The European Commission has postponed fines on oil and gas companies for methane emissions until 2030, mentioning concern over energy supplies and prices. The commission has also analyzed the EU’s Emissions Trading Scheme, decreasing the pressure on industry to reduce overall emissions. The context is the US–Israeli war on Iran restricting supplies from the Gulf and its effect on oil prices because of uncertainty around negotiations among Iran and the United States.
The EU’s methane legislation was adopted in 2024 as the first effort to manage methane leaks associated to oil, gas and coal. It includes domestic manufacturing, shipping and processing, along with imports, with emissions supervising needed from 2027. ‘Trying to mandate measurement, reporting and verification in a foreign country makes this quite complex,’ says Jonathan Stern at the Oxford Institute for Energy Studies, UK.
Environmental organizations signaled disappointment with the postponement. The International Energy Agency (IEA) evaluate that around 30% of the rise in global temperatures since the Industrial Revolution can be linked to methane, since it’s a much potent greenhouse fuel than carbon dioxide, in spite of its relatively short lifetime in the atmosphere. Fossil fuels accidentally and intentionally emit methane across their supply chains.
Reducing those emissions is considered as one of the simplest and lowest cost ways to effect worldwide warming before 2050. As per the United Nations, around 75% of emissions from oil and gas and 50% from coal can be eliminated with existing technology. While the threat of fines has now been postponed, manufacturers in Europe and elsewhere have already made vital steps towards developing the needed measurement, leak detection and repair programmes.
Under the EU regulation, fuel importers will still be needed to show evidence of compliance to EU national government. Member states had been tasked with deciding their own penalties, however ‘a lot of those bodies took time to be installation and the legal frameworks moved pretty slowly,’ says Stern. That has led to uncertainty for industry over the risks of failing to comply. The commission’s recommendation to suspend penalties in part lets in time to resolve this uncertainty, and says that eventual penalties ought to be proportionate and not longer endanger supply security.
The overall architecture requires to stay sturdy enough to incentivise low-carbon investment for the vast majority of firms
Already, at the end of 2025, energy ministers meeting in Brussels had expressed concern about energy safety when discussing the methane legislation. The US war against Iran exacerbated anxieties. Four of the EU’s largest energy suppliers– the US, Qatar, Nigeria and Algeria – also urged for more time to adapt to the legislation.
The US is generally against restricting methane emissions. ‘The administration led by Donald Trump doesn’t think emissions are vital as it doesn’t assume climate change is vital,’ says Stern. The US ambassador to the EU, Andrew Puzder, has suggested the methane regulation risks triggering another energy crisis.
It is more challenging to comply with the legislation for sites in which methane escapes as a byproduct of oil manufacturing, which is the case in Nigeria and US shale-oil basins. This needs applying additional technology to accumulate the gas, instead of venting or burning it in a flare. The value of captured gas can offset the cost, Moreover. The picture is mainly complex in North America. ‘In US and Canada, you’re dealing with basins which include thousands, probably millions of wells owned by different companies and each with a different composition,’ says Stern. It ought to be easier for Qatar to comply with the legislation due to the significant majority of its gas is from one large field, he adds.
More headroom in emissions trading cap
Also in July, the commission launched a review of the EU Emissions Trading System (ETS) – which makes industry pay for greenhouse gas emissions. This has been carried out to power generation and energy-intensive industries since 2005, extending to aviation in 2012 and maritime transport from 2024. Since 2005, emissions from the applicable sectors have declined through more than 50%. The proposed ETS reform gives businesses more time to reduce their carbon emissions.
The ETS has been criticized by the European chemicals industry for putting it at a competitive disadvantage. Industry body Cefic stated that the benchmarks up until 2030 ‘are in largely excessive, unrealistic and do not reflect the seriousness of the situation our industry is facing’. It estimates that around 10% of European manufacturing capacity has been lost since 2022.
The ETS is already costing hundreds of millions per year in carbon taxes. The chemical industry is on the verge of fall apart
The latest review was supportive of European industry, said the commission. The annual reduction on the emissions cap was made more slow: it had been set to lessen through 4.3–4.4% in line with year up to 2030, but will now decline by 3.7% by year for 2031 to 2035 and 1.7% per year for 2036 to 2040. The EU is likewise developing an Industrial Decarbonisation Bank, so that it will reinvest ETS revenues to assist energy-intensive industries deploy proven decarbonisation technology more broadly. EU countries ought to direct 50% of their ETS revenues to support decarbonisation in sectors covered by the ETS.
It may not be sufficient for the chemical industry. ‘They’ve tweaked a system that requires more substantial reform. The ETS is already costing hundreds of millions per year in carbon taxes,’ says Richard Carter, an independent consultant to the chemical industry and former BASF manager. ‘The chemical industry is on the verge of collapse.’ He would have appreciated to see the emissions cap reduction rate brought down further, to 1–2%.
Others view the proposals from the commission more positively. ‘The average architecture requires to stay strong enough to incentivise low-carbon investment for the widespread majority of companies that are in a wait-and-see situation,’ says Darius Sultani, climate and energy guidelines researcher at the Potsdam Institute for Climate Impact Research, Germany. Moreover, he notes that reforms to ETS started in 2021 assumed that decarbonisation technologies would today be more broadly available, at lower cost.
The chemicals industry is paying a price. ‘They don’t have conditions ready to make the low-carbon investments, however we’re going through an increasing carbon price in the next couple of years,’ mentions Sultaini. ‘They lost some trust among the environmental communities by saying the ETS should be abolished altogether, but they are the ones feeling the pain and they don’t have a way out at the moment.’
The difficulties with European chemicals are exacerbated by China persisting to construct more chemical centers, in spite of global overcapacities, keeping prices low. Meanwhile Europe endures higher feedstock and energy costs than North America or the Middle East, making it harder to compete. Industry has complained about financial dumping by China, which has resulted in some penalties.
The EU must use more competitive trade instruments that it formed to combat Chinese dumping of chemicals at uncompetitive costs, Carter advocates, even though ETS still requires further reform. ‘The EU ETS is a home-grown issue formed by the EU and can therefore be solved via the EU. The EU cannot solve Chinese overcapacities,’ mentions Carter. Moreover, Sultani says that the ETS is working properly and that some parts of European chemicals, consisting of commodity polymers, have to inevitably fail due to costs, while other parts ought to be better shielded by EU trade measures.
