Methane under Fire
How the EU’s bold regulations aim to confront supercharged emissions
16 December 2025
- The EU Methane Regulation introduces binding rules for energy firms and importers, potentially creating both compliance risk and investment opportunities.
- We believe methane abatement may offer rapid climate benefits and financial upside, with many solutions already cost-effective.
- Major energy firms are integrating methane reduction into their strategies, but concerns remain over the impact of regulatory complexity on Europe’s global competitiveness.
Four years after the European Commission’s initial communication on the matter, the EU Methane Regulation finally came into force on 4 August 2024. It is the world’s first legally binding standard aimed at reducing methane emissions, with its primary focus being the energy sector (crude oil, natural gas and coal).
’GAM Investments recognises the importance of policy as a pillar in supporting a just transition to a more sustainable economy. Policy making related to climate action has historically focused heavily on carbon dioxide emissions, with the EU’s Methane Regulation marking a notable step to reducing greenhouse gas emissions in new ways.
Why Methane?
Methane versus CO2: When Heat-Trapping Power rivals Staying Power
The central focus on carbon dioxide (CO2) emissions in climate regulations comes from the vast quantities emitted along with, importantly, the fact that CO2 persists in the atmosphere for centuries or even millennia. However, attention is increasingly turning to methane. Although methane remains in the atmosphere for only 7 to 12 years1, it has a far higher global warming potential; over a 20-year period, it traps approximately 84 times more heat than CO22. Despite this, human activity (agriculture, energy and waste) contributes to 60% of these emissions1 and the International Energy Agency (IEA) highlights that currently “methane concentrations have been rising more quickly than those of all other major greenhouse gases – and at a rate faster than in any period since recordkeeping began.”
Simple Solutions, Profitable Outcomes
What we believe makes methane emission reductions so compelling from an investment point of view is the opportune blend of environmental urgency with profitability potential and practical solutions. The energy sector is responsible for a third of global methane emissions2 and in 2023 alone, it emitted 260 trillion litres of gas through flaring, venting and leaking3. Flaring refers to the burning of excess gas, venting to the intentional release of methane into the atmosphere, and leaking to unintended emissions from faulty equipment or infrastructure.
Remarkably, 47% of these emissions2 could be prevented using existing technologies such as leak detection and repair. Capturing this lost gas can reduce waste, both benefiting energy companies’ bottom lines and enhancing EU energy security by increasing domestic supply. Crucially, according to the International Energy Agency (IEA), around 40% of methane mitigation measures could be cost-neutral or even profitable4 due to the market value of the recovered gas. Also, reducing methane emissions could lessen the need for new gas reserves before 2050, supporting broader climate objectives.
All in all, the focus on CO2’s longevity remains essential, but with the global time crunch, methane’s heat-trapping potential, and the low-hanging financial fruit, tackling methane seems to offer a real chance for fast climate wins. According to estimates by the UN Environment Programme (UNEP) and the Climate and Clean Air Coalition (CCAC), a 45% cut in methane emissions by 2030, based on measures aligned with the UN Sustainable Development Goals, could avoid up to 0.3°C of global warming by 20455.
What is The EU Methane Regulation 2024/1787?
Measures for companies operating within the EU in the energy sector include monitoring, reporting and verification (MRV) of methane levels, leak detection and repair (LDAR) procedures designed to prevent flaring, venting and leaking, and a ban on routine venting and flaring. In line with these requirements, the IEA highlights that eliminating all non-emergency flaring and venting is the single most effective step countries can take to reduce methane emissions in the energy sector.
EU importers are required to track methane emissions associated with imported fossil fuels. This is a critical step, given Europe’s high reliance on fossil energy imports. Importantly, the burden of compliance falls on EU-based importers to ensure that suppliers meet EU requirements. From 2028, importers must report methane intensity6, and from 2030 they will need to meet methane intensity thresholds set by the EU.
What are the potential financially material implications?
Companies caught unprepared may face financial penalties or even market exclusion, especially as methane becomes a growing legal and political priority.
An example of such growing priority is that at 2023’s COP28 in the United Arab Emirates, the Oil and Gas Decarbonisation Charter was launched and saw 52 companies commit to near-zero (ie 0.25% or below) upstream methane emissions by 2030. More countries joined the Global Methane Pledge, new abatement financing was announced and the first Global Stocktake (a mandatory assessment of progress made) reinforced methane’s urgency.
