IEEJ：February 2021©IEEJ 2021
Special Bulletin
A Japanese Perspective on the International Energy Landscape (519)

February 12, 2021

Attention-attracting EU Methane Strategy and Its Implications
Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, JapanOn February 9, the Institute of Energy Economics, Japan, held an “IEEJ Global EnergyWebinar”, an online seminar featuring a presentation by a famed foreign energy expert. The
presenter in the seventh IEEJ Global Energy Webinar was Prof. Jonathan Stern, chairman of theNatural Gas Research Program at the Oxford Institute for Energy Studies. His presentation titled“The Future of Natural Gas and LNG: are methane emissions a big problem?” discussed how theproblems related to methane emissions in the natural gas and LNG supply chains would affect thefuture of natural gas and LNG that have grown important in the global energy mix, focusing onproblems regarding the European Union’s methane strategy published in October 2020. Following
his presentation, comments were made by Takeshi Soda, director of the Petroleum and Natural Gas
Division, Natural Resources and Fuel Department, Agency for Natural Resources and Energy, andJun Nishizawa, chief executive officer of the Natural Gas Group, Mitsubishi Corp. Later, Prof. Stern
had a panel discussion with the two Japanese commentators and joined a question-and-answer
session of the webinar. I served as moderator of the panel discussion and the question-and-answer
session. I here would like to make my personal comments on the webinar where extremely importantand interesting arguments were made on the methane emissions problem and the EU methanestrategy.
First, the most impressive to me in the webinar was Prof. Stern’s argument that unless themethane emissions problem is adequately addressed, a natural gas and LNG phaseout could
accelerate in the EU and later in Asia as well.
Natural gas and LNG are the cleanest fossil fuels and emit less CO2 than other fossil fuels. In
major countries and regions in the world, natural gas and LNG consumption and its share of primaryenergy consumption have continued to expand thanks to abundant resources and supply, although theshare has varied by country or region. Particularly in Asia where energy demand is increasing, greathopes are placed on natural gas and LNG as clean energy. As calls for suppressing greenhouse gasemissions are growing amid increasing global interest in climate change, however, the world hasincreasingly become critical of not only CO2 emissions but also methane emissions for which theglobal warming potential is 10-fold higher than for CO2. Although methane is emitted through oil,gas, and coal production, the agricultural sector is known as a primary methane emitter. However,methane emission reduction in the energy sector suitable for cost-efficient emission cuts has become
an important issue mainly in Europe. The just inaugurated U.S. Biden administration has indicatedan attitude of enhancing methane emission reduction.
In October 2020, the EU announced its methane strategy. This strategy covers not only theenergy sector but also others including agriculture. However, a methane emission reduction initiativein the energy sector including natural gas attracts attention. Natural gas is a key energy source
accounting for 25% of EU primary energy demand in 2019. The EU seeks to achieve carbon neutral
status by 2050 and plans to promote the decarbonization of natural gas. In this respect, it has1

IEEJ：February 2021©IEEJ 2021
proposed the methane strategy focusing on natural gas imports. Behind the strategy is the EU’s
growing dependence on natural gas imports. As internal natural gas production declined rapidly, theEU depended on net imports for 79% of local natural gas consumption. The dependence on imports
is expected to rise further. So, the EU has requested major gas exporters to the EU (including Russia,Algeria, Qatar, Nigeria, and the United States) to measure, report, and verify methane emissions inthe upstream (development and production) sector and the mid-stream and transportation sectors fornatural gas and LNG for the EU. However, the EU has indicated that if exporters are identified by
the EU as failing to take sufficient measures in response to the request, it would consider taking
tougher actions including the imposition of some economic burden on relevant imports.
In trying to enhance methane emission reduction initiatives, the EU has also paid attention to
LNG as a more liquid trading good and indicated that it would offer to cooperate with major LNGimporters such as Japan, China, and South Korea in tackling the methane emissions problem in theenergy sector. While becoming more critical of the methane emissions problem, the EU as a major
natural gas and LNG importer may be trying to prevent Asia from becoming a loophole.
As noted above, the EU methane strategy requests natural gas and LNG exporters to developarrangements for methane emission measurement, reporting and verification (MRV), falling short ofsetting out any forcible measures. The strategy will have to be legislated before taking effect in eachEU member country. Such legislation is expected to come in or after the middle of the 2020s. Whenmajor natural gas and LNG exporters develop the methane MRV arrangements, how to accurately
measure methane emissions may become a major technical challenge. In the case of U.S. LNG, it
may be difficult to identify the gas fields producing natural gas for liquefaction. As methaneemissions differ by gas field, the methane emission measurement may be viewed as difficult. How tocooperate with major LNG importers outside Europe would be a future challenge for the EU as well.
As pointed out by Prof. Stern, the methane emissions problem has become important as far as
EU policymakers have increasingly viewed responses to methane emissions as significant in linewith growing interest in climate change. For this reason, as noted above, natural gas and LNG could
be phased out with their share of the energy mix declining in the EU and even in Asia later if naturalgas and LNG, even though seen as the cleanest among fossil fuels, are affected further by themethane emissions problem under the impact of carbon neutral initiatives.
As noted in the panel discussion, however, natural gas and LNG are expected to play a key rolein initiatives to reduce environmental loads and promote low-carbonization and decarbonization inthe world including the EU, and particularly in Asia. Key points would include how best to use
natural gas and LNG to promote decarbonization cost-efficiently and suppress costs for transition toa carbon neutral society and how to use blue hydrogen and ammonia from natural gas over the longterm. To allow natural gas and LNG to play the key role, natural gas and LNG stakeholders would
have to sufficiently address the methane emissions problem.
Another point I felt through the webinar is that international rulemaking is critically important.
As climate change countermeasures are enhanced, international rules are destined to become
extremely important for institutional and technical fields and for the certification of technologies andtheir effects. The EU has been taking the initiative in such rulemaking. It will become important forJapan and for Asia to recognize the significance of international rulemaking and appropriately makerules reflecting Asian realities by engaging in such rulemaking proactively for international
contributions.
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Contact :report@tky.ieej.or.jp