Industry commentary: Strengthening the biomethane market: Why CSRD improvement is key for industry growth

As Europe intensifies its climate efforts, clearer regulatory guidelines for biomethane are essential to provide businesses with the certainty they need.

The current landscape: A fuel for the future

Europe is making substantial progress in scaling biomethane production and improving the traceability of emissions. To reach the goal of reducing net greenhouse gas (GHG) emissions by at least 55% by 2030 compared to 1990 levels and the subsequent 2040 target of a 90% reduction, the energy sector must undergo a fundamental transformation. While electrification is a cornerstone of this transition, hard-to-abate industries and household heating require reliable, low-emission alternatives.

Among renewable energy sources, biomethane plays a distinctive role. Unlike wind and solar energy, it can provide stable, base-load energy while contributing to a circular economy. The European Commission has identified its importance, stating that the EU’s biomethane production, either as biogas or its upgraded version, biomethane, will need to reach 35 billion cubic metres (bcm) per year by 2030. Today, the installed capacity is roughly 7 bcm. Its future growth depends not only on investment but also on a clear, consistent regulatory framework regarding the consumption and reporting of biomethane.

Fragmented frameworks and reporting gaps

While there is full industrial potential to scale up production capacity, a regulatory framework fit for this purpose is currently missing. Without a harmonised, credible utilisation framework, the fuel risks becoming easy to produce but difficult to consume for emission reduction.

Currently, the industry lacks a transparent and harmonised framework for the recognition of renewable and low-carbon gases within the GHG Protocol and corporate accounting frameworks. While measures to address this gap are under development, such as the establishment of the Union Database for Biofuels (UDB), a stronger and more explicit focus on biomethane implementation within the Corporate Sustainability Reporting Directive (CSRD) is needed to enable the growth potential of the biomethane market.

The CSRD requires large companies to report environmental, social, and governance (ESG) impacts according to the European Sustainability Reporting Standards (ESRS). Emissions related to energy consumption must be reported under these obligations. Scope 1 emissions, including those related to biomethane, must be reported following the GHG Protocol Corporate Standard. However, the GHG Protocol currently lacks clear guidance on how biomethane and biomethane certificates can reduce