sector can be recovered and sold on the market so it claims that the measures in the proposed Regulation will be cost-effective for companies and are not expected to significantly impact energy prices. Methane emissions from the agricultural and waste sectors are being addressed through other EU initiatives.

Although the EU only contributes to around 5% of global methane emissions, it is thought to be the largest global importer of fossil fuels. The hope is that the Global Methane Pledge (launched jointly by the EU and US at COP26) will prove successful. In any event, the draft EU Regulation provides for a review by 2025 so that the Commission can assess whether the EU needs to introduce more stringent measures on fossil fuels imports.

Next steps

The draft Regulation will now need to be considered by the European Parliament and Council so it may take 12-18 months at least before the legislation is adopted.