EU methane regulation risks worsening the energy crisis

The EU's recently introduced Methane Emissions Regulation (EU MER) presents significant challenges to European energy security, particularly as the bloc grapples with the ongoing energy crisis exacerbated by the wars in Iran and Russia/Ukraine. Critics argue that the regulation, set to take effect on January 1st, will cut oil and gas imports into Europe when supplies are already constrained.

The EU is heavily reliant on imported oil and gas, and fears of an energy crisis this winter may lead to a proposal for a 12-month delay in the regulation's implementation. Wood Mackenzie's carbon experts suggest that methane emissions must be regulated, but current implementation requirements are seen as impractical. Importers must comply with measurement, reporting, and verification (MRV) standards by August 4th, 2024, and penalties for non-compliance can amount to up to 20% of an importer's global annual revenues.

However, many oil and gas exporting countries are not ready to meet the EU's equivalence within the given timeframe, and there is currently no agency accredited to verify methane measurement and reporting for production outside the EU. Industry players and 17 EU member states have called for a three-year postponement of the most substantive Article 28 requirements, but the EU Commission has suggested waiving financial penalties through the end of 2029, while still maintaining the reporting obligation.

This delay may not be enough to prevent potential disruptions in the EU's oil and gas supply during a dangerous stretch of overlapping crises.