European Commission eases penalties linked to methane rules

The European Commission has proposed waiving penalties linked to the bloc’s methane rules for three years.

Industry and top liquefied natural gas (LNG) exporters have been pressuring Brussels over its burdensome reporting requirements, which they said could affect exports to the European Union.

EU member states adopted methane rules in May 2024, introducing the bloc’s first framework for measuring, reporting and verifying methane emissions in the energy sector as part of efforts to curb one of the most potent greenhouse gases. Failure to honor such requests would incur penalties, which would start applying in 2027.

But on Monday, the Commission recommended exempting business operators from full compliance.

The much-anticipated recommendations come after months of lobbying from the United States, Qatar, Algeria and Nigeria, who warned the EU executive that its rules would endanger the EU’s security of supply at a time when the bloc is struggling to offset losses from the Middle East – a claim hotly contested by environmentalists.

Green organisations warned that broad discretion to waive penalties could weaken one of the world’s most ambitious efforts to curb emissions of methane, a greenhouse gas far more potent in the short term than carbon dioxide.

“A three-year sanction holiday, triggered by exaggerated and unsubstantiated security of supply concerns raised by industry, risks giving a free pass to methane-intensive gas imports – notably from the US,” said Esther Bollendorff, fossil free program manager at Climate Action Network Europe.

Bollendorff argued that the recommendations “should not deter member states from implementing robust penalty systems”, arguing that such actions are “essential to ensuring that companies pay the price for their pollution”.

“These recommendations should be reviewed well before the suggested 2028 timeline, to suspend their application as soon as possible,” Bollendorff added.

Contractual law for regulatory certainty

In the four-page recommendation, Brussels also instructs importers how to write contracts that will allow them to comply with the rules.

The recommendations don’t create new legal obligations, but they provide optional model contract clauses that energy importers can use to comply with the methane rules – a response business operators’ calls for regulatory certainty.

“The optional model clauses are intended to promote fair, transparent and sustainable contractual practices, to provide a framework for the adjustment of contractual terms, to support compliance (…) and to foster reliable supply of crude oil, natural gas, LNG or coal to the Union,” the Commission’s recommendations say.

Industry groups say the Commission has acknowledged flaws in the methane rules that could threaten Europe’s energy security, but argue its proposed non-binding guidance falls short.

“The Commission persists in wanting to fix them through non-binding guidance, which cannot deliver the uniform legal certainty Europe needs. Only targeted amendments, as called for by Member States and industry, can,” a spokesperson from the International Association of Oil and Gas Producers told Euronews.

With fewer than six months before key provisions take effect, businesses warn that delays are already affecting commercial decisions and supply contracts. They urge the EU to fast-track targeted amendments that maintain methane reduction goals while safeguarding the EU’s security of supply, competitiveness and consumers from higher costs.

Maas Goote, international lawyer and former EU lead negotiator at UN climate talks, welcomed the Commission’s “wise approach” by “offering pragmatic solutions for implementation issues and strengthening the EU methane regime step-by-step”.

“In doing so, it is important that the integrity of the Regulation remains intact,” Goote noted. “The upward trend of methane emissions worldwide shows that voluntary approaches are not delivering results. We need strong regulatory frameworks to drive down methane emissions, with the EU methane regulation as a strong and critical piece.”