COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT REPORT Accompanying the 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
Date: 2021-12-15
Institutions: Directorate-General for Energy, European Commission
Subjects: EU energy policy, coal industry, gas, greenhouse gas, hydrocarbon, import (EU), oil industry, reduction of gas emissions

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  EN 

   EUROPEAN COMMISSION  Brussels, 15.12.2021  SWD(2021) 460 final  COMMISSION STAFF WORKING DOCUMENT  EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT REPORT  Accompanying the 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 {COM(2021) 805 final} - {SEC(2021) 432 final} - {SWD(2021) 459 final}  
 
 
Executive Summary Sheet  

Impact assessment on a proposal for a legislative act to reduce methane emissions in the oil, gas and coal sectors 

A. Need for action 

What is the problem and why is it a problem at EU level?  

The European Green Deal puts the EU on a path to climate neutrality by 2050 through the deep decarbonisation of 
all  sectors  of  the  economy.  Methane  is  a  powerful  greenhouse  gas, second only  to  carbon  dioxide  in  its overall 
contribution  to  climate  change  and  responsible  for  about  one  third  of  current  climate  warming.  The 
Intergovernmental Panel on Climate Change 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 2030 Climate 
Target Plan’s impact assessment indicates that 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 EU’s single 
market  for  energy.  As  the majority of methane  emissions  linked  to  fossil  energy  consumed within  the  EU  occur 
outside the EU, only joint action by Member States could present results in this field. 

What should be achieved? 

The  general objective  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 EU. The specific objectives are 1) improve the accuracy of information 
on the main sources of methane emissions associated with energy consumed in the EU, 2) ensure further effective 
mitigation  of  methane  emissions  across  the  energy  supply  chain  in  the  EU  and  3)  reduce  methane  emissions 
related to fossil energy imported to the EU. 

What is the value added of action at the EU level (subsidiarity)?  

The reduction of methane emissions across the EU would benefit from a homogeneous policy approach at the EU 
level given the strong interlinkage between Member States through cross-border infrastructure and the integrated 
EU  energy  market.  Coordinated  action  at  the  EU  level  has  a  much  higher  chance  of  leading  to  accelerated 
reductions in methane emissions in the energy sector along the value chain and facilitates the full consideration of 
the different capabilities to act among Member States and private entities. The EU and its Member States are part 
of  a  global  oil  market  in  which  collective  action  carries  more  weight  vis-à-vis  exporters  than  individual  national 
measures. The EU is also the biggest gas import market in the world and EU-level methane policy adds significant 
value for international climate action. 

B. Solutions 

What are the various options to achieve the objectives? Is there a preferred option or not? If not, why? 

Policy area 1 considers options to improve measuring and reporting of methane emissions in the energy sector by 
obligating companies to carry out asset-level measurements and report direct emissions of methane for economic 
activities in the EU territory. Policy area 2 contains options for the mitigation of methane emissions in the EU, and 
includes 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  a  legislative  measure  to  achieve  a  certain  reduction  in  methane  emissions  via  a 
performance  requirement.  Policy  area  3  contains  options  on  measuring,  reporting  and  mitigating  methane 
emissions  linked  to  EU  fossil  fuel  consumption  but  occurring  outside  the  EU,  including  transparency  tools, 
mandatory measuring, reporting and mitigation of fossil energy emissions, transparency on measuring, reporting 
and  mitigation  of  fossil  energy  sector  emissions,  and  legislative  measures  to  achieve  a  certain  reduction  in 

 
 
methane emissions. 

All policy areas include a business as usual option. Preferred options have been identified for all three policy areas. 

What are different stakeholders' views? Who supports which option?  

Stakeholders  expressed  widespread  support  for  developing  a  robust  measurement,  reporting  and  verification 
(MRV)  standard  for  methane  emissions  in  the  energy  sector.  In  the  open  public  consultation  (OPC),  78%  of 
responses were in support of basing the oil and gas part of the MRV proposal on the methodology of the Oil and 
Gas Methane  Partnership, which is also backed by all the EU oil and gas trade associations.  There  is very large 
support for including coal into an MRV regulation (96% of responses to the OPC), including by the coal industry. 

There is widespread 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  EU 
legislation  an  obligation  on  leak  detection  and  repair  (LDAR),  and  NGOs  are  also  widely  supportive  of  such  an 
obligation. All NGOs and industry respondents to the OPC believe 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 of coalmine methane, the public consultation yielded high and widespread support (80% of responses).  

