EUROPEAN COMMISSION Brussels, 15.12.2021 COM(2021) 805 final 2021/0423(COD) 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 (Text with EEA relevance) {SEC(2021) 432 final} - {SWD(2021) 459 final} - {SWD(2021) 460 final}



EXPLANATORY MEMORANDUM 1.CONTEXT OF THE PROPOSAL •Reasons for and objectives of the proposal The European Green Deal puts the Union on a path to climate neutrality by 2050 through the deep decarbonisation of all sectors of the economy. It also aims to protect, conserve and enhance the EU's natural capital, and protect the health and well-being of citizens from environment-related risks and impacts. Methane is a powerful greenhouse gas, second only to carbon dioxide in its overall contribution to climate change and responsible for about a third of current climate warming. Although it remains in the atmosphere for a shorter period than carbon dioxide (10-12 years before oxidizing into carbon dioxide that continues to trap heat), on a molecular level, methane is a far more powerful climate forcer (with a global warming potential of 28 times that of carbon dioxide over 100 years and of 86 over 20 years). In addition, methane contributes to ozone formation, which is a potent air pollutant that causes serious health problems. Approximately 60% of global methane emissions are anthropogenic, of which the largest sources, based on estimations, are fossil fuel production and use (between a fourth and a third), waste (around a quarter) and agriculture (around half of total methane emissions), in particular linked to intensive production. The Intergovernmental Panel on Climate Change (IPCC) notes that deep reductions in methane emissions must be achieved by 2030 for the world to stay below the 1.5°C (or even the 2°C) 2050 global temperature target. The most recent IPCC report underlines the role of methane as one of the main greenhouse gases responsible for climate change. The report outlines that methane levels are at an all-time high and well above the emission levels compatible with limiting warming to 1.5°C. There is thus a need for a sharp, rapid and sustained reduction in methane emissions to slow down global warming and improve air quality. It is important to note that the report concludes that the increase of methane in the atmosphere is the result of human activity and that fossil fuels have been a large contributor to the growth in methane emissions at least since 2007, alongside agriculture (mainly livestock) and wastewater. The 2030 Climate Target Plan’s impact assessment indicates that in the EU the most cost-effective methane emission savings can be achieved in the energy sector. These emissions are a transboundary problem and uncoordinated regulatory treatment across Member States and sectors creates gaps and inefficiencies and may impair the functioning of the Union’s single market for energy. As the majority of methane emissions linked to fossil energy consumed within the Union occur outside its borders, only joint action by Member States could present results in this field. In September 2021 the Union and the United States announced the Global Methane Pledge which represents a political commitment to reduce global methane emissions across all methane-emitting sectors by 30% by 2030 (from 2020 levels), launched at the UN Climate Change Conference (COP 26) in November 2021 in Glasgow. Over one hundred countries have committed to support the Pledge, representing nearly half of global anthropogenic methane emissions. The Global Methane Pledge includes a commitment to move towards using best available inventory methodologies to quantify methane emissions, with a particular focus on high emission sources. The general objective of the Regulation is, in the context of the functioning of the internal market for energy and while ensuring security of supply in the Union, to preserve and improve the environment by reducing methane emissions from fossil energy produced or consumed in the Union. The specific objectives are the following: (i) Improve the accuracy of information on the main sources of methane emissions associated with energy produced and consumed within the EU. The goal is to ensure the availability of asset-level data and robust quantification of emissions, and thereby increase the accuracy of measurements – including the reporting of greenhouse gas (‘GHG’) inventories data to the United Nations Framework Convention on Climate Change (‘UNFCCC’) – as well as the scope for appropriate measures for mitigation. (ii)Ensure further effective reduction of methane emissions across the energy supply chain in the EU. This specific objective addresses the market failures leading to insufficient mitigation of methane emissions by companies. (iii)Improve the availability of information to provide incentives for the reduction of methane emissions related to fossil energy imported to the EU. As the majority of methane emissions linked to fossil energy consumed within the EU occur outside the EU, this specific objective seeks to set incentives to reduce methane emissions in partner countries by creating transparency in the market. •Consistency with existing policy provisions in the policy area In Regulation (EU) 2021/1119 (‘European Climate Law’), the Union has enshrined into legislation the target of economy-wide climate neutrality by 2050 and also established a binding Union domestic reduction commitment of net greenhouse gas emissions (emissions after deduction of removals) of at least 55% below 1990 levels by 2030. The proposal builds on the Union’s 2030 Climate Target Plan and its impact assessment. The Climate Target Plan showed, on the basis of modelled scenarios, that achievement of an increased climate target of at least 55% net greenhouse gas emissions reduction in 2030 is feasible and would enable a smooth trajectory to climate neutrality in 2050. It also highlights the need to step-up reductions in methane emissions. The European Green Deal combines a comprehensive set of mutually reinforcing measures and initiatives aimed at achieving climate neutrality in the Union by 2050. The European Green Deal Communication indicates that the decarbonisation of the gas sector will be facilitated, including by addressing the issue of energy-related methane emissions. The Commission adopted an EU strategy to reduce methane emissions (‘the Methane Strategy’) in October 2020 setting out measures to cut methane emissions in the EU, including in the energy sector, and internationally. Regulation (EU) 2018/1999 (Governance Regulation) requires Member States to establish national inventory systems to estimate anthropogenic emissions of greenhouse gases and to report those national projections. This reporting is done using IPCC guidelines, and is often based on default emission factors rather than direct source-level measurements, implying uncertainties regarding the precise origin, frequency and magnitude of emissions. Methane emissions occurring at the level of oil and fossil gas exploration and production, fossil gas gathering and processing, transmission, distribution, underground storage and liquid fossil gas (LNG) terminals, as well as operating, closed or abandoned coal mines are not specifically regulated at the Union level.

