EU pauses methane penalties amid energy crisis, US pressure

The European Union has recommended the suspension of penalties for oil and gas companies that breach its methane emissions standards, following pressure from the United States and other countries.

The European Commission on Monday said that EU member states should not apply penalties in 2027-2030 in order to avoid energy supply disruptions. The environmental regime was due to come into effect from the start of next year, but the energy crisis sparked by the US-Iran war has served to complicate the issue.

The commission said the suspension would give importers time to reach compliance “while ensuring security of supply in a context of global energy markets tightness caused by the ongoing blockade of the Strait of Hormuz and the conflict in the Middle East“.

The EU Methane Regulation would have seen companies face fines of up to 20 percent of annual turnover for failing to comply with European-equivalent emissions monitoring rules.

The US and other oil- and gas-producing states, as well as fossil fuel industry groups and some EU member states, had demanded changes to the law.

US Energy Secretary Chris Wright, alongside Algeria, Nigeria and Qatar, wrote to the EU in June, warning of potential disruptions to Europe’s oil and gas supply.

A group of 17 EU member states also asked for the law to be delayed.

Environmental groups have sought to hit back, urging Brussels to keep the penalties in place.

However, the suspension announced on Monday is unlikely to satisfy the critics. The commission noted that “all obligations stemming from the Regulation will continue to apply”.

In addition, the European Commission’s recommendation is not legally binding, but courts are required to take the recommendation into account.

The commission noted that although methane is the second-greatest contributor to climate change, “geopolitical developments in the Middle East are re-shaping the global energy system”.

Restricted traffic through the Strait of Hormuz has disrupted the flow of oil and gas for months, and with the current renewed tensions between the US and Iran, fears of supply shortages remain high.