For methane-emitting companies willing to invest in the right abatement technologies, wastage can be avoided, which could lead to increased revenues, and potential financial implications of non-compliance are avoided.
With a large emphasis from the regulation on upgrading infrastructure, detecting, and reducing emissions at the source, there may also be upstream opportunities for investors.
For example, Rotork plays a growing role in methane emissions reduction by replacing traditional gas-powered pneumatic actuators, which vent methane during operation, with electric actuators that eliminate this leakage. This shift supports customers’ decarbonisation goals and regulatory compliance, while creating a new growth market for Rotork.
ABB develops advanced sensors and analysers used to detect methane leaks from oil and gas wells and pipelines, helping operators quickly locate and repair fugitive emissions. Honeywell manufactures gas detection systems and process controls that monitor methane and other hydrocarbons in industrial settings, improving safety and reducing unintentional releases.
Drägerwerk, a specialist in industrial safety equipment, supplies portable and fixed methane detectors used across energy and chemical sectors to prevent leaks. Siemens provides continuous emissions monitoring and biogas analysis systems capable of measuring methane concentrations, as well as automation and compressor technologies that cut fugitive gas losses. Together, these companies enable industries to detect, measure and prevent methane emissions, forming a crucial part of global decarbonisation and regulatory compliance efforts.
Downstream: How is Big Oil responding?
Major oil firms agree flaring, venting and leaking are key concerns, though some question the regulation’s strictness and its impact on Europe’s global competitiveness.
Prior to the enforcement of the EU Methane Regulation, Shell had already positioned itself as an advocate for methane reduction achieving a methane intensity of just 0.04%7 (well below its target of 0.2%) and aiming for near-zero methane emissions by 2030. Shell has publicly backed the regulation and is actively working to embed methane reduction into its broader 2024–2029 energy transition strategy, including a pledge to eliminate routine flaring by 2025. However, Shell emphasises the need for a balanced policy approach to all climate-related initiatives, noting the importance of maintaining stable supply of energy.
BP’s 2024 sustainability report outlines its ongoing commitment to reducing methane emissions, with a target of 0.02% by 20258. BP is investing in pipeline infrastructure, central delivery points, tankless upstream facilities, and electric-driven instrument air and gas compression systems. BP has expressed support for the “development of regulations that focus on the most effective mitigation of methane emissions” but has advocated for facility-specific leak detection and repair (LDAR) monitoring to better target high-risk areas, and cautioned against the ambitious implementation schedule for upgrading flaring technology.
Total Energies, though silent on the regulation, has emerged, in our opinion, as a leader in methane compliance. The company has focused its efforts on flaring, venting, and real-time detection across all upstream assets, achieving a 55% reduction in methane emissions ahead of its 2025 target, with a goal of reaching near-zero methane emissions by 2030.
ExxonMobil, headquartered in the US, participated in the development of the regulation, and has cut methane intensity by 60% since 2016, targeting 70–80% by 20309. It publicly frames methane reduction as “smart business,” noting that “more natural gas means more to sell.” Despite these advancements, ExxonMobil Europe President, Philippe Ducom, published an article in October 2024 expressing concern that increasingly complex regulations may be driving industries and investments away from Europe.
We believe that the EU Methane Regulation marks a turning point in climate governance, pairing environmental urgency with practical and profitable solutions. Technologies to detect, capture and prevent methane emissions already exist, and compliance can drive efficiency and financial value. With its binding framework, the EU sets a global precedent. Despite some reservations, major oil firms are aligning compliance with strategy, as the regulation drives innovation and frames methane reduction as both a climate and commercial opportunity. As implementation unfolds over the coming years, our attention now turns to the success rates of the measures put in place and how we might potentially benefit from an investment perspective.
David Barker (alongside Tom O’Hara and Jamie Ross) co-manages European Equities strategies at GAM Investments. You can find out more information on the team and the strategies they are responsible for here.
Joel Gubb is a Senior Analyst, Sustainability & Investments Business Management, in GAM’s Responsible Investment Team. Learn more about the team's views on Sustainable Investing here.