Directive 2010/75/EU (Industrial Emissions Directive, IED), currently under revision, regulates pollutant emissions from industrial installations, notably by setting emission limit values based on best available techniques as permit conditions. The IED covers the refining of mineral oil and gas but not fossil gas upstream, mid and downstream (LNG, underground gas storage, transmission, distribution) or coal mining. Closely related to the IED, Regulation (EC) 166/2006 (European Pollutant Release and Transfer Register, E-PRTR), requires ‘Underground mining and related operations’ to report pollutant releases, including methane when exceeding a reporting threshold of 100,000 kg/year. For measuring methane releases, Appendix 3 of the E-PRTR guidance refers to an ISO standard in preparation (by ISP/TC 146/SC 1/WG 22). The E-PRTR is also currently under revision. The revision of the IED and the E-PRTR will take into account the need to avoid double regulation. This proposal is thus complementary to those two acts as it addresses methane emissions along the entire fossil energy supply chain. On 14 July 2021 the European Commission adopted a series of legislative proposals setting out how it intends to achieve climate neutrality in the EU by 2050, including the intermediate target of an at least 55% net reduction in greenhouse gas emissions by 2030. In this context, the following initiatives have relevant links with methane emission measurement and mitigation: Regulation (EU) 2018/842 (the Effort Sharing Regulation, ESR) contains binding annual greenhouse gas emission targets at country level for Member States from 2021 to 2030 for sectors including transport (without aviation), buildings, agriculture, waste, industry and the parts of the energy sector not covered by the existing EU Emissions Trading System (ETS). It includes methane in its scope and this is maintained in the proposal for revision adopted on 14 July 2021. This initiative is complimentary to the ESR as it introduces specific measures for the reduction of methane emissions, as the ESR does not prescribe such measures and leaves some margin to Member States on how best to achieve the required greenhouse gas emission reductions. Those measures will contribute to Member States fulfilling their targets and can also contribute to increasing the cost-effectiveness of achieving the ESR’s targets due to the trading potential in the ESR between Member States. The proposal to amend Regulation (EU) 2018/841 (LULUCF Regulation) as part of the ‘Fit for 55’ package sets an overall EU target for carbon removals by natural sinks, national targets will require Member States to care for and expand their carbon sinks. The proposal also determines the Union target of climate neutrality for 2035 in the land use, forestry and agriculture sectors, including also agricultural non-CO2 emissions, i.e. methane. Directive (EU) 2018/2001 (Renewable Energy Directive, REDII) is the main EU instrument dealing with the promotion of energy from renewable sources and will facilitate the gradual replacement of fossil energy sources by renewables. It furthermore contains default greenhouse gas savings values including estimations of methane losses in the production of biogas and biomethane, which can be relevant for the sustainability of biogas and biomethane. These default values can be used by producers in their reporting of the greenhouse gas savings of their production to demonstrate that they meet REDII sustainability requirements and indirectly provide incentives for the reduction of methane emissions. Methane emissions occurring in space heating and cooling appliances are covered in several ecodesign and energy labelling regulations, which provide rules for improving the environmental performance of products, such as household appliances, information and communication technologies or engineering. Finally, the European Commission is also proposing to revise Directive 2009/73/EC and Regulation (EC) 715/2009 to facilitate the emergence of decarbonised hydrogen and gas markets, by establishing a new market design, facilitating access for renewable and low-carbon gases to pipelines so as to, on the one hand, create the conditions for a hydrogen market and, on the other hand, remove barriers to the decarbonisation of existing natural gas grid. The proposal is complementary as it will improve the climate performance of fossil gas during the period in which it will be gradually replaced by renewable and low-carbon gases. •Consistency with other Union policies This proposal is complementary to action taken in the fields of agriculture and waste to reduce methane emissions. As regards the agriculture sector, several challenges are addressed in the ‘Farm to Fork’ strategy. The Commission has set up an expert group to analyse life-cycle methane emissions metrics. In cooperation with sectoral experts and Member States, the Commission is developing an inventory of best practices and available technologies to explore and promote the wider uptake of innovative mitigating actions. To encourage carbon-balance calculations at farm level, by 2022 the Commission will provide a digital carbon navigator template and guidelines on common pathways for the quantitative calculation of greenhouse gas emissions and removals. The Commission will promote the uptake of mitigation technologies through the wider deployment of ‘carbon farming’ in Member States and their Common Agricultural Policy Strategic Plans, as from 2021. In the Horizon Europe strategic plan 2021-2024, the Commission is proposing targeted research on the different factors that effectively lead to greenhouse gases emission reductions, focusing on technology and nature-based solutions as well as on the factors leading to dietary shift. The Commission is also considering bringing part of the cattle rearing within the scope of the IED, which may contribute to curbing methane emissions of the sector. Methane emissions in the waste sector are covered by existing and upcoming planned reviews of environmental legislation. Directive (EU) 2018/850 (the Landfill Directive) requires landfill operators to manage landfill gas by either using it to generate energy or flaring it. In the review of the Landfill Directive foreseen for 2024, the Commission will consider further action to improve the management of landfill gas, minimise its harmful climate effects, and harness any of its potential energy gains. Furthermore, the ongoing review of the IED is also considering the adoption of conclusions on BAT for landfilling that would inter alia address methane emissions. Recent changes to EU waste legislation (2018) introduced an obligation to collect biodegradable waste separately by 2024, and set a new target of a maximum 10% landfilling of waste by 2035. As a result of these changes, it is expected that methane emissions from landfills will decrease further. Concerning the treatment and use of wastewater and sewage sludge under the current regulatory framework, namely the Urban Waste Water Treatment Directive and the Sewage Sludge Directive, emissions of greenhouse gases are not specifically tackled. The implementation of the Urban Waste Water Treatment Directive has, however, helped to prevent significant methane emissions due to the collection and treatment of wastewater inefficient centralised facilities. The Urban Waste Water Treatment Directive is currently being reviewed. The Sewage Sludge Directive regulates the use of sewage sludge to protect the environment, and in particular soil, against the harmful effects of contaminated sludge when used in agriculture. 2.LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY •Legal basis The legal basis of this initiative is Article 194(2) of the Treaty on the Functioning of the European Union (TFEU), which empowers the Union to establish the measures necessary to achieve the objectives of the Union with regard to policy on energy. The proposal concerns the energy sector only and it contributes to the Union’s energy policy objectives as outlined in Article 194(1), in particular the functioning of the energy market by harmonizing monitoring, reporting and abatement rules on methane, which contributes to preserve and improve the environment. •Subsidiarity (for non-exclusive competence) Methane emissions in the energy sector are a transboundary problem and vary across national and regional levels of the Union. They are relevant in all Member States to a varying degree, depending on their energy mix and natural endowments, e.g. how many underground coalmines are operated or sealed, how much fossil gas is produced or transported. The scale of gas infrastructure demonstrates the Union wide aspect, with roughly 190,000 km of transmission pipelines across all Member States. The level of reporting of emissions and the scope of mitigation measures differs by Member State and sub-sector. There are several private and voluntary initiatives, these are, however, insufficient due to limitations in scope, participation and enforceability. Diverse national approaches may lead to inconsistencies in regulatory treatment across Member States, increasing the administrative burden on companies operating in more than one Member State, potentially impeding the functioning of the internal market through the creation of barriers to operators, as well as complicating the collection of comparable data across the Union. In addition, as the majority of methane emissions linked to fossil energy consumed within the Union occur outside its borders, joint action by Member States would be more likely to deliver results for those parts of the supply chain and preserve the integrity of the internal energy market. In light of the above, the reduction of methane emissions across the Union would benefit from a homogeneous policy approach at the Union level. The impacts of measures aimed at methane measurement and mitigation and related effects on innovation, cost-effectiveness, and a level-playing field in maintenance of a well-functioning internal market warrant coordination across Member State borders. Coordinated Union policies have a much higher chance of leading to further reductions in methane emissions in the energy sector than fragmented national efforts. Coordinated action at the Union level furthermore facilitates the full consideration of the different capabilities to act among Member States and private entities. It also affords operators the benefits of a single regulatory regime, facilitating adherence and reducing administrative burden relative to the application of fragmented rules across Member States.

Union-level methane policy adds significant value for international climate action. By developing legislation to minimise methane emissions in the energy sector, the Union is sending a strong political signal to external actors, increasing the awareness of the harmful effects of methane emissions on the climate. This signal will not only encourage Union partners to address the problem of methane emissions in the energy sector, but also lead to the creation of an international partnership and thus give the Union a leadership role in addressing methane emissions. In conclusion, the challenges in reducing methane emissions hence require a harmonised and coordinated approach and cannot be addressed efficiently by individual Member States. Union action is thus justified on grounds of subsidiarity in line with Article 194 TFEU. •Proportionality The proposal strikes a careful balance between, on the one hand, the regulatory autonomy Member States have for national corrective actions, setting incentives for technological innovation or deciding on the level of dedicated resources and, on the other hand, the need to address the problems concerning methane emissions that have to be tackled at Union level. As described in Chapter 6 of the Impact Assessment, the costs and regulatory burdens associated with this proposal have been kept as limited as possible. The measures foreseen in this proposal do not extend beyond what is necessary to solve the identified problems and to achieve the objectives set. The foreseen costs for the Commission and Member States are considered as acceptable, also bearing in mind the positive net economic impacts linked to an environmentally and socially cost effective abatement level. •Choice of the instrument A Regulation is the appropriate legal instrument for this legislative proposal as it imposes clear and detailed rules which do not give room for divergent transposition by Member States. A Regulation ensures that legal requirements are applicable at the same time throughout the Union, therefore it would avoid the inefficiencies and regulatory costs/burdens related to an inconsistent implementation of the methane emission reduction provisions across the Union. In addition, a Regulation is the adequate instrument to impose direct obligations on economic operators and national authorities. This would be required in order to have clear obligations to quantify report and verify data, as well as to employ measures to mitigate methane emissions, including the phasing out of harmful industry practices such as venting and flaring. In order to have consistent and comparable data, it is crucial to have harmonised measurement and reporting requirements. This can be best done via a Regulation, as shown by related EU legal acts, such as Regulation (EU) 2015/757, Regulation (EC) 166/2006 or Implementing Regulation (EU) 2018/2066. On this subject, the level of discretion left to Member States in a Directive would be incompatible with the need for comparable and therefore harmonised data. Furthermore, with respect to mitigation measures and restrictions on industrial practices, Regulation is the adequate instrument to ensure that provisions target companies directly and a minimum level-playing field is established in those practices. Finally, a Regulation allows the urgency of dealing with methane emissions to be addressed in a more direct and conducive manner, in the context of the climate emergency and the Union’s climate neutrality target, as explained in section 1 above. The choice of a Regulation ensures that the identified problems and objectives are addressed in the most effective, efficient and proportionate way. It ensures a careful balance between, on the one hand, the regulatory autonomy Member States have for national corrective actions, setting incentives for technological innovation, or deciding on the level of dedicated resources and, on the other hand, the need to address the problems concerning methane emissions that have to be tackled at Union level. 3.RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS •Stakeholder consultations In line with the Better Regulation Guidelines for impact assessments, the Commission carried out a comprehensive stakeholder consultation based on a consultation strategy that included a range of methods and tools. The consultation strategy aimed to ensure that all relevant evidence was taken into account, including data about costs, societal impact, and the potential benefits of the initiative. The strategy was designed in line with the intervention logic and combined both backward and forward-looking elements. Several consultation tools were employed: an online public consultation, a targeted consultation on costs of implementing monitoring, reporting and verification (MRV) regulation based on the Oil and Gas Methane Partnership, in-depth interviews and (three) online stakeholder webinars. The open public consultation (OPC) received 131 responses, of those 126 were submitted by at least partial completion of the online questionnaire and five additional contributions were received in the form of email submissions. In particular, the Agency for the Cooperation of Energy Regulators (ACER) and the Council of European Energy Regulators (CEER) submitted a survey among their members as informal contribution to the open public consultation, expressing the view that “national regulatory authorities broadly support an EU-level harmonized approach to methane emissions monitoring and detection, based in particular on mandatory monitoring of methane emissions.” Stakeholders expressed widespread support for developing a robust MRV standard for methane emissions in the energy sector. In the OPC, 78% of responses supported basing the oil and gas part of the MRV proposal on the methodology of the Oil and Gas Methane Partnership, which was also backed by all the EU oil and gas trade associations. There was also wide support, including by the coal industry, for including MRV provisions for coal (96% of responses to the OPC). Those aspects are included in this proposal. There was broad support for legislative measures to mitigate emissions in the oil, fossil gas and coal sectors. All oil and gas industry associations that provided a response to the OPC expressed support for putting into Union law an obligation on leak detection and repair (LDAR). NGOs were also widely supportive of such an obligation. All NGOs and industry respondents to the OPC believed that it is feasible to phase out routine venting and flaring associated with energy produced and consumed in the EU. As regards the inclusion of mitigation measures for coalmine methane, the public consultation yielded strong support (80% of responses). Those aspects are included in this proposal. Ninety-two percent of responses to the OPC were supportive of Union legislation on methane emissions in the energy sector covering oil and gas placed in the Union market. Specifically, 96% of responses supported the development of a methane transparency tool at the Union and international levels. This element is included in this proposal.