Ninety-two percent of responses to the OPC are supportive of EU legislation on methane emissions in the energy 
sector  covering  all  oil  and  gas  entering  the  EU  market.  Specifically,  96%  of  responses  are  supportive  of  the 
development  of  a  methane  transparency  tool  at  EU  and  international  level.  72%  of  responses  consider  that  EU 
legislation  on  methane  emissions  in  the  energy  sector  should  extend  obligations  to  companies  importing  fossil 
energy into the EU/companies exporting fossil energy to the EU, and 65% of responses consider that it is feasible 
to impose the same obligations on MRV, LDAR and venting and flaring equally on all actors of the oil and gas value 
chain for oil and gas consumed in the EU, including actors from outside of the EU.  

C. Impacts of the preferred option 

What are the benefits of the preferred option (if any, otherwise of main ones)?                                     

Policy  area  1:  Imposes  detailed  (asset-level)  measuring  and  reporting  obligation  on  all  direct  fossil  sources  of 
methane emissions 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: Imposes obligations to mitigate methane emissions on all direct fossil sources of oil, fossil gas and 
coal-related methane emissions in the  EU  energy sector, in terms of leak  detection and repair and measures  to 
limit 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: Puts forward various instruments dedicated to improving information on methane emission sources 
from countries exporting fossil energy to the EU as well as incentives for those countries to voluntarily abate their 
methane  emissions  or  binding  measures  to  achieve  those.  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. 

What are the costs of the preferred option (if any, otherwise of main ones)?                                    

Policy area 1: No public quantification of costs is available, the impact assessment is therefore based on voluntary 
estimations carried out to date by industry and their qualitative input, noting that there is strong support across 
stakeholders, including industry itself, for putting in place such an obligation.    

Policy area 2: 127 million Euros in net costs incurred by operators; No quantified costs of verifying compliance and 

 
 
of enforcement were available but the level of quantitative benefits are so significant compared to the costs of the 
abatement  measures  to  companies,  that  the  difference  between  the  two  is  expected  to  more  than  adequately 
cover for all such costs; No quantified impacts of the costs of abatement measures on energy prices were available 
but the costs of the measures to operators (127 million Euros) are insignificant relative to the overall costs to the 
EU of purchasing oil, fossil gas and coal (184 billion Euros in 2020/287 billlion Euros in 2019) such that they would 
be negligible. 

Policy area 3: No quantified costs were available of the measures to abate methane emissions occurring abroad 
but linked to EU consumption of fossil energy. Estimations of the total costs of all abatement measures  across a 
sample of the largest  oil and fossil gas exporting countries were  used instead as proxy. At social/environmental 
optimal level of abatement, they amount to 2,216 million Euros; No quantified costs of verifying compliance and of 
enforcement were available but the level of quantitative benefits across a sample of the largest oil and fossil gas 
exporting countries to the EU are so significant compared to the costs of the abatement measures to companies, 
that the difference between the two is expected to more than adequately cover for all such costs; No quantified 
impacts  of  abatement  measures  on  energy  prices  were  available  but  the  level  of  costs  across  a  sample  of  the 
largest oil and fossil exporting countries to the EU are small (2,607 million Euros) relative to the costs to the EU of 
purchasing oil, fossil gas and coal (184 billion Euros in 2020/287 billlion Euros in 2019) that they would unlikely be 
significant. 

What are the impacts on SMEs and competitiveness?  

Coal,  fossil  gas  and  oil  operators  responsible  for  emitting  methane  along  the  value  chains  are  not  small 
enterprises.  Impacts  on  competitiveness  are  not  expected  for  companies  within  the  EU  as  all  will  be  equally 
obligated by the measures proposed in the preferred options in policy areas 1 and 2. The preferred option in policy 
area 3 is the one most likely to minimise impacts on competitiveness of EU operators as it is the option aiming to 
achieve a level playing field. 

Will there be significant impacts on national budgets and administrations?  

Not  in  the  EU. While  the measures  included  in  the preferred  options  will  lead  to extra  costs  and  administrative 
burden in the EU, these will not be significant  for the  following principle reasons: as regards policy area 1, data 
reporting  on  methane  emissions  is  already  being  undertaken  by  EU  Member  States;  as  regards  policy  area  2, 
verification of measures to abate methane emissions is already being undertaken by EU Member States. In policy 
area 3 in non-EU countries with minimal or non-existent methane regulations, the costs and administrative burden 
will be more important. 

Will there be other significant impacts?  

No. 

Proportionality?  

The preferred set of options is considered proportionate and builds to the extent possible on existing approaches. 
The balance between obligations and consideration of the different capabilities to act among Member States and 
private entities is considered appropriate given the imperative of achieving climate neutrality. 

D. Follow up 

When will the policy be reviewed?  

The  Commission  will  monitor  implementation  of  the  legal  act  and  its  correct  application.  If  necessary,  the 
Commission will take enforcement action, including infringement procedures.