Brussels, 10 October 2023 -- Thanks in part to the EU’s leadership, the fight against methane emissions has become a shared global priority. Countries around the world increasingly recognize that we will not be able to limit the planet’s warming to 1.5°C without drastic reductions in anthropogenic methane emissions, and governments, industries, scientists, and civil society are increasingly working together to find new ways to track, measure, and reduce this potent greenhouse gas.
As we approach the third year of the Global Methane Pledge, the EU’s leadership in the fight against methane emissions has never been more pivotal: methane concentrations continue to increase, and concrete plans for abatement are urgently needed.
As the world’s largest importer of oil and natural gas, the European Union is in a unique position to leverage its buying power, climate ambition, and technical expertise to drastically reduce methane emissions from the oil and gas sector, nearly a quarter of global methane emissions.i The EU imports 90% of the gas and 97% of the oil it consumes,ii which means that by implementing a rigorous import standard for these fossil fuels in the forthcoming Methane Regulation, the EU can take steps to both drive methane reductions amongst its trade partners and reduce the emissions it is responsible for creating outside its borders.
Therefore, as you negotiate the forthcoming Methane Regulation, we urge you to guarantee this legislation maximizes its full potential by including a rigorous import standard for oil and gas. A Methane Regulation that includes an equivalent 0.2% emission intensity standard on imports could reduce up to 30% of global emissions in the oil and gas sector if exporting countries to the EU employ measures to reduce emissions from their total production and not just the volumes they send to the EU.iii Consequently, an EU import standard could reduce roughly 20 times more emissions than an agreement limited solely to production within the EU.
As you work towards an agreement on Article 27 and Annex VIII of the Methane Regulation, we recommend that you take the following points into consideration:
• An import standard can be smoothly implemented without a grandfather clause to exempt existing contracts: In the event that importers cannot secure emissions data from exporters to evaluate compliance with an intensity standard, default emissions factors for each country and segment of the value chain should be used to determine any potential fees. These default emissions factors would be set by the European Commission, and would help incentivize importers and exporters to provide information that may show lower intensity than the default emissions factors.iv This means that while some importers may not have contractual rights to request emissions data from exporters, the imported oil and gas could still be included so long as the country of origin and transmission can be determined. This would allow all incoming oil and gas to be included in the scope of an import standard without a grandfather clause exemption.
• Even when LNG and gas streams are merged, or when importers purchase gas from aggregate marketers, data on intensity and origin can still be tracked: These types of data questions have been resolved in the past, and any company working towards certification by MiQ or Canary would need to provide similar data. It’s important to recognize that companies can be extremely accurate when it comes to assessing royalties – for fiscal purposes. Therefore, any company can track and verify how much of each resource is coming from where, and even marketers that aggregate gas from multiple producers will know how much they receive from each producer. Furthermore, the delay period before implementation of an import standard (set by the EP to start in 2026), would give importers and exporters ample time to sort and disaggregate this data.
• An EU methane import standard would not negatively impact energy security to the EU: Cutting methane emissions is intrinsically beneficial to energy security. The IEA estimated that the oil and gas industry could have saved 210 bcm of fossil gas by limiting flaring and methane emissions in 2021, or $90 billion in 2022 prices.v This represents over 58% of the EU’s annual gas consumption.vi An energy- equivalent 0.2% intensity import standard that covers both oil and gas in its scope could save an estimated 90 bcm of gas per year, equivalent to nearly the entire annual consumption of Germany. This would not only benefit European energy security, but also benefit the economies of partner countries through €54 billion of increased revenue.vii
• An import standard can be implemented without bilateral agreements or a global framework: Precedent approaches under other EU regimes establish import standards without establishing bilateral agreements or a global framework involving producers and buyers. Examples include deforestation-free products, measures to eliminate illegal and unregulated fishing, and the new Carbon Border Adjustment Mechanism (CBAM). An import standard would take a similar approach to CBAM, which requires importers to purchase carbon certificates for embedded emissions, thereby increasing the landed cost for exports and subsequently encouraging third countries to commit to the EU’s legislative standards to maintain competitiveness.
Sincerely,
1. 2Celsius - Mihai Stoica, Executive Director
2. Amici della Terra – Monica Tommasi, President
3. CAN Europe – Esther Bollendorff, Senior Gas Policy Coordinator
4. Clean Air Task Force – Jonathan Banks, Global Director, Methane
5. Deutsche Umwelthilfe – Sascha Müller-Kraenner, Executive Director
6. Environmental Defense Fund Europe – Flavia Sollazzo, Senior Director EU Energy Transition
7. Environmental Investigation Agency – Clare Perry, EIA Climate Campaign Leader
8. Fundación Renovables – Raquel Paule, Chief Director
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i Saunois et al., 2020. The Global Methane Budget 2000-2017. Earth System Science Data. Available here.
ii European Commission, Proposal for a Regulation of the European Parliament and of the Council on methane emissions reduction in the energy sector and amending Regulation (EU) 2019/942, 2022.
iii Analysis by CATF showsthat a comparable 0.2% intensity standard implemented solely on EU production would reduce just 1.4% of total oil and gas sector emissions. See CATF Analysis, “Emissions Reduction Potential of an EU Methane Import Standard.” 2023. Available here.
iv This approach would mirror the approach taken in the EU’s Carbon Border Adjustment Mechanism, which applies a default rate should an importer not have access to emissions data.
v IEA. “The energy security case for tackling flaring and methane leaks.” 2022. Available here.
vi IEA. EU gas consumption in 2022 was 360bcm according to the IEA, see, “Baseline European Union gas demand and supply in 2023.” Available here.
vii CATF Analysis, “Emissions Reduction Potential of an EU Methane Import Standard.” 2023. Available here.