72% of responses considered that Union legislation on methane emissions in the energy sector should extend obligations to companies importing fossil energy into the Union. 65% of responses considered it feasible to impose the same obligations with respect to MRV, LDAR and venting and flaring on all actors of the oil and gas value chain for oil and gas consumed in the Union. To respond to this, the proposal includes a review clause explicitly referring to the Commission’s prerogative to submit amending legislative proposals to impose more stringent measures on importers once better global methane emission data are available. •Collection and use of expertise The proposal and its underpinning impact assessment draw on evidence from the stakeholder input to the extensive consultations carried out in this respect, specific workshops, as well as literature review, analysis and modelling. The literature review included the results of a series of topical studies on key elements of the methane emissions regulations in different countries and EU Member States, limiting methane emissions in the energy sector, as well as evaluations and assessments carried out in the framework of other relevant Commission initiatives. •Impact assessment Throughout the impact assessment work, a range of measures was considered across all areas to address the identified problems and problem drivers in order to reach the objectives of the initiative. All policy areas included a business as usual option. Preferred options have been identified for three policy areas. Following an assessment of their effectiveness, efficiency, coherence and proportionality, a package of preferred options was found to be best suited to contribute to the set objectives. The package of preferred options includes the following main provisions: Policy area 1 considers options to improve the accuracy of measuring and reporting of methane emissions in the energy sector by obliging operators to carry out asset-level measurements and report direct emissions of methane for economic activities in the EU territory. This includes compulsory monitoring, reporting and verification for oil and gas, compulsory monitoring, reporting and verification for oil, gas and coal, and compulsory monitoring, reporting and verification for oil, gas and coal covering also indirect emissions. The preferred option for policy area 1 is to impose detailed (asset-level) measuring and reporting obligation on methane emissions from oil, gas and coal in the EU energy sector. The key benefit is that this will improve the level of reporting of such emissions and will increase understanding of the sources and magnitude of those emissions which will lead to more effective abatement of associated emissions. Policy area 2 contains options for the mitigation of methane emissions in the EU, through leak detection and repair measures and limits on venting and flaring. They aim to ensure further effective mitigation of methane emissions across the energy supply chain. The options include Commission guidance or mandatory measures on mitigation of methane emissions in the oil and fossil gas sectors, mandatory measures on mitigation of methane emissions in the oil, fossil gas and coal sectors as well as indirect emissions and legislative measure to achieve a certain reduction in methane emissions via a performance requirement. The preferred option for policy area 2 is to impose obligations to mitigate methane emissions from oil, gas and coal in the EU energy sector, in terms of leak detection and repair measures and to ban venting and flaring. These will lead to greater abatement of methane emissions compared to a business as usual scenario, with associated environmental and social benefits in terms of slowing climate change and reducing air pollution. Policy area 3 contains options that aim at reducing methane emissions related to imported fossil energy. It includes options on measuring, reporting and mitigating methane emissions linked to EU fossil fuel consumption but occurring outside the EU, including the use of diplomatic action and transparency tools, mandatory measuring, reporting and mitigation applying to all methane emissions from fossil energy consumed in the EU covering the value chain, the establishment of a transparency database on methane emissions and a global high methane emitting monitoring tool, as well as an obligation to achieve a certain amount of methane emissions reduction applying to all fossil energy consumed in the EU covering the value chain. The preferred option for policy area 3 is to put forward various instruments to improve information on methane emission sources from companies exporting fossil energy to the EU as well as incentives for countries to reduce their methane emissions. Similarly to policy area 2, reducing global methane emissions will have environmental and social benefits, for the EU in particular in terms of slowing climate change. •Fundamental rights The initiative is fully in line with Article 37 of the Charter of Fundamental Rights of the European Union, which requires that a high level of environmental protection and the improvement of the quality of the environment must be integrated into the policies of the Union and ensured in accordance with the principle of sustainable development. 4.BUDGETARY IMPLICATIONS The proposal includes a number of requirements with budgetary implications. First, the requirement for the European Union Agency for the Cooperation of Energy Regulators (ACER) to establish and make publicly available a set of indicators and corresponding reference values for the comparison of unit investment costs linked to measurement, reporting and abatement of methane emissions for comparable projects, once every three years. While so far ACER has not dealt with costs of network operators due to measurement, reporting and abatement of methane emissions, the additional tasks and their workload for ACER are estimated to be sufficiently covered by 1 additional FTE. Second, the requirement for the Union to establish and maintain a methane transparency platform including information on imports of fossil energy into the Union, with updates to be provided every quarter, as well as to establish a global methane monitoring tool that regularly publishes the results of aerial monitoring of large emitters of methane from energy sources, with updates to be provided every month. The additional tasks and their workload for the Commission are estimated to require 2 extra full-time officials. Section 3 of the Legislative Financial Statement outlines the proposal’s budgetary implications and the human and administrative resources required. 5.OTHER ELEMENTS •Implementation plans and monitoring, evaluation and reporting arrangements EU climate and energy legislation provides a comprehensive framework to achieve progress towards EU targets, and to track that progress, to which this proposal will contribute. The overarching framework is provided by the European Climate Law and a detailed integrated monitoring and reporting framework is provided by the Regulation on the Governance of the Energy Union and Climate Action. Data collected in the context of that Regulation is to be made publicly accessible on an e-platform, including indicators for monitoring progress towards the Union’s energy and climate objectives.

Member States national policies and measures to achieve their targets under the Effort Sharing Regulation are checked by the Commission every five years. The implementation and effectiveness of the provisions contained in the proposal will therefore be also tracked under the target achievement under the ESR. The established control mechanisms for the quality of national submissions will also allow an evaluation of the effectiveness of the provisions of this proposal in achieving improvements in data accuracy. In this context, the Regulation on the Governance of the Energy Union and Climate Action sets out the requirements for national and Union inventory systems for GHG emissions, policies, measures and projections, calling for their continuous improvement. The establishment of such systems is required internationally and is meant to support the implementation of national energy and climate plans with regard to the decarbonisation dimension. Methane emissions are increasingly subject to public attention, including scientific and stakeholder campaigns to detect and quantify emissions. Supported by increasing spatial and temporal resolution of satellite data, such public scrutiny is a valuable resource in monitoring the impact of the proposal and identifying shortcomings in implementation. As regards monitoring and evaluation of the obligations set out in this proposal, the main responsibility in ensuring application of the provisions will lie with the national competent authorities. With respect to emissions data verification, this proposal provides for the role of independent accredited verifiers. The International Methane Emission Observatory will provide additional scrutiny of submitted methane emissions data, including the possibility to cross-reference them with other sources such as satellite imaging and products. The Commission will monitor the implementation of the legal act, through checking the correct application of the measures by the obligated parties and if necessary taking enforcement action. This proposal includes a review clause whereby the Commission will submit a report on the evaluation and review of the Regulation. •Detailed explanation of the specific provisions of the proposal The proposed regulation consists of six chapters comprising 35 articles. Chapter 1 – General provisions This chapter sets out the scope and the main terms used in the proposed regulation. It also includes a provision recognising the costs of network operators in implementing the Regulation. Chapter 2 – Competent authorities and independent verification This chapter lays down the compliance provisions of the Regulation, in addition to the penalties provisions in Chapter 6. It sets out the tasks of competent authorities, in particular the rules concerning inspections and complaints, as well as the role and procedures for independent accredited verifiers with respect to verification of methane emissions data reported by operators. Chapter 3 – Methane emissions in the oil and gas sectors This chapter lays down the obligations of operators and Member States with respect to measurement and reporting of methane emissions data, as well as obligations for the abatement of methane emissions in the relevant sites. Chapter 4 – Methane emissions in the coal sector This chapter is divided in three sections to cover the following: monitoring and reporting of methane emissions in operating mines; mitigation of methane emissions in operating underground mines and methane emissions in closed and abandoned underground mines. Each section lays down the obligations of operators and Member States with respect to measurement and reporting of methane emissions data, as well as obligations for the abatement of methane emissions in the relevant sites.

