Viewpoint: Gas Escapes EU Iron Fist

The European Commission's plans to decarbonize gas markets, promote hydrogen and reduce methane emissions apparently leave the writing on the wall for fossil gas. While the proposals unveiled last week don't constitute a cease-and-desist order, many industry players will at first glance see the wording of amendments to gas market directives as a sign fossil gas is being painted into an increasingly tight corner.

Closer inspection suggests the corner may not be that tight.

The commission says long-term gas contracts are fine until 2049, a year ahead of the EU's net-zero 2050 deadline. After that, short-term contracts are fine. And Brussels continues to use soft words such as "transitional" to describe the decline slope for gas. The fact many countries still want gas classed as "sustainable" under EU taxonomy rules for green financing shows the commission for now lacks wholesale support for squeezing gas out of the mix. Indeed, biggest member Germany concedes it may need gas for decades as it eliminates nuclear and coal power.

The commission says in a question and answer document it expects gas to be replaced "gradually" by renewable and low-carbon gases out to 2030. "Gradual" doesn't sound like a sharp push. As Brussels notes, gas makes up 22% of the bloc's energy mix, 20% of the power mix and 39% of its heating. Conversely, renewable and low-carbon gases account for less than 5%.

Under the commission's MIX scenario — part of its European Green Deal analysis — biogas is the only renewable gas to make a dent in fossil gas demand out to 2035. Even then it will be a single-digit percentage contribution. Synthetic gases and hydrogen won't start playing a meaningful role before 2040.

Brussels says the EU's gaseous fuels in 2050 need to be roughly two-thirds low-carbon and renewable gases, and one-third fossil gas with carbon capture and storage (CCS). To qualify as low-carbon, it says the fuels must produce "at least 70% less greenhouse gas emissions than fossil natural gas across their full lifecycle."

That doesn't mean it will be business as usual for the industry. Brussels concedes that unabated gas will constitute a big part of the energy mix well beyond 2030. CCS may play a role, but is unlikely to see a commercial-scale explosion in capacity this decade. As a result, Brussels intends to get more of a grip over methane emissions. Building on the global methane pledge unveiled with the US ahead of the COP26 climate talks, Brussels wants oil, gas and coal firms to measure, report and verify methane emissions. It also plans to introduce "strict rules" to detect and repair methane leaks and to end routine venting and flaring. Gas imports will also be closely scrutinized, with suppliers having to demonstrate their products meet EU emissions standards.

Industry responses suggest players don't feel harshly treated. Lobby group Eurogas says the measures are "a good start" that need "fine tuning." Gas Infrastructure Europe, which represents infrastructure operators, says it "stands ready to support the EU's ambitions" to decarbonize gas markets, promote hydrogen and reduce methane emissions.