This post is by Jack Corscadden, climate campaigner at EIA.
On 20 July, the European Commission issued two long awaited recommendations to support the implementation of the EU Methane Regulation (EUMR). The commission aims to clarify to EU member states how to effectively implement the rules to reduce methane emissions linked to imported fossil fuels. But these recommendations have opened the door to greenwashing and have largely removed the incentive for companies to comply with the requirements.
Cherry picked exports allow the worst pollution to continue
The first recommendation addresses solutions to demonstrate compliance with the monitoring, reporting and verification (MRV) requirements due in January 2027. To assess the environmental attributes linked to specific fossil fuel volumes, we need to know the provenance of oil and gas. The commission has put forward two optional solutions: trace-and-claim and certification.
Only the first of these will enable fossil fuels volumes, and their associated emissions, to be traced back to the site of production. This is achieved by linking emissions to specific fossil fuel volumes, and following the trading of these fuels along the contractual supply chain. But this is the more complicated of the two options, as new digital infrastructure would be needed.
Certification on the other hand, is likely to become the de facto solution. It allows for the separation of environmental attributes from their associated fuels. If applied at national level, this approach will enable the cherry picking of assets for export to the EU, while the worst performing facilities continue to pollute. Significant concerns have been raised about the integrity of the certificates issued by existing solutions providers. Certification opens the door to greenwashing and will not deliver methane emissions reductions.
Oil and gas companies have fought penalties
The commission’s second recommendation is that EU member states suspend any penalties for failing to comply for three years. So, between 2027 and 2029, a company that breaches import requirements won’t face any financial consequences.
This is in response to the energy crisis resulting from the US-Iran war. However, there’s no evidence that penalties reduce energy security. It’s a knee jerk reaction and a capitulation to demands from the US and the fossil fuel industry.
Industry advocated this ‘stop-the-clock’ mechanism long before the US-Iran war. Softening penalties won’t protect European consumers, but it does protect the profit margins of oil and gas companies. Even under the most ambitious proposed penalty frameworks, the economic impact on suppliers would remain moderate relative to normal fluctuations in oil and gas prices.
Member states are divided
It’s now up to member states to consider the recommendations. Most have yet to adopt national penalty frameworks, despite it being well beyond the deadline. A harmonised approach is needed across the EU to support implementation and avoid ‘enforcement shopping’ by different operators. If the ambition of certain member states falls down on the application of penalties or the acceptance of weak certificates, the regulation will effectively be nullified.
Despite penalties being suspended, all obligations remain in place. They say a good compromise is when both parties are left dissatisfied. This is certainly the case here. The International Association of Oil and Gas Producers (IOGP) argues that the non-binding recommendations don’t provide “the uniform legal certainty” needed. While NGOs state the recommendations have removed the regulation’s teeth by giving companies a free pass to breach it. Member states remain extremely divided in their support for the EUMR.
What does this mean for the UK?
Despite the UK being a net importer of energy, around 80 per cent of the oil produced in the North Sea is exported. This is because different oil refineries are set up to process crude oil volumes with specific characteristics. Most UK oil refineries can’t process North Sea oil. It has little to no impact on UK energy prices, which are determined by global markets.
Ninety per cent of UK primary oil exports go to the EU, mainly to refining hubs in the Netherlands. Importers placing these fuels on the EU market must ensure that they are compliant with EUMR rules. While these companies will not be subjected to financial penalties over the coming three years, they still need to comply with the importer requirements.
As of January 2027, these companies must meet the same MRV requirements as fossil fuel production within the EU. In 2028, they will need to start reporting on the methane intensity of their product, with an import performance standard (maximum intensity threshold) coming into play in 2030.
The UK’s Energy Independence Bill should mirror the EU’s approach
The UK has positioned itself as a methane leader, agreeing international commitments under the Global Methane Pledge and leading a COP30 initiative to drastically reduce fossil fuel methane emissions. By adopting domestic legislation, the UK can give credibility to these leadership efforts, while streamlining compliance with EU requirements.
The upcoming Energy Independence Bill is the perfect opportunity to introduce mandatory methane requirements. The UK could mirror the EU’s approach by banning venting and flaring and introducing requirements for MRV and leak detection and repair (LDAR) to eliminate duplicative compliance burdens for companies. It could also secure regulatory equivalency under Article 28 of the EUMR, meaning that UK companies would not subjected to EU reporting requirements, if they meet equivalent UK standards. This would ensure the continued export of UK oil to the EU market, without any risk of financial penalties for rule infringements.
By adopting its own import performance standard, the UK would show support for the EU approach to reducing methane emissions, at a time when EU policy makers are under significant pressure from vested interests to relax the rules. If it did so, a greater share of the global fossil fuel market would be subject to performance standards, sending a strong demand signal to other producer countries.
Discover more from Inside track
Subscribe to get the latest posts sent to your email.