Chapter 5 – Methane emissions occurring outside the Union This chapter introduces transparency tools for methane emissions occurring outside the Union: an information obligation by importers of fossil fuels with regards to methane emissions, a transparency list of Union companies and countries and companies exporting fossil energy to the Union, including information on their international reporting obligations with respect to methane emissions and a global monitoring tool to divulge the magnitude, recurrence and location of methane emitters globally. In addition, to account for imports of fossil energy into the Union, the chapter sets out importer information requirements, as well as the Commission’s prerogative to submit amending legislative proposals to impose more stringent measures on importers once better global methane emission data are available and ensuring compliance with the applicable international obligations of the Union. Chapter 6 – Final provisions This chapter provides in particular for a system of penalties: while recognising that establishing penalties is a national competence, it sets out guiding principles for penalties, in particular criteria for setting penalties, the types of infringements to be penalised, criteria on maximum ceilings, as well as the possibility to impose periodic penalty payments. It also contains empowerment provisions for the adoption of delegated and implementing acts, as well as a review clause. 2021/0423 (COD) 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 (Text with EEA relevance) THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty on the Functioning of the European Union, and in particular Article 194(2) thereof, Having regard to the proposal from the European Commission, After transmission of the draft legislative act to the national parliaments, Having regard to the opinion of the European Economic and Social Committee, Having regard to the opinion of the Committee of the Regions, Acting in accordance with the ordinary legislative procedure,

Whereas: (1) Methane, the main component of natural gas, is second only to carbon dioxide in its overall contribution to climate change and is responsible for approximately a third of current warming. (2)On a molecular level, although methane remains in the atmosphere for a shorter period (10 to 12 years) than carbon dioxide (hundreds of years), its greenhouse effect on the climate is more significant and it contributes to ozone formation which is a potent air pollutant that causes serious health problems. The amount of methane in the atmosphere globally has risen sharply over the last decade. (3)According to recent estimates by the United Nations Environment Programme and the Climate and Clean Air Coalition, methane emission reductions of 45% by 2030, based on available targeted measures and additional measures in line with the United Nations (‘UN’) priority development goals, could avoid 0.3°C of global warming by 2045. (4)According to the Union’s greenhouse gas (‘GHG’) inventories data, the energy sector is estimated to be responsible for 19% of methane emissions within the Union. This does not include methane emissions linked to the Union’s fossil energy consumption which are occurring outside the Union. (5)The European Green Deal combines a comprehensive set of mutually reinforcing measures and initiatives aimed at achieving climate neutrality in the Union by 2050. The European Green Deal Communication indicates that the decarbonisation of the gas sector will be facilitated, including by addressing the issue of energy-related methane emissions. The Commission adopted an EU strategy to reduce methane emissions (‘the Methane Strategy’) in October 2020 setting out measures to cut methane emissions in the EU, including in the energy sector, and internationally. In Regulation (EU) 2021/1119 (‘European Climate Law’), the Union has enshrined into legislation the target of economy-wide climate neutrality by 2050 and also established a binding Union domestic reduction commitment of net greenhouse gas emissions (emissions after deduction of removals) of at least 55% below 1990 levels by 2030. To achieve that level of GHG emission reductions, methane emissions from the energy sector should decrease by around 58% by 2030 compared to 2020. (6)Methane emissions are included in the scope of the Union greenhouse gas reduction targets for 2030 set out in the European Climate Law and the binding national emission reduction targets under Regulation (EU) 2018/842. However, there is currently no Union level legal framework setting out specific measures for the reduction of anthropogenic methane emissions in the energy sector. In addition, whilst Directive 2010/75 on industrial emissions covers methane emissions from the refining of mineral oil and gas, it does not cover other activities in the energy sector. (7)In this context, this Regulation should apply to the reduction of methane emissions in oil and fossil gas upstream exploration and production, fossil gas gathering and processing, gas transmission, distribution, underground storage and liquid fossil gas (LNG) terminals, as well as to operating underground and surface coalmines, closed and abandoned underground coal mines. (8)Rules for accurate measurement, reporting and verification of methane emissions in the oil, gas and coal sectors, as well as for the abatement of those emissions, including through leak detection and repair surveys and restrictions on venting and flaring, should be addressed by an appropriate Union legal framework. Such a framework should contain rules to enhance transparency with regard to fossil energy imports into the Union, thus improving the incentives for a wider uptake of methane mitigation solutions across the globe. (9)Compliance with the obligations under this Regulation is likely to require investments by regulated operators and the costs associated with such investments should be taken into account in tariff setting, subject to efficiency principles. (10)Each Member State should appoint at least one competent authority to oversee that operators effectively comply with the obligations laid down in this Regulation and should notify the Commission about such appointment and any changes thereof. The competent authorities appointed should take all the necessary measures to ensure compliance with the requirements set out in this Regulation. Taking into account the cross-border character of energy sector operations and methane emissions, competent authorities should cooperate with each other and the Commission. In this context, the Commission and the competent authorities of the Member States should form together a network of public authorities applying this Regulation to foster close cooperation, with the necessary arrangements for exchanging information and best practices and allow for consultations. (11)In order to ensure a smooth and effective implementation of the obligations laid down in this Regulation, the Commission supports Member States through the Technical Support Instrument providing tailor-made technical expertise to design and implement reforms, including those promoting the reduction of methane emissions in the energy sector. The technical support, for example, involves strengthening of administrative capacity, harmonising the legislative frameworks and sharing of relevant best practices. (12)In order to ensure the performance of their tasks, operators should provide the competent authorities with all assistance necessary. In addition, operators should take all the necessary actions identified by the competent authorities within the period determined by the competent authorities or any other period agreed with the competent authorities. (13)The main mechanism available to the competent authorities should be inspections, including examination of documentation and records, emissions measurements and site checks. Inspections should take place regularly, on the basis of an appraisal of the environmental risk conducted by the competent authorities. In addition, inspections should be carried out to investigate substantiated complaints and occurrences of non-compliance and to ensure that repairs or replacements of components are carried out in accordance with this Regulation. Where they identify a serious breach of the requirements of this Regulation, competent authorities should issue a notice of remedial actions to be taken by the operator. Competent authorities should keep records of the inspections and the relevant information should be made available in accordance with Directive 2003/4/EC of the European Parliament and of the Council. (14)In light of the proximity of some methane emission sources to urban or residential areas, natural or legal persons harmed by breaches of this Regulation should be able to lodge duly substantiated complaints with the competent authorities. Complainants should be kept informed of the procedure and decisions taken and should receive a final decision within a reasonable time of lodging the complaint. (15)A robust verification framework can improve the credibility of reported data. In addition, the level of detail and technical complexity of methane emissions measurements requires proper verification of methane emissions data reported by operators and mine operators. While self-verification is possible, third party verification ensures greater independence and transparency. In addition, it allows for a harmonized set of competences and level of expertise that may not be available to all public entities. Verifiers should be accredited by accreditation bodies in accordance with Regulation (EC) 765/2008 of the European Parliament and of the Council. Independent accredited verifiers should thus ensure that emissions reports prepared by operators and mine operators are correct and in compliance with the requirements set out in this Regulation. They should review the data in the emissions reports to assess their reliability, credibility and accuracy against free and publicly available European or international standards developed by independent bodies and made applicable by the Commission. The Commission should thus be empowered to adopt delegated acts for the purpose of incorporating and setting out the applicability of such European or international standards. Verifiers are separate from competent authorities and should be independent from the operators and mine operators, who should provide them with all assistance necessary to enable or facilitate the performance of the verification activities, notably as regards access to the premises and the presentation of documentation or records. (16)The information in the emission reports submitted to the competent authorities should be provided to the Commission in view of a verification role to be attributed to the International Methane Emissions Observatory (IMEO), in particular with regards to methodologies for data aggregation and analysis and verification of methodologies and statistical processes employed by companies to quantify their emissions reported data. The reference criteria in that respect may include the OGMP standards and guidance documents. The information produced by the IMEO should be made available to the public and the Commission should use such information to address any identified shortcomings with regards to the measurement, reporting and verification of methane emissions data. (17)The IMEO was set up in October 2020 by the Union in partnership with the United Nations Environmental Programme, the Climate and Clean Air Coalition and the International Energy Agency, and launched at the G20 Summit in October 2021. The IMEO has been tasked with collecting, reconciling, verifying and publishing anthropogenic methane emissions data at a global level. The IMEO is part of the United Nations Environment Programme, which concluded a Memorandum of Understanding with the European Union. Its role is crucial for verification of methane emissions data in the energy sector and appropriate relations should be established in order to put into effect the entrustment of verification tasks. As the IMEO is not a Union body and is not subject to Union law, it is essential to provide that IMEO takes appropriate measures to ensure the protection of the interests of the Union and its Member States. (18)As party to the United Nations Framework Convention on Climate Change (UNFCCC) and the Paris Agreement, the Union is required to provide annually an inventory report of anthropogenic greenhouse gas emissions constituting an aggregate of the member States national greenhouse gas inventories, prepared using good practice methodologies accepted by the Intergovernmental Panel on Climate Change (IPCC). (19)Regulation (EU) 2018/1999 of the European Parliament and of the Council requires Member States to report greenhouse gas inventory data to the Commission and to report their national projections. Pursuant to Article 17(2) of Regulation (EU) 2018/1999 reporting is to be undertaken using UNFCCC reporting guidelines, and is often based on default emission factors rather than direct source-level measurements, implying uncertainties on the origin, frequency and magnitude of emissions.

