
EU Commission publishes further guidance on the EU Methane Emissions Regulation
Following the entry into force of the EU Methane Emissions Regulation1 (the Regulation) in August 2024, the EU Commission published non-binding guidance (the Guidance) on the Regulation, in the form of a Q&A document, on 19 November 2024. Although the Guidance does not technically have legal force, it is intended to help companies to interpret and apply the Regulation by clarifying certain provisions that have been the subject of frequently asked questions from the industry.
The Regulation applies to EU importers and operators/undertakings within the crude oil, natural gas and coal sectors. For a summary of its key aspects, please see HFW’s previous article here. In this article, we consider some of the key points addressed in the newly-published Guidance.
The meaning of “importer”
The Guidance attempts to provide clarification on certain parts of the legislative text (and indeed gaps in the text), including in relation to the requirement for an “importer” to report to its Member State. Whereas previously it seemed unclear whether non-EU entities importing into the EU would be caught by the Regulation, the Guidance suggests that only importers which are established in the EU, with legal responsibility for customs formalities for the relevant cargoes, would be deemed “importers” in respect of those cargoes. It states that “an importer must be established in the EU, otherwise it cannot lawfully place goods on the EU market“. In our view, this raises further questions. By linking the meaning of the term “importer” to the customs process, the Guidance appears inconsistent with other EU legislation which places obligations on importers within the commodities sector, such as REACH, where the guidance expressly states that being an “importer” depends on many factors, is not solely linked with dealing with customs formalities, and that it is not possible to fall back on the Union Customs Code.
Even if not deemed the actual “importer,” many non-EU companies will undoubtedly be affected by the Regulation, even if indirectly. That is because parties will likely use contractual obligations up and down the supply chain to ensure that the goods are able to be sold to a party who will ultimately be deemed the importer under the Regulation and who therefore must be able comply with its requirements. See our comments on this in our previous article on the Regulation.
Gathering and reporting information
The Guidance states that the information to be reported by importers is already clearly defined in the Regulation and addresses the ways in which it can be gathered and reported. It confirms that no template will be published to show how information should be reported and notes that the Regulation does not “impose any particular system of gathering information or a method to ensure compliance.” It states that the requirement of “reasonable efforts” in relation to the obtaining of information under certain Articles should be determined on a “case-by-case basis” by each Member State’s competent authority, suggesting factors which may be taken into account. Overall, the Guidance suggests that there will be no hard and fast rules in relation to the presentation and assessment of the information that is reported.
What is a “renewed contract” and when is a contract concluded?
The Guidance clarifies that in order to be a “renewed contract,” one of the contract’s “essential” elements should be new and confirms that this does not include amendments to an existing contract which do not impact that contract’s fundamental elements.
It also clarifies the meaning of the date on which a contract is “concluded” for the purposes of Articles 28(1), 28(2), 29(1) and 29(2), identifying that there are various points at which a contract might be “concluded”.
Reporting requirements for commingled gas
There is further clarification on the information required to be reported for commingled gas sourced from trading hubs. The Guidance makes clear that there are no exceptions for commingled commodities and that the burden is on the compliance entity – most likely the importer – to ensure that the required information is passed down via the entity with which it has a direct relationship. This is equally the case where the compliance entity has no direct relationship with a producer, but instead only with an exporter lower down the supply chain. The Guidance clarifies that the compliance entity is under an obligation to ensure that the requisite information is given by the producer and is eventually passed to them via the counterparty with which they have a direct contractual relationship (which may be an exporter). This could be especially frustrating if parties encounter uncooperative producers further up supply chains. However, suppliers may risk losing customers which import into the EU if they do not begin to comply. This will likely prompt an increased interest in and focus on reporting amongst suppliers generally, extending beyond the EU to non-EU suppliers globally.
Research conducted by Violet O’Gorman, Trainee Solicitor.
Footnotes
- Regulation (EU) 2024/1787 of the European Parliament and of the Council of 13 June 2024 on the reduction of methane emissions in the energy sector and amending Regulation (EU) 2019/942.