EU's greenhouse gas strategy fails to plug methane hole

FILE PHOTO: A view shows Gazprom's gas processing facility at Bovanenkovo gas field

By Kate Abnett and Shadia Nasralla

BRUSSELS (Reuters) - The European Union does not plan to crack down on planet-warming methane emissions from gas imports despite pressure from oil companies, activists and academics, according to its draft strategy and sources familiar with the matter.

While the EU plans to impose carbon dioxide (CO2) taxes on imports of energy intensive goods, critics say the world's biggest gas importer is not targeting suppliers of the fuel hard enough in its methane strategy due to be unveiled this year.

This comes despite an unlikely alliance of big oil firms, environmental activists, investors and researchers pushing the bloc to plug this hole in its methane plan and punish gas producers that fail to rein in their emissions.

While the EU regulates methane emissions from gas burned in the bloc, it doesn't regulate emissions during the production or transport of gas imported by Europe. That means those emissions don't show up in the tally of greenhouse gases linked to Europe's gas-fuelled power plants, nor are they are counted in the EU's climate goals.

The draft methane plan, which may be subject to change, says the European Commission will propose legislation requiring gas firms to better monitor and report methane emissions, but it does not include setting methane standards for imported gas.

The Commission, the European Union's executive, declined to comment on unpublished documents.

Campaigners say the omission of imported emissions risks undermining the EU's climate policy as methane is 100 times more potent than CO2 when it first goes into the atmosphere.

"Setting clear product standard requirements on all gas sold in the EU's internal market is essentially a global climate opportunity with significant potential to curb global methane emissions from oil and gas quickly," said Poppy Kalesi, global energy policy director at the Environmental Defense Fund (EDF).

It teamed up with seven European oil firms - BP, Eni, Equinor, Repsol, Royal Dutch Shell, Total and Wintershall DEA - to ask Brussels to address what they see as a blind spot in its climate plans.

Sources familiar with the Commission's thinking say it has not shifted its position on regulating methane emissions from imported gas since compiling the draft.

GRAPHIC-EU gas imports by origin

Gas production is associated with emissions of methane, which leaches into the atmosphere from leaky pipelines and infrastructure at oil and gas fields.

The EU imported about 80% of the gas it consumed last year. Almost three-quarters of its imports came from Russia, Norway and Algeria, with Russia's Gazprom by far the biggest non-EU supplier.

Methane is 100 times more powerful than CO2 as a global warming gas, but it degrades while CO2 remains in the atmosphere. Over a 20-year period, methane is 86 times more powerful though that drops to 34 times over 100 years.

GRAPHIC-Methane emissions from oil and gas by country


Analysis of satellite imagery and other aerial surveillance over the past few years has shown that oil and gas industry leaks are responsible for far more of the methane in the atmosphere than previously thought.

The Institutional Investors Group on Climate Change, whose members have 30 trillion euros ($34 trillion) of assets under management, wrote to the Commission in May asking it to propose rules this year to ban gas with a methane leakage rate in upstream supply chains of more than 0.25% by 2025.

U.S. lobby groups EDF and the Rocky Mountain Institute, the Florence School of Regulation research centre and the European oil companies also wrote to the Commission in May, recommending "a methane intensity-based performance standard applied to the upstream segment of the supply chains from 2025".

Their letter called for: "A procurement standard to be applied from 2025 to incentivise the continual reduction of the methane emissions intensity of the gas entering domestic and import supply chains."

A Commission official said by focusing its proposals on monitoring and reporting emissions, the aim was to get a handle on the issue.

"The main thing is to get a good picture of where the methane is actually coming from," the official said, speaking on condition of anonymity.

Campaigners fear this approach could delay plans to regulate imported emissions and say there is sufficient data to design such policies.

Andris Piebalgs, professor at the Florence School of Regulation and a former EU energy commissioner, said any indication that Brussels will integrate international methane emissions into its policy would be a substantial step forward.

"Because at this stage, it's not ... much discussed at all."

For European oil and gas firms, tackling methane emissions could help them make the case that gas can play a role in Europe's shift to "net zero" emissions by 2050 at a time when investors are increasingly focused on their climate performance.

European oil companies that have invested to curb their own methane emissions may also be wary about being undercut by producers outside the bloc who haven't done the same.

GRAPHIC-Global methane intensity on the rise


Gas is far from being a zero emissions fuel but it produces roughly half the CO2 emissions of coal when burned in power plants and is seen by Eastern European countries such as Poland as a transition fuel to wean themselves off coal.

But methane leaks can quickly dent this argument.

"When you get to about 3% leakage, the entire benefit of gas as a lower-emissions fuel is entirely wiped out. So we're operating in a relatively small window of gas actually being better than coal," said Frank Jotzo, director of the centre for climate economics and policy at Australian National University.

The International Energy Agency says a third of methane emissions from the oil and gas industry could be saved at no net cost, as the captured gas could be sold.

However, EU methane standards for gas imports could rile large suppliers, especially if it restricts their access to the European market.

"As 40% of EU gas imports stem from Russia, dealing with methane emissions means dealing with Gazprom," said Esther Bollendorff, EU gas policy coordinator at the non-profit Climate Action Network, referring to Russia's state-owned gas producer.

Gazprom is Europe's largest gas supplier and owns pipelines transporting the fuel to Europe. Last year, it sold almost 200 billion cubic metres of gas to countries in Europe and Turkey.

In a June 10 statement about emissions, Gazprom estimated that 0.29% of the 679 billion cubic metres of gas it moved through its pipelines escaped as methane in 2019 and said this corresponded to the best global practices.

Some observers said the slump in EU gas consumption this year during coronavirus lockdowns meant the bloc was less dependent on gas suppliers and was in a stronger position to push them to tackle methane emissions.

"The EU has the power now," said Lisa Fischer, senior policy adviser at the climate change think-tank E3G.

($1 = 0.8749 euros)

(Reporting by Kate Abnett and Shadia Nasralla; Editing by David Clarke)