(20)Country data reported pursuant to UNFCCC reporting provisions is submitted to the UNFCCC secretariat according to different tiers of reporting in line with the IPCC guidelines. In this context, the IPCC generally suggests using higher tier methods for those emission sources which have a significant influence on a country’s total inventory of greenhouse gases in terms of absolute level, trend or uncertainty. (21)A tier represents a level of methodological complexity. Three tiers are available. Tier 1 methods typically use IPCC default emission factors and require the most basic, and least disaggregated, activity data. Higher tiers usually utilise more elaborate methods and source-specific, technology-specific, region-specific or country-specific emission factors, which are often based on measurements, and normally require more highly disaggregated activity data. Specifically, tier 2 requires country-specific, instead of default, emission factors to be used, while tier 3 requires plant-by-plant data or measurements and comprises the application of a rigorous bottom-up assessment by source type at the individual facility level. Progressing from tier 1 to tier 3 represents an increase in the certainty of measurements of methane-related emissions. (22)Member States have different practices as concerns the tier level at which they report their energy related methane emissions to the UNFCCC. Reporting at tier 2 for large emission sources is in line with IPCC reporting guidelines as tier 2 is considered a higher tier method. Consequently, estimation methodologies and reporting of energy related methane emissions varies across Member States, and reporting at the lowest, tier 1, level is still very common in several Member States for methane emissions from coal, gas and oil. (23)Currently, voluntary industry-led initiatives remain the principal course of action for methane emissions quantification and mitigation in many countries. A key energy sector led initiative is the Oil and Gas Methane Partnership (‘OGMP’), a voluntary initiative on measuring and reporting of methane emissions created in 2014 by the United Nations Environmental Programme (UNEP) and the Climate and Clean Air Coalition (CCAC), in whose board the Commission is represented. The OGMP focuses on establishing best-practices to improve the availability of global information on methane emissions quantification and management and to drive mitigation actions to reduce methane emissions. To date, over 60 companies have signed up to OGMP, covering 30% of global oil and gas production and assets in five continents. The OGMP’s work on developing standards and methodologies involves governments, civil society and business. The OGMP 2.0 framework is the latest iteration of a dynamic methane emissions standard and it can provide a suitable basis for methane emissions standards, based on sound scientific norms. (24)Against this background, it is necessary to improve the measurement and quality of reported data of methane emissions, including on the main sources of methane emissions associated with energy produced and consumed within the Union. Moreover, the availability of source-level data and robust quantification of emissions should be ensured, thereby increasing the reliability of reporting as well as the scope for appropriate measures for mitigation. (25)For measuring and reporting to be effective, oil and gas companies should be required to measure and report methane emissions by source, and to make aggregated data available to Member States in order for Member States to be able to improve the accuracy of their inventories reporting. In addition, effective verification of company reported data is necessary and, to minimise the administrative burden for operators, reporting should be organised on an annual basis. (26)This Regulation builds on the OGMP 2.0 framework insofar as it meets the criteria referred to in Recitals 24 and 25, to contribute towards the collection of reliable and robust data that would form a sufficient basis for monitoring methane emissions and if necessary to build additional action to further curb methane emissions. (27)The OGMP 2.0 framework has five levels of reporting. Source-level reporting begins at level 3, which is considered comparable with UNFCCC tier 3. It allows generic emission factors to be used. OGMP 2.0 level 4 reporting requires direct measurements of source-level methane emissions. It allows the use of specific emission factors. OGMP 2.0 level 5 reporting requires the addition of complementary site-level measurements. In addition, the OGMP 2.0 framework requires companies to report direct measurements of methane emissions within three years of joining OGMP 2.0 for operated assets and within five years for non-operated assets. Building on the approach taken in OGMP 2.0 with regard to source-level reporting and taking into account that a large number of Union companies had already signed up to OGMP 2.0 in 2021, Union operators should be required to deliver direct source-level measurements of their emissions within 24 months for operated assets and within 36 months for non-operating assets. In addition to source level quantification, site-level quantification allows assessment, verification and reconciliation of source-level estimates aggregated by site, thereby providing improved confidence in reported emissions. As in OGMP 2.0, this Regulation requires site-level measurements to reconcile source-level measurements. (28)According to data from the Union’s GHG inventory, more than half of all direct energy sector methane emissions is due to unintentional release of emissions into the atmosphere. In the case of oil and gas, that represents the largest share of methane emissions. (29)Unintentional leaks of methane into the atmosphere can occur during drilling, extraction as well as during processing, storage, transmission and distribution to end-use consumers. They can also occur in inactive oil or gas wells. Some emissions result from imperfections in, or ordinary wear and tear of, technical components such as joints, flanges and valves, or from damaged components, for example in the case of accidents. Corrosion or damage can also cause leaks from the walls of pressurised equipment. (30)While venting of methane is typically intentional, resulting from processes or activities and devices designed for that purpose, it can also be unintentional, as in the case of a malfunction. (31)In order to reduce those emissions, operators should take all measures available to them to minimise methane emissions in their operations. (32)More specifically, methane emissions from leaks are most commonly reduced by methane leak detection and repair (‘LDAR’) surveys, carried out to identify leaks and followed by repair of such leaks. Operators should therefore conduct at least periodic LDAR surveys and these should also cover surveying of components that vent methane, to survey for unintentional venting of methane. (33)For that purpose, a harmonised approach to ensure a level-playing field for all operators in the Union should be set up. That approach should include minimum requirements for LDAR surveys, while leaving an adequate degree of flexibility to Member States and operators. This is essential to allow innovation and the development of new LDAR technologies and methods, thus preventing the lock-in of technology, to the detriment of environmental protection. New technologies and detection methods continue to emerge and Member States should encourage innovation in this sector, so that the most accurate and cost-effective methods can be adopted. (34)Obligations on LDAR surveys should reflect a number of good practices. LDAR surveys should be primarily aimed at finding and fixing leaks, rather than quantifying them, and those areas with a higher risk of leaks should be checked more frequently; the frequency of surveys should be guided not only by the need to repair components from which methane is escaping above the methane emission threshold but also by operational considerations, taking into account risks to safety. Thus, where a higher risk to safety or higher risk of methane losses is identified, the competent authorities should be allowed to recommend a higher frequency of surveys for the relevant components; all leaks irrespective of size should be recorded and monitored, as small leaks can develop into larger ones; leak repairs should be followed by confirmation that they have been effective; in order to allow for future, more advanced methane emissions detecting technologies to be used, the size of methane loss at or above which a repair is warranted should be specified, while allowing operators the choice of detection device. Where appropriate, continuous monitoring may be used in the context of this Regulation. (35)Venting consists of the release of uncombusted methane into the atmosphere either intentionally from processes or activities or devices designed to do it, or unintentionally in the case of a malfunction. In light of its potent GHG emission effect, venting should be banned except in the case of emergencies, malfunction or during certain specific events where some venting is unavoidable. (36)Flaring is the controlled combustion of methane for the purpose of disposal in a device designed for said combustion. When carried out during the normal production of oil or fossil gas and as a result of insufficient facilities or amenable geology to re-inject methane, utilise it on-site, or dispatch it to a market, it is considered routine flaring. Routine flaring should be banned. Flaring should only be permissible when it is the only alternative to venting and where venting is not prohibited. Venting is more harmful to the environment than flaring as the released gas typically contains high-levels of methane, whereas flaring oxidises methane into carbon dioxide. (37)Using flaring as an alternative to venting requires that flaring devices are efficient at combusting methane. For that reason, a combustion efficiency requirement should also be included for the cases in which flaring is admissible. Use of pilot burners, which give more reliable ignition as they are not affected by wind, should also be required. (38)Re-injection, utilisation on-site or dispatch of the methane to a market should always be preferable to flaring - and therefore venting - of methane. Operators that vent should provide proof to the competent authorities that neither re-injection, utilisation on-site or dispatch of the methane to a market nor flaring were possible and operators that flare should provide proof to the competent authorities that re-injection, utilisation on-site or dispatch of the methane to a market was not possible. (39)Operators should notify major venting and flaring events without delay to the competent authorities and submit more comprehensive reports on all venting and flaring events. They should also ensure that equipment and devices comply with the standards laid down in Union law.

