Page 5 - EurOil Week 01 2021

EurOil COMMENTARY EurOil

trading system (ETS) and the introduction of are in terms of their emissions and avoids a
a cross-border carbon tax in 2026. Gas-burn- one-size-fits-all approach to achieving further
ing power plants will find themselves paying reductions.
more in carbon taxes as a result of the ETS On the same day in late December, the com-
changes. The system will also now apply to mission also unveiled its package for decar-
the shipping sector, and this will likely have a bonising the natural gas system, proposing
positive impact on the adoption of LNG as a measures to encourage the development and
bunkering fuel. use of low-carbon gases such as hydrogen and
The cross-border carbon tax will not initially bio-methane. The measures largely relate to
apply to oil and gas, although it is expected to at improvements in infrastructure management
a later stage. In the meantime, the extra need for to spur the emergence of a bloc-wide market for
decarbonising industrial products like steel will these fuels.
provide opportunities for oil and gas companies
in countries that supply the EU such as Russia. What next?
Last but not least, early in January the EC posted
Methane in the crosshairs its recommendations on planned changes to the
Another crucial development last year was the EU’s taxonomy, designed to help investors and
European Commission (EC)’s release of a leg- governments decide what investments are sus-
islative proposal for reporting and reducing tainable. The EC called for both natural gas and
emissions of methane in the energy sector. Oil, nuclear to be recognised as sustainable, much to
gas and coal companies will have to “ensure the the frustration of some member states and many
highest standard of measurement, reporting and NGOs.
verification (MRV)” of these emissions, accord- This came as no surprise, as reports have been
ing to the proposal.They will need to measure circulating for months that the EC intended to
and quantify the emissions at individual assets include gas and nuclear on its green list. The
and carry out comprehensive surveys to find and spike in energy prices this year has also brought
repair leaks. Routine venting and flaring will also the importance of gas as a reliable source of base-
be banned. load energy that is cleaner than coal, into sharp
The proposed regulation will also affect focus. The EC recognised that gas could help
Europe’s oil and gas suppliers. It will first require with the decarbonisation effort by displacing
importers to file information on how their sup- coal, and could serve as a companion to inter-
pliers quantify their emissions, and employ a mittent renewables.
transparency database and global monitoring Exactly how these various regulations will
tools such as satellites to show how different look when they are finalised will depend on
countries and energy companies are performing upcoming negotiations between EU member
in reducing their emissions. states and the European Parliament. It is clear
The commission aims to introduce more that the current energy crisis has checked some
stringent rules on methane emissions associated of the climate ambitions of member states. The
with imported energy by 2025, following diplo- importance of ensuring energy security and
matic discussions with key suppliers. energy affordability on the road to net zero has
The European oil and gas industry has become more clear, and this could lead the EU to
largely welcomed the methane proposal, but adopt a more pragmatic approach to the energy
has stressed the need for a pragmatic approach transition that sees a larger continued role for oil
that recognises where individual companies and gas, and for longer. ™

Week 01 06•January•2022 www. NEWSBASE .com P5