EU Plans to Phase Out Long-Term Gas Contracts

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The European Union has proposed phasing out long-term natural gas supply contracts as part of the bloc's energy transition plans.

The measure was part of a package of legislative proposals published by the European Commission on Wednesday that require the approval of EU energy ministers and the European Parliament.

"No long- term contracts for supply of unabated fossil gas shall be concluded with a duration beyond the end of year 2049," the commission said.

Tight gas supplies have pushed European gas and electricity prices to record levels this year, leading to tensions with Russia which is the region's biggest gas supplier.

President Vladimir Putin has blamed Europe's recent gas woes on a policy shift that favors buying more LNG in the spot market and relying less on long-term supply contracts.

Russia's deputy energy minister, Pavel Sorokin, said on Wednesday that the EU would come to regret a shift away from long-term gas supply deals, predicting that it would lead to higher energy costs.

'Strong and Clear Signal'

EU Commissioner Kadri Simson said industry players knew that an end date for long-term gas contracts was coming because the bloc had already adopted a target of net-zero carbon emissions by 2050.

Simson said the proposal sends a "strong and clear signal" that the EU is serious about transitioning away from fossil fuels.

As expected, the package of hydrogen and gas market proposals opens the door to joint purchases of gas by EU member states for an emergency gas stockpile. Participation would be voluntary.

Simson said details of how this might work would need to be determined by the participating countries and then checked for compliance with EU law.

The package also includes new rules to facilitate the uptake of renewable and low-carbon gases, such as biomethane and hydrogen.

The EU has defined "low-carbon gases" as those that deliver a reduction in greenhouse gases of at least 70% compared to fossil fuels.

Methane Emissions

Brussels also set out its plans for reducing methane emissions from oil, gas and coal — an area in which the EU has lacked a legal framework until now.

Methane — a potent but short-lived greenhouse gas — is the main component of natural gas.

Emissions of methane from the energy sector account for 19% of the EU's man-made methane emissions, excluding imports.

The EU had already backed the Global Methane Pledge in which more than 100 countries agreed at the Glasgow climate conference to a 30% reduction in methane emissions by 2030 from 2020 levels.

The proposed methane regulation would apply to upstream oil and gas operations, gas gathering and processing, transmission, distribution, underground storage and LNG terminals.

As previously reported, companies would have to report their methane emissions and take measures to detect and repair leaks. They would face penalties if they failed to do so.

Flaring and Venting

The commission wants to ban routine flaring and venting of methane and will require energy importers to provide information about methane emissions and mitigation efforts in the exporting country.

Simson expects full implementation of the proposals to deliver an 80% reduction in methane emissions from gas, oil and coal by 2030, compared with 2020 levels.

A trio of environmental groups — the Environmental Investigation Agency, Food & Water Action Europe, and Deutsche Umwelthilfe — said the proposed measures did not go far enough.

"Any methane reduction initiative not linked to a phase-out of fossil fuels falls dangerously short of the necessary climate actions,” they said in a joint statement.

Zero-Emission Buildings

The commission also addressed the decarbonization of buildings, which account for 36% of the bloc's greenhouse gas emissions.

It proposed that all new private buildings must have zero emissions by 2030, and all new public buildings by 2027.

It wants national building guidelines to include road maps for phasing out fossil fuels in heating and cooling systems by 2040.

The commission also said that governments should stop providing financial incentives for fossil fuel heating installations by 2027.

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