(40)Methane emissions from inactive oil and gas wells pose public health, safety and environmental risks. Therefore, monitoring and reporting obligations should still apply and those wells and well sites should be reclaimed and remediated. In such cases, Member States should have a predominant role, in particular to establish an inventories and mitigation plans. (41)EU GHG inventory data shows that coalmine methane emissions are the biggest single source of methane emissions in the Union’s energy sector. In 2019, direct emissions from the coal sector represented 31% of methane emissions, almost equal to the percentage of direct methane emissions from fossil gas and oil combined, of 33%. (42)Currently, there is no Union-wide specific regulations limiting methane emissions from the coal sector, despite availability of a wide array of mitigation technologies. There is no Union or international coal-specific monitoring, reporting and verification standard. In the Union, reporting of methane emissions from the coal industry is part of the GHG emission reporting by Member States and data from underground mines is also included in the European Pollutant Release and Transfer Register established by Regulation (EC) No 166/2006. (43)Methane emissions are primarily linked to underground mining activities, both in active and abandoned mines. In active underground mines, methane concentration in the air is continuously controlled, as it constitutes a health and safety hazard. In the case of underground coal mines, the vast majority of the methane emissions occur through ventilation and drainage or degasification systems, which represent the two main ways of lowering methane concentrations in a mine’s airways. (44)Once production is halted and a mine is closed or abandoned, it continues to release methane, referred to as abandoned mine methane (AMM). These emissions typically occur at well-defined point sources, such as ventilation shafts or pressure-relief vents. With increased climate ambition and shifting energy production to less carbon-intensive energy sources, AMM emissions are likely to increase in the Union. It is estimated that even 10 years after mining is ceased, methane from non-flooded mines continues to be emitted at levels attaining approximately 40% of emissions recorded at the time of closure. Moreover, treatment of AMM remains fragmented due to different ownership and exploitation rights across the EU. Member States should thus establish inventories of closed and abandoned coal assets and, either them or the identified responsible party, should be required to install devices for measurement of methane emissions. (45)Operating surface coal mines in the Union produce lignite and emit less methane than underground coal mines. According to the Union GHG inventory, in 2019 operating surface mines emitted 166 kilotonnes compared to 828 kilotonnes for underground coal mines. Measurement of surface coal mine methane emissions is challenging due to their diffuse nature over a wide area. Therefore, and despite available technology, emissions from surface mines are rarely measured. Methane emissions from surface mines can be derived using basin-specific coal emission factors and, with greater precision, using mine- or deposit-specific emission factors, since coal basins have deposits with different methane-bearing capacity. Emission factors can be derived from measuring gas content of the seams sampled from exploration borehole cores. Mine operators should thus perform measurements of methane emissions in surface coal mines using such emission factors. (46)Therefore, mine operators should perform continuous measurement and quantification of methane emissions from ventilation shafts in underground coal mines, continuous measurement of vented and flared methane in drainage stations and use specific emission factors as regards surface coal mines. They should report that data to the competent authorities. (47)Currently, mitigation of methane emissions can be best achieved in operating and closed or abandoned underground coal mines. Effective mitigation of methane emissions from operating and closed or abandoned surface mines is currently limited by technology. However, in order to support research and development on mitigation technologies of such emissions in the future, there should be effective and detailed monitoring, reporting, and verification of the scale of those emissions. (48)Underground mines are either thermal or coking coal mines. Thermal coal is used primarily as an energy source and coking coal is used as a fuel and as a reactant in the process of steelmaking. Both coking coal and thermal coal mines should be subject to measuring, reporting and verification of methane emissions. (49)For operating underground coal mines, mitigation of methane emissions should be implemented through a phase out of venting and flaring. For closed or abandoned underground coal mines, while flooding the mine can prevent methane emissions, this is not systematically done and has environmental risks. Venting and flaring in these mines should also be phased out. As geological constraints and environmental considerations prevent a one-size-fits-all approach to mitigate methane emissions from abandoned underground coal mines, Member States should establish their own mitigation plan, taking into consideration those constraints and the technical feasibility of AMM mitigation. (50)Following a Commission proposal, on 28 June 2021, the Council adopted the new legal base of the Research Fund for Coal and Steel which foresees support for research and innovation for repurposing of the formerly operating coal mines or coal mines in the process of closure and related infrastructure in line with the overall objective of moving away from the coal and the Just Transition Mechanism. In this context, one of the main objectives for the new Research Fund for Coal and Steel programme for the coming years will be to minimise the environmental impacts of coal mines in transition, in particular with regard to methane emissions. (51)The Union is dependent on imports for 70% of its hard coal consumption, 97% of its oil consumption, and 90% of its fossil gas consumption. There is no precise knowledge on the magnitude, origin or nature of methane emissions linked to fossil energy consumed in the Union but occurring in third countries. (52)Global warming effects caused by methane emissions are cross-border. Although some fossil energy producing countries are beginning to act domestically to reduce methane emissions from their energy sectors, many exporters are not subject to any regulations in their respective domestic markets. Such operators need clear incentives to act on their methane emission, hence transparent information on methane emissions should be made available to the markets. (53)Currently there is limited accurate data (UNFCCC Tier 3 or equivalent) on international methane emissions. Many fossil exporting countries have so far not submitted full inventory data to the UNFCCC. At the same time, there is evidence of large increases of methane emissions from oil and gas production activities globally from 65 to 80 Mt/year in the last 20 years. (54)As announced in the Communication on the EU Methane Strategy, the Union is committed to working in cooperation with its energy partners and other key fossil energy importing countries to tackle methane emissions globally. Energy diplomacy on methane emissions has already yielded important outcomes. In September 2021, the Union and the United States announced the Global Methane Pledge, which represents a political commitment to reduce global methane emissions by 30% by 2030 (from 2020 levels), launched at the UN Climate Change Conference (COP 26) in November 2021 in Glasgow. Over one hundred countries have committed their support, representing nearly half of global anthropogenic methane emissions. The Global Methane Pledge includes a commitment to move towards using best available inventory methodologies to quantify methane emissions, with a particular focus on high emission sources. (55)Further, the International Methane Emissions Observatory (IMEO) will play an important and lead role to increase transparency on global energy sector methane emissions. Support for setting up the IMEO was provided by the Council in its January 2021 conclusions on Climate and Energy Diplomacy. (56)The Commission will work with the IMEO to set up a ‘Methane Supply Index’, as explicitly referred to in the Communication on the EU Methane Strategy. It would provide methane emission data from different sources of fossil energy from around the globe - including from source-level estimations and measurements as well as from aerial/satellite monitoring - thereby empowering buyers of fossil energy to make informed purchasing decisions on the basis of the methane emissions of fossil energy sources. (57)In parallel to continuing its successful diplomatic work to achieve such global commitments, the Union is further encouraging significant methane emissions abatement globally, and in particular in the countries supplying fossil energy to the Union. (58)Therefore, importers of fossil energy to the Union should be required to provide Member States with information on measures related to measurement, reporting and mitigation of methane emissions undertaken by exporters, in particular the application of regulatory or voluntary measures to control their methane emissions, including measures such as leak detection and repair surveys or measures to control and restrict venting and flaring of methane. The levels of measurement and reporting set out in the information requirements applied to importers correspond to the ones to be required from Union operators in this Regulation, as outlined in Recitals 24 to 26 and 46. The information on measures to control methane emissions is not more burdensome than that required from Union operators. (59)Member States should communicate that information to the Commission. On the basis of that information, the Union should set up and manage a transparency database for fossil energy imports into the Union, detailing whether the exporting companies have signed up to the OGMP for oil and gas companies and to the extent that it is set up, an equivalent, internationally or Union recognised standard for coal companies. Such information should demonstrate the degree of commitment of companies in exporting countries to measure, report and have verified their methane emissions according to tier 3 methods of UNFCCC reporting. Such a transparency database would serve as a source of information for the purchasing decisions of importers of fossil energy to the Union as well as for other stakeholders and the public. The transparency database should also reflect the efforts undertaken by companies in the Union and companies exporting fossil energy to the Union to measure and report as well as reduce their methane emissions. It should also include information on the measurement, reporting and mitigation regulatory actions by countries where fossil energy is produced.

