The European Commission (EC) has informed EU governments that they should waive penalties for oil and gas companies that breach its methane emissions law for the next three years, owing to pressure from the United States government to scrap the rules. While the decision is not binding, many member states are expected to follow the EC’s advice.
The EC made the move after the U.S. and Qatar, as well as oil and gas industry groups and most EU member states, voiced concerns about the strict rules and demanded change. Several states feared that Europe would not be able to secure fuel supplies once the rules came into place in January 2027 if energy companies could not provide gas imports that met the EU’s strict emissions rules.
The EC announced that the changes were justified “in a context of global energy markets tightness caused by the ongoing blockade of the Strait of Hormuz”. The Strait has been almost completely closed since February, following the U.S.-Israeli-led war on Iran. The trade corridor, located between Oman and Iran, connects the Persian Gulf with the Gulf of Oman and the Arabian Sea. It transports an average of around 20 per cent of the global petroleum liquids and gas supply when fully operational.
The EU climate policy, a world first, was adopted in 2024 to crack down on methane leaks in a bid to tackle climate change. It established the first EU framework for measuring, reporting, and verifying methane emissions in the energy sector. However, the EC said in a statement that while methane is the second-greatest contributor to climate change, “geopolitical developments in the Middle East are re-shaping the global energy system”.
Methane heats the planet up to 80 times more than carbon dioxide over two decades. Methane has contributed roughly 30 per cent of the increase in global temperatures since the Industrial Revolution, and the energy sector contributes over 35 per cent of the methane emissions from human activity. Despite the launch of the Global Methane Pledge at the COP26 climate summit in 2021, many countries are falling behind on their methane targets.
The delay in the rule’s implementation is expected to help the EU to avoid supply chain disruptions. Once the rule is implemented, companies that fail to comply could face fines equivalent to up to 20 per cent of their annual turnover. However, critics have suggested that rather than waive the rule entirely, the EC could amend the law for gradual implementation to help Europe begin to tackle methane emissions.
Esther Bollendorff, the Fossil Free Programme Manager at Climate Action Network Europe, explained, “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 U.S.” She added that the recommendations “should not deter member states from implementing robust penalty systems” and suggested that such actions are “essential to ensuring that companies pay the price for their pollution”.
The United States has been particularly vocal in its criticism of the law and of other EU climate policies. U.S. Energy Secretary Chris Wright, alongside Algeria, Nigeria, and Qatar, addressed the EU in June, warning of potential disruptions to the region’s oil and gas supply. A group of 17 EU member states also requested that the law be delayed.
The EU has some of the world’s most far-reaching climate rules, which, if enacted, could provide a blueprint for other countries and regions to follow. However, the bloc is currently considering other changes to climate policy that could trigger backlash from environmentalists.
The EC has unveiled proposals to slow cuts to greenhouse gas emissions limits for businesses as part of a potential overhaul. The reforms would water down the rules for the EU’s emissions trading system and give businesses more time to reduce their carbon emissions than previously planned.
The proposed changes could allow some industries to extend the deadline to 2038, from 2034 at present, so long as they commit to investing in decarbonisation efforts. EU countries and lawmakers must approve the proposal for it to take effect, which could take up to a year. EU climate commissioner Wopke Hoekstra stated, “We are adopting a more business-friendly and, may I say so, savvy approach.” Meanwhile, the EC assured member states that the changes would still ensure the ETS was aligned with the EU’s target of reducing carbon emissions by 90 per cent by 2040, compared with 1990 levels.
Pressure from the United States and other countries, as well as continued global fuel shortages, has prompted the European Commission to encourage a temporary waiver on penalties for oil and gas companies that breach its methane emissions rules, much to the dismay of environmentalists. In addition, there are growing concerns that the EU’s strong climate policy may be watered down if other rule changes are imposed before it can be implemented.
By Felicity Bradstock for Oilprice.com
