In possible Trump tariff concession, EU could weaken Methane Regulation

The European Union is considering a “simplification” of its Methane Regulation to facilitate more U.S. LNG imports, according to a draft document seen by Gas Outlook.

Europe is slowly rolling out its Methane Regulation, which aims to ensure imported gas meets stringent emissions requirements. To be phased in over the coming years, imported gas would need to demonstrate low levels of methane emissions at the point of production.

Meanwhile, the EU is also trying to phase out Russian gas at the same time, which has European officials looking to U.S. LNG as a solution.

A draft European Council document, seen by Gas Outlook, calls on the bloc to “speedily assess” which energy policies may be “in need of simplification,” and it specifically suggested the Methane Regulation “as it might impact the cooperation with economic operators from outside of the EU.”

A decision to revisit and simplify the Methane Regulation is expected to take place at a forthcoming meeting in Luxembourg on June 16th. The suggested policy changes were first reported by Politico.

The backtracking on the Methane Regulation can also be seen as a concession to the U.S. The EU has offered to purchase more U.S. LNG cargoes to appease Trump, who has positioned fossil fuel exports as one of his key priorities.

But American trade policy is in disarray with President Trump’s tariff authority in jeopardy following an adverse court ruling, which could vaporise his leverage in the U.S.-EU trade talks.

Unease with the Methane Regulation is coming from several EU member states, including Romania, Slovakia, and Hungary. However, critics warn that quitting Russian gas only to end up relying on U.S. LNG does very little for European energy security, and will simply swap one dependency for another. 

“Weakening the Methane Regulation for the purpose of importing more US LNG will mean that the EU will be more dependent on one source,” Ana Maria Jaller-Makarewicz, lead European energy analyst for the Institute for Energy Economics and Financial Analysis (IEEFA), told Gas Outlook. “US LNG already represents more than half of the EU’s LNG import mix and one quarter of all gas and LNG imports.”

Methane Regulation

The rush to weaken climate policy is coming at the behest of the oil and gas industry on both sides of the Atlantic.

Eurogas, a trade group for European gas companies, has criticized the Methane Regulation, arguing that it “is already preventing certain gas supply contracts from being signed.”

At the CERAWeek conference in Houston in March, Fred Hutchison, President of LNG Allies, an industry trade association, said that opposition to the Methane Regulation came more from “sister organisations in Brussels,” rather than from U.S. companies. “The European side of the industry is looking to delay this,” he said. However, he has also called the Methane Regulation a “trade barrier that needs to be reduced.”

Back in the U.S., the industry is rejoicing at the bonanza of deregulation happening under the Trump administration. The assaults on environmental rules are almost too numerous to count, but they include weakening fuel standards on cars and trucks, revisiting rules on toxic pollution from power plants, and weakening wastewater rules for oil and gas drilling.

According to the New York Times, the EPA is planning to erase all limits on greenhouse gas emissions from power plants. In fact, the EPA is attempting to go even further by ending the government’s collection of data on emissions, clearly targetted to derail future efforts to formulate climate policy. It is hard to regulate greenhouse gas emissions if you know very little about them.

In March, after announcing 31 actions to “unleash American energy,” the head of the Environmental Protection Agency — the agency whose mission is to protect the environment — boasted about the historic nature of his actions.

“Today is the greatest day of deregulation our nation has seen. We are driving a dagger straight into the heart of the climate change religion to drive down cost of living for American families, unleash American energy, bring auto jobs back to the U.S. and more,” said EPA Administrator Zeldin.

The U.S. is the largest emitter of methane from oil and gas operations in the world, with vast plumes of methane routinely drifting across the Permian basin. Here are a few from April, for example.   

But methane emissions from U.S. shale, already a global concern, could soon grow worse. The Congress voted to scrap the methane fee on oil and gas producers, and the EPA directed its inspectors to no longer enforce methane regulations on drillers.

“Breaking the law should have consequences but when it comes to the oil and gas industry, EPA Administrator Lee Zeldin doesn’t think so,” Mark Brownstein, senior vice president of energy transition at the Washington-based environmental group EDF, said in March. “His agency’s decision to not enforce methane reduction requirements is a gross failure of responsibility to protect public health and the environment, and it is at odds with common sense besides.”

Some European companies importing U.S. gas are eager to see the EU Methane Regulation weakened. There was already a discrepancy between the goals of the EU Methane Regulation and standards in the U.S. oil patch on methane emissions. Those standards, paltry to begin with, are now being eviscerated. 

To be sure, even the big U.S. LNG exporters recognise the danger of being seen as operating in a lawless environment. Following Zeldin’s announcement, LNG Allies insisted that the U.S. LNG industry would not backtrack on methane monitoring and abatement, recognising that gas exporters still need access to European markets. 

That suggests that even as the Trump administration lets U.S. oil and gas drillers have free rein, the European methane rules could still force progress onto the American industry. 

Some experts are placing their hopes in a complex supply chain monitoring scheme that would trace the origin of U.S-produced gas, track it, and attach certificates to it so that European importers can comply with the Methane Regulation. European member states attended a closed-door meeting on May 19th, organised by Clean Air Task Force (CATF) and STX Group, in collaboration with the IEA, to discuss how such a programme would work.

“As implementation begins, it is essential that industry and governments have a clear, shared understanding of compliance expectations. Getting the supply chain tracking right is fundamental to credible differentiation that rewards low-emitting producers and penalises high-emitting ones. It’s the backbone of the import standard,” Brandon Locke, senior Europe policy manager on methane at Clean Air Task Force, said in a statement. Locke insists that the Methane Regulation can drive down methane emissions globally if supply chain monitoring is beefed up and properly implemented.

Falling gas demand 

Locked in heated trade negotiations, a U.S. court decision invalidating Trump’s authority to impose sweeping tariffs could not have come at a better time for Europe. A subsequent court temporarily reinstated tariff powers while the process plays out, but his ability to wage an extensive trade war against much of the world is now very much in doubt.

That seemingly diminishes the urgency for Brussels to offer Washington big concessions on energy.

“The White House of course wants to make sure that the EU actually buy U.S. LNG,” Arne Anders Lohmann Rasmussen, chief analyst at Global Risk Management, a Danish risk management firm, told Gas Outlook. “However, with the new court ruling on tariffs Trump has been boxed into the corner and suddenly the EU has the upper hand.”

It is not clear that Europe needs more gas. EU gas demand declined by 20 percent between 2021 and 2024, and is expected to drop even further by 2030. Imports will remain important, but there’s little evidence of an urgent need for more.

“There’s no reason to increase gas and LNG imports from any source,” Jaller-Makarewicz said. “Energy security is built by reducing consumption, not by looking for new suppliers for old dependencies.”

French Minister for Industry and Energy Marc Ferracci had also made it clear that there will be no energy security for Europe if it remains dependent on fossil fuels. “We need to accelerate the phasing [out] of imported energy, and this means decarbonization,” he said at a London energy summit in April.

(Writing by Nick Cunningham; editing by Sophie Davies)