(60)In addition, the Union should put in place a global methane emitter monitoring tool, providing information on the magnitude, recurrence and location of high methane-emitting sources. This should further encourage real and demonstrable results from the implementation of methane regulations and effective mitigation actions by companies in the Union and companies supplying fossil energy to the Union. The tool should pool data from several certified data providers and services, including the Copernicus component of the EU Space Programme and the IMEO. The tool should inform the Commission’s bilateral dialogues with the countries concerned to discuss the different scenarios envisaged for methane emissions policies and measures. (61)In combination, the measures referred to in Recitals 58 to 60 should enhance transparency for buyers, enabling them to make informed sourcing decisions and improve the possibility of wider uptake of methane mitigation solutions across the globe. In addition, they should further incentivise international companies to sign up to international methane measurement and reporting standards such as OGMP or to adopt effective measurement, reporting and mitigation measures. These measures are designed as the basis for a stepwise approach to increase the level of stringency of the measures applicable to imports. The Commission should thus be empowered to amend or add to the reporting requirements of importers. Furthermore, the Commission should evaluate the implementation of those measures and, if it deems appropriate, submit proposals for review to impose more stringent measures on importers and to ensure a comparable level of effectiveness of measures applicable in third countries to monitor, report, verify and mitigate methane emissions. The evaluation should take into account the work undertaken by the IMEO, including the Methane Supply Index, the transparency database and the global methane emitter monitoring tool. Should the Commission find it appropriate to increase the level of stringency of the measures applicable to imports, it is of particular importance that the Commission carries out appropriate consultations during its preparatory work including consulting relevant third countries. (62)Member States should ensure that infringements of this Regulation are sanctioned by effective, proportionate and dissuasive penalties, which may include fines and periodic penalty payments, and take all measures necessary to ensure that they are implemented. In order to play a significant deterrent effect, penalties should be adequate to the type of infringement, to the possible advantage for the operator and to the type and gravity of the environmental damage. When imposing penalties, due regard should be given to the nature, gravity and duration of the infringement in question. The imposition of penalties should be proportionate and should comply with Union and national law, including with applicable procedural safeguards and with the principles of the Charter of fundamental rights. (63)In order to ensure more consistency, a list of the types of infringements that should be subject to penalties should be set out. In order to facilitate the more consistent application of penalties, common non-exhaustive and indicative criteria for the application of penalties should be set out. The deterrent effect of penalties should be reinforced by the possibility to publish the information related to the penalties imposed by Member States, in compliance with the data protection requirements set out in Regulations (EU) 2016/679 and (EU) 2018/1725 of the European Parliament and the Council. (64)As a result of the provisions requiring investments by regulated operators to be taken into account in tariff setting, Regulation (EU) 2019/942 of the European Parliament and of the Council should be amended to entrust ACER with the task of making available a set of indicators and reference values for the comparison of unit investment costs linked to measurement, reporting and abatement of methane emissions for comparable projects. (65)In order to define the elements of the phase out of venting and flaring in coking coal mines, the power to adopt acts in accordance with Article 290 of the Treaty on the Functioning of the European Union should be delegated to the Commission to supplement this Regulation by setting out restrictions on venting methane from ventilation shafts for coking coal mines. In addition, in order to allow for further information to be required from importers, as proved necessary, the power to adopt acts in accordance with Article 290 of the Treaty on the Functioning of the European Union should be delegated to the Commission to supplement this Regulation by amending or adding to the information to be provided by importers. It is of particular importance that the Commission carry out appropriate consultations during its preparatory work, including at expert level, and that those consultations be conducted in accordance with the principles laid down in the Interinstitutional Agreement on Better Law-Making of 13 April 2016. In particular, to ensure equal participation in the preparation of delegated acts, the European Parliament and the Council receive all documents at the same time as Member States' experts, and their experts systematically have access to meetings of Commission expert groups dealing with the preparation of delegated acts. (66)In order to ensure uniform conditions for implementation, implementing powers should be conferred on the Commission to adopt detailed rules with regard to common formats for reporting, in accordance with Article 291 of the Treaty on the Functioning of the European Union. Those powers should be exercised in accordance with Regulation (EU) No 182/2011 of the European Parliament and of the Council. (67)Operators and competent authorities should be given a reasonable period in order to take the necessary preparatory actions to meet the requirements of this Regulation. (68)Since the objective of this Regulation, namely the accurate measurement, reporting, verification and the reduction of methane emissions in the energy sector, cannot be achieved by the Member States individually and can therefore, by reason of its scale, be better achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality, as set out in that Article, this Regulation does not go beyond what is necessary in order to achieve that objective, HAVE ADOPTED THIS REGULATION: Chapter 1 General Provisions Article 1 Subject matter and scope 1. This Regulation lays down rules for the accurate measurement, reporting and verification of methane emissions in the energy sector in the Union, as well as the abatement of those emissions, including through leak detection and repair surveys and restrictions on venting and flaring. This Regulation also lays down rules on tools ensuring transparency of methane emissions from imports of fossil energy into the Union. 2. This Regulation applies to: (a) oil and fossil gas upstream exploration and production, fossil gas gathering and processing; (b) gas transmission, distribution, underground storage and liquid gas (LNG) terminals operating with fossil and/or renewable (bio-or synthetic) methane; (c) operating underground and surface coalmines, closed and abandoned underground coal mines.

3. This Regulation applies to methane emissions occurring outside the Union in what relates to importer information requirements, to the methane transparency database and to the methane emitters monitoring tool. Article 2 Definitions For the purposes of this Regulation, the following definitions apply: (1) ‘methane emissions’ means all direct emissions occurring from all components that are potential sources of methane emissions, whether as a result of intentional or unintentional venting, incomplete combustion in flares or from other components and unintentional leaks; (2) ‘transmission system operator’ has the meaning attributed to it by [Article 2(4) of Directive 2009/73/EC of the European Parliament and of the Council] [to be adapted as per ongoing recast proposal]; (3) ‘distribution system operator’ has the meaning attributed to it by [Article 2(6) of Directive 2009/73/EC] [to be adapted as per ongoing recast proposal]; (4) ‘operator’ means any natural or legal person who operates or controls an asset or, where provided for in national legislation, to whom decisive economic power over the technical functioning of an asset has been delegated; (5) ‘mine operator’ means any natural or legal person who operates or controls a coal mine or, where provided for in national legislation, to whom decisive economic power over the technical functioning of a coal mine has been delegated; (6) ‘verification’ means the activities carried out by a verifier to assess the conformity of the reports transmitted by the operators and mine operators; (7) ‘verifier’ means a legal person different from the competent authorities appointed in accordance with Article 4 of this Regulation which carries out verification activities and which is accredited by a national accreditation body pursuant to Regulation (EC) No 765/2008 or a natural person otherwise authorised, without prejudice to Article 5(2) of that Regulation, at the time a verification statement is issued; (8) ‘source’ means a component or a geological structure that releases methane into the atmosphere whether intentionally or unintentionally, intermittently or persistently; (9) ‘asset’ means a business or operating unit, which can be composed of several facilities or sites, including assets under the operational control of the operator (operated assets) and assets which are not under the operational control of the operator (non-operated assets); (10) ‘emission factor’ means a coefficient that quantifies the emissions or removals of a gas per unit activity, which is often based on a sample of measurement data, averaged to develop a representative rate of emission for a given activity level under a given set of operating conditions; (11) ‘generic emission factor’ means a standardised emission factor for each type of emission source which is derived from inventories or databases, but in any case not verified through direct measurements; (12) ‘specific emission factor’ means an emission factor derived from direct measurements; (13) ‘direct measurement’ means direct quantification of the methane emission at source-level with a methane measuring device; (14) ‘site-level methane emissions’ means all sources of emissions within an asset; (15) ‘site-level measurement’ means a top-down measurement and typically involves the use of sensors mounted on a mobile platform, such as vehicles, drones, aircrafts, boats and satellites or other means to capture a complete overview of emissions across an entire site;

(16) ‘undertaking’ means a natural or legal person carrying out at least one of the following functions: upstream oil and fossil gas exploitation, exploration and production, fossil gas gathering and processing and gas transmission, distribution and underground storage, including LNG; (17) ‘leak detection and repair survey’ means a survey to identify sources of methane emissions, including leaks and unintentional venting; (18) ‘venting’ means the release of uncombusted methane into the atmosphere either intentionally from processes, activities or devices designed for such a purpose, or unintentionally in the case of a malfunction or geological constraints; (19) ‘flaring’ means the controlled combustion of methane for the purpose of disposal in a device designed for said combustion; (20) ‘emergency’ means a temporary, unexpected, infrequent situation in which the methane emission is unavoidable and necessary to prevent an immediate and substantial adverse impact on human safety, public health or the environment, but does not include situations arising from or related to the following events: (a) failure of the operator to install appropriate equipment of sufficient capacity for the expected or actual rate and pressure of production; (b) failure of the operator to limit production where the production rate exceeds the capacity of the related equipment or gathering system, except where the excess production is due to a downstream emergency, malfunction, or unscheduled repair and lasts for no longer than eight hours from the time of notification of the downstream capacity issue; (c) scheduled maintenance; (d) operator negligence; (e) repeated failures, that is to say four or more failures within the preceding 30 days, of the same piece of equipment; (21) ‘malfunction’ means a sudden, unavoidable failure or breakdown of equipment beyond the reasonable control of the operator that substantially disrupts operations but does not include a failure or breakdown that is caused entirely or in part by poor maintenance, careless operation or other preventable equipment failure or breakdown; (22) ‘routine flaring’ means flaring during the normal production of oil or fossil gas and in the absence of sufficient facilities or amenable geology to re-inject methane, utilise it on-site, or dispatch it to a market; (23) ‘flare stack’ means a device equipped with a burner used to flare methane; (24) ‘inactive well’ means an oil or gas well or well site where operations for exploration or production have ceased for at least one year; (25) ‘remediating’ means the process of cleaning up contaminated water and soil; (26) ‘reclaiming’ means the process of returning a well or well site to having soil and vegetation conditions similar to those that existed before it was disturbed; (27) ‘coal mine’ means a site where coal mining occurs or has occurred, including lands, excavations, underground passageways, shafts, slopes, tunnels and workings, structures, facilities, equipment, machines and tools situated on the surface or underground and used in, or resulting from the work of extracting lignite, subbituminous coal, bituminous coal, or anthracite from its natural deposits in the earth by any means or method, including the work of preparing the coal to be extracted; (28) ‘operating coal mine’ means a coal mine where the majority of its revenue comes from the work of extracting lignite, subbituminous coal, bituminous coal or anthracites, and where at least one of the following conditions apply: (a) mine development is underway. (b) coal has been produced within the last 90 days.

