EU Commission Gambles on Fossil Fuel Exports Amid Methane Rules Dispute

BRUSSELS — The European Commission is betting that profit-hungry gas and oil companies will continue exporting into Europe next year, resisting calls by companies to rewrite new climate laws that they say will force them to seek other markets.

Fossil fuel companies and member countries say new EU rules requiring them to track emissions of methane — a potent greenhouse gas — beginning in 2027 will be impossible to comply with in time, diverting vast chunks of the EU’s supply as exporters strain to avoid legal risk.

But the EU executive doesn’t buy their rhetoric, and has resisted calls to reopen the legislation, which could give member countries and lawmakers an opportunity to radically weaken the law designed to mitigate one of the top causes of global warming.

Instead, it has issued new guidelines advising EU countries’ governments to hold off on fining offenders for three years. While that doesn’t officially remove the requirements, it would suspend enforcement to give companies more time to comply. The guidelines, first reported by POLITICO, were made official Monday after months of speculation. Member countries will discuss them Wednesday.

The Commission’s gamble is that companies are raking in so much money from selling to Europe — especially as the closure of the Strait of Hormuz sends energy prices soaring — that they won’t kill a lucrative trade just because of some legal uncertainties.

The executive is also confident that compliance won’t be a problem in the first place, and has reassured diplomats that its three-year “grace period” for penalties will stand up in court if member countries implement it properly. Last week it issued further guidance to help companies prove the emissions intensity of cargoes — a key detail they say has been missing.

“People will come to their senses” over the summer, said one EU official, granted anonymity to speak openly. The guidelines “will make it clearer how and when to comply, and it will become clearer that most importers can comply and will comply rather than lose their sales in a liquid global gas market.”

It’s true that business is booming for companies exporting to Europe. In the first 100 days after the U.S. and Israel’s attack on Iran, the EU paid an additional €62 billion for energy supplies, according to the Jacques Delors Institute. In particular, the bloc massively increased its imports of jet fuel and liquefied natural gas from the U.S., one of the most vocal opponents of the methane rules.

The conviction that companies won’t abandon Europe was illustrated in a meeting of EU ambassadors last week, during which the Commission told member countries that it would be best to wait until 2028 to assess the impact of the rules, instead of tearing them open on the basis of industry speculation, according to two diplomats briefed on the meeting.

To some, that only underscored the sense that the Commission is simply trying to run out the clock.

“It’s a stand-off, a western, and the Commission is trying not to blink,” said one diplomat of the diplomats.

Even some of the strongest advocates for delaying the rules admit that companies may prefer to risk the legal consequences over cutting trade with the bloc.

Andreas Guth, secretary-general of premier EU gas lobby Eurogas, pointed out that supply deals are still being cut between the U.S. and the EU. A “lot of non-compliant gas” may end up in Europe from January, he told POLITICO, adding that was the “best-case scenario” and that cargoes could still be diverted.

One company that seems to have no qualms about the rules is Venture Global, a U.S.-based liquefied natural gas exporter that has brokered a series of long-term supply deals in Greece and the wider Balkans, in line with the explicit policy of the Trump administration.

Such deals demonstrate the “strong commercial demand for U.S. LNG and that the methane rules are not preventing European companies from signing U.S. deals,” an industry executive told POLITICO.

Analysts also say that if the Iran war resolves, it could quickly tilt global markets into oversupply, undercutting the argument that Europe must pick from a narrowing pool of sellers.

But other industry executives insisted to POLITICO that no company would continue trading with Europe if there was any risk of being in breach, whether or not penalties are imposed. The Commission itself acknowledges in the draft text of its recommendation to suspend penalties that the grace period “may result in a period of non-compliance.”

“The industry cannot send cargoes to the EU if the cargoes are not in compliance,” Charlie Riedl, executive director of the Center for Liquefied Natural Gas, told POLITICO, adding that he had conveyed this position to policymakers since the rules were first introduced.

Indeed, industry argues that the diversion of cargoes from European energy markets will be catastrophic for the bloc’s supply.

Earlier this month, the International Energy Agency, a Paris-based international body that coordinates energy supplies among wealthy countries, lent support to that view, warning that the rules could leave 50 percent of the bloc’s crude oil imports as non-compliant.

The EU executive never bought the conclusions of a previous, more dramatic report commissioned by Brussels’ top oil lobby, officials say, but the Commission told diplomats Wednesday it would “assess” the conclusions of the IEA report, according to a diplomat present. It has also acknowledged the impact on energy prices from the Iran war, which it says gives legal weight to the temporary suspension of penalties.