Where we are on methane abatement in the EU

One year ago today, the European Union took a major step towards one of the most impactful climate actions the world can make in the short term: methane abatement.

The EU’s Methane Regulation, enacted in August 2024, is designed to improve the measurement and reporting of methane emissions, aiming to reduce the environmental impact of the oil, gas, and coal sectors of the economy. This is a critical step. The right investment and policy strategies can future-proof the EU economy as well as make meaningful cuts in emissions and climate effects.

Unfortunately, progress on implementing the Regulation has been slower than expected. EU Member States were required to designate national competent authorities by February 2025, but some Member States have yet to meet this deadline. In response, the Commission is sending “formal notices” requiring them to take swift action or face further consequences, including a potential “reasoned opinion” from the Commission.

Climate Bonds’ Methane Abatement Project

Methane abatement is one of the most cost-effective near-term climate solutions available, yet it is still underfunded. Despite methane's outsized role in near-term global warming, targeted methane abatement finance remains severely underfunded. According to the Climate Policy Initiative (CPI), methane abatement received only 1% of global climate finance in 2021/2022 (approximately USD 13.7 billion) while the estimated annual need is USD 48 billion by 2030.

At Climate Bonds, we are working to address this financing gap. In July 2024, we began a two-year global project: Mobilising Sustainable Finance for Methane Abatement, supported by the Global Methane Hub.

The overall goal of the project is to increase credible methane abatement action in line with 1.5°C scenarios by facilitating finance flows to activities and entities that are actively reducing methane emissions across key sectors.

Methane has 80 times the warming potential of carbon dioxide over a 20-year period. It is responsible for about 30% of the world’s current warming, and tackling it is one of the most cost-effective climate solutions available. The Global Methane Pledge targets a 30% reduction by 2030, a critical milestone for staying within 1.5°C pathways.

Climate Bonds’ project is expanding the scope of green and sustainable finance to incorporate methane abatement measures. We aim to equip financial institutions, corporates, and policymakers with the tools, data, and frameworks they need to make rapid, credible abatement efforts. This includes the development of transition frameworks, investment criteria, and taxonomies, as well as fostering collaboration between the financial sector, industry, and policymakers.

New Guidance for Methane Abatement Finance

As part of this project, Climate Bonds took part in the development of new Guidance for including methane abatement in oil and gas debt structuring. This guidance, developed by the Methane Finance Working Group, highlights the critical role of the EU Methane Regulation by enabling financial mechanisms that support faster, verifiable emissions reductions across the global oil and gas supply chain.

The Methane Finance Working Group was launched at COP28 in 2023 to support implementation of the Oil and Gas Decarbonization Charter, which commits 50 oil and gas companies, including 29 NOCs, to reduce methane and flaring emissions to near-zero.

By integrating methane abatement conditions into debt instruments, the Guidance helps mobilise capital toward compliance-aligned actions such as monitoring, reporting, and verification (MRV), leak detection and repair (LDAR), and the elimination of routine flaring and venting—core requirements of the EU’s Regulation.

The Guidance addresses one of its key implementation challenges: ensuring that companies, particularly in emerging markets, have the financial and technical capacity to meet the EU’s increasingly stringent standards for imported fossil fuels.

The Guidance sets out what makes a bond credible, in terms of eligible project types and the reporting required. The core principle is that project activities should deliver substantial, real, measurable and durable emission reductions, covering both methane and other GHGs over 20- and 100-year timeframes.

Three Recommendations for Scaling Methane Abatement in the EU

1. Leverage the EU's import power to drive global methane abatement. From 2027, importers must meet monitoring and verification rules. The EU should go further by offering incentives that encourage methane abatement by its suppliers.

2. Fast-track action on the EU’s highest methane-emitting sectors. While energy is addressed in the Methane Regulation, agriculture —responsible for 56% of emissions — needs clearer guidance. Common Agricultural Policy reforms should direct subsidies toward transition pathways, especially for cattle farming, to support credible, financeable abatement strategies. Additionally, to provide clarity for investors and increase momentum for methane abatement, the European Commission should include methane abatement measures in the EU taxonomy for specific activities associated with extensive methane gas emission, such as energy generation from fossil gaseous fuels, waste management or bioenergy production. This would reinforce that credible methane action is part of the transition to net zero. To maintain integrity, the criteria should integrate the latest scientific evidence and explicitly avoid prolonging the life of fossil fuel assets.

3. Support methane capture from abandoned coal mines. These sites are major emission sources. Member States should fast-track capture projects by enabling market access, providing incentives, and securing EU funding, given their emissions and revenue benefits. By implementing these steps, the EU can embed methane abatement into the heart of its sustainable finance and energy strategies and reinforce its global leadership while unlocking real, near-term climate gains.

What’s Next?

The EU Methane Regulation sends a powerful signal, but its success depends on more than compliance. It will take capital, capacity, and credibility to turn policy into real-world abatement.

Policy tools will be critical to ensure that methane abatement measures are not only encouraged, but required and properly incentivised across all key sectors. The EU’s Methane Regulation further demonstrates the EU’s place as a climate leader.

But regulation alone is not enough. Investors, regulators, and industry must work together to unlock finance at scale. That finance must be transparent and based on credible, ambitious guidance.

As the EU moves toward full implementation, it has the opportunity to speed, steer, and simplify methane abatement across the economy. By combining clear regulation, credible finance frameworks, and a growing ecosystem of transition-aligned investment tools, the EU can help deliver the methane reductions needed for a 1.5°C future and catalyse faster, more ambitious action across global supply chains.

The next year is the EU’s methane moment. Let’s make it count.