(c) mine ventilation fans are operative. (29) ‘underground coal mine’ means a coal mine where coal is produced by tunnelling into the earth to the coalbed, which is then mined with underground mining equipment such as cutting machines and continuous, longwall and shortwall mining machines, and transported to the surface; (30) ‘surface coal mine’ means a coal mine where coal lies near the surface and can be extracted by removing the covering layers of rock and soil; (31) ‘ventilation shaft’ means a vertical passage used to move fresh air underground or to remove methane and other gases from an underground coal mine; (32) ‘drainage station’ means a station collecting methane from a coal mine gas drainage system; (33) ‘drainage system’ means a system, which may comprise multiple methane sources and which drains methane-rich gas from coal seams or surrounding rock strata and transports it to a drainage station; (34) ‘post-mining activities’ are activities carried out after coal has been mined and brought to the surface, including coal handling, processing, storage, and transport; (35) ‘continuous measurement’ means a measurement where the reading is taken at least every minute; (36) ‘ventilation air methane’ means methane emitted from coal seams and other gas-bearing strata and which enters the ventilation air and is exhausted from the ventilation shaft; (37) ‘coal deposit’ is an area of the land containing significantly mineable quantities of coal, defined according to the Member State’s methodology on documenting geological mineral deposits; (38) ‘closed coal mine’ means a coal mine with an identified operator, owner or licensee and closed according to the applicable licensing requirements or other regulations; (39) ‘abandoned coal mine’ means a coal mine where an operator, owner or licensee cannot be identified, or that has not been closed in a regulated manner; (40) ‘coking coal mine’ means a mine where at least 50% of the production output averaged over the last three available years is coking coal, as defined in Annex B of Regulation (EC) no 1099/2008 of the European Parliament and of the Council; (41) ‘importer’ means a natural or legal person established in the Union who, in the course of a commercial activity, places fossil energy from a third country on the Union market. Article 3 Costs of regulated operators 1. When fixing or approving transmission or distribution tariffs or the methodologies to be used by transmission system operators, distribution system operators, LNG terminal operators or other regulated companies including where applicable underground gas storage operators, regulatory authorities shall take into account the costs incurred and investments made to comply with the obligations under this Regulation, insofar as they correspond to those of an efficient and structurally comparable regulated operator. 2. Every three years, the European Union Agency for the Cooperation of Energy Regulators (ACER) shall establish and make publicly available a set of indicators and corresponding reference values for the comparison of unit investment costs linked to measurement, reporting and abatement of methane emissions for comparable projects.

Chapter 2 Competent authorities and independent verification Article 4 Competent authorities 1. Each Member State shall designate one or more competent authorities responsible for monitoring and enforcing the application of this Regulation. Member States shall notify the Commission of the names and contact details of the competent authorities by … [3 months after the date of entry into force of this Regulation]. Member States shall notify the Commission without delay of any changes to the names or contact details of the competent authorities. 2. The Commission shall make a list of the competent authorities publicly available and shall regularly update that list. 3. Member States shall ensure that the competent authorities have adequate powers and resources to perform the obligations set out in this Regulation. Article 5 Tasks of the competent authorities 1. The competent authorities shall take the necessary measures to ensure compliance with the requirements set out in this Regulation. 2. Operators and mine operators shall provide the competent authorities with all assistance necessary to enable or facilitate the performance of the tasks of the competent authorities referred to in this Regulation, notably as regards access to the premises and the presentation of documentation or records. 3. The competent authorities shall cooperate with each other and with the Commission and as necessary with authorities of third countries, in order to ensure compliance with this Regulation. The Commission may set up a network of competent authorities to foster cooperation, with the necessary arrangements for exchanging information and best practices and allow for consultations. 4. Where reports are to be made public in accordance with this Regulation, the competent authorities shall make them publicly available free of charge, on a designated website and in freely accessible, downloadable and editable format. Where information is kept confidential in accordance with Article 4 of Directive 2003/4/EC, the competent authorities shall indicate the type of information that has been withheld and the reason therefor. Article 6 Inspections

1. The competent authorities shall carry out periodic inspections to check the compliance of operators or mine operators with the requirements set out in this Regulation. The first inspection shall be completed by … [18 months after the date of entry into force of this Regulation]. 2. Inspections shall include, where relevant, site checks or field audits examination of documentation and records that demonstrate compliance with the requirements of this Regulation, methane emissions detection and concentration measurements and any follow-up action undertaken by or on behalf of the competent authority to check and promote compliance of sites or facilities with the requirements of this Regulation. Where an inspection has identified a serious breach of the requirements of this Regulation, the competent authorities shall issue a notice of remedial actions to be undertaken by the operator or mine operator, as part of the report referred to in paragraph 5. 3. After the first inspection referred to in paragraph 1, the competent authorities shall draw up programmes for routine inspections. The period between inspections shall be based on an appraisal of the environmental risk and shall not exceed two years. Where an inspection has identified a serious breach of the requirements of this Regulation, the subsequent inspection shall take place within one year. 4. The competent authorities shall carry out non-routine inspections: (a) to investigate substantiated complaints referred to in Article 7 and occurrences of non-compliance as soon as possible after the date the competent authorities become aware of such complaints or non-compliance; (b) to ensure that leak repairs or replacements of components were carried out in accordance with Article 14. 5. Following each inspection, the competent authorities shall prepare a report describing the legal basis for the inspection, the procedural steps followed, the relevant findings and recommendations for the further action by the operator or mine operator. The report shall be notified to the operator concerned and made publicly available within two months of the date of the inspection. Where the report was triggered by a complaint made in accordance with Article 7, the competent authorities shall notify the complainant once the report is publicly available. The report shall be made publicly available by the competent authorities in accordance with Directive 2003/4/EC. Where information is kept confidential in accordance with Article 4 of Directive 2003/4/EC, the competent authorities shall indicate in the report the type of information that has been withheld and the reason thereof. 6. Operators and mine operators shall take all the necessary actions set out in the report referred to in paragraph 5 within the period determined by the competent authorities or any other period agreed with the competent authorities. Article 7 Complaints lodged with the competent authorities 1. Any natural or legal person which considers that it has suffered injury as a result of a breach of the requirements of this Regulation by operators or mine operators, may lodge a written complaint with the competent authorities. 2. The complaints shall be duly substantiated and contain sufficient evidence of the alleged breach and of the injury resulting therefrom. 3. Where it becomes apparent that the complaint does not provide sufficient evidence to justify pursuing an investigation, the competent authorities shall inform the complainant of the reasons for their decision not to pursue an investigation. 4. Without prejudice to the rules applicable pursuant to national law, the competent authorities shall keep the complainant informed of the steps taken in the procedure and, where applicable, inform them of appropriate alternative forms of redress, such as recourse to national courts or any other national or international complaints procedure. 5. Without prejudice to the rules applicable pursuant to national law and on the basis of comparable procedures, the competent authorities shall establish and make publicly available indicative periods to take a decision on complaints.

Article 8 Verification activities and verification statement 1. Verifiers shall assess the conformity of the emissions reports submitted to them by operators or mine operators in accordance with this Regulation. They shall assess the conformity of the reports with the requirements laid down this Regulation and review all data sources and methodologies used in order to assess their reliability, credibility and accuracy, in particular the following points: (a) the choice and employment of emission factors; (b) the methodologies, calculations, samplings, statistical distributions and levels of materiality leading to the determination of methane emissions; (c) any risks of inappropriate measuring or reporting; (d) any quality control or quality assurance systems applied by the operators or mine operators. 2. In carrying out the verification activities referred to in paragraph 1, verifiers shall use free and publicly available European or international standards for methane emissions quantification as made applicable by the Commission in accordance with paragraph 5. Until such date where the applicability of those standards is determined by the Commission, verifiers shall use existing European or international standards for quantification and verification of greenhouse gas emissions. Verifiers may conduct site checks to determine the reliability, credibility and accuracy of the data sources and methodologies used. 3. Verifiers shall issue a verification statement verifying the conformity of the emissions report and specifying the verification work carried out, once their assessment concludes with reasonable assurance that the emissions report complies with the requirements of this Regulation. The verifiers shall only issue the verification statement where reliable, credible and accurate data and information enable the methane emissions to be determined with a reasonable degree of certainty and provided the reported data is coherent with the estimated data, complete and free of inconsistencies. Where the assessment concludes that the emissions report does not comply with the requirements of this Regulation, the verifiers shall inform the operator or the mine operator thereof and the operator or the mine operator shall submit a revised emissions report to the verifier without delay. 4. Operators and mine operators shall provide the verifiers with all the assistance necessary to enable or facilitate the performance of the verification activities, notably as regards access to the premises and the presentation of documentation or records. 5. The Commission shall be empowered to adopt delegated acts in accordance with Article 31 to supplement this Regulation by incorporating and setting out the applicability of European or international standards on methane emissions quantification and measurement for the purposes of this Regulation. Article 9 Independence and accreditation of verifiers 1. Verifiers shall be independent from the operators and mine operators and shall carry out the activities required under this Regulation in the public interest. For that purpose, neither the verifiers nor any part of the same legal entity shall be an operator or mine operator, the owner of an operator or mine operator, or be owned by them, nor shall the verifiers have relations with operators or mine operators that could affect their independence and impartiality. 2. Verifiers shall be accredited by a national accreditation body pursuant to Regulation (EC) No 765/2008. 3. Where no specific provisions concerning the accreditation of verifiers are laid down in this Regulation, the relevant provisions of Regulation (EC) No 765/2008 shall apply.

Article 10 International Methane Emissions Observatory 1. Provided the interest of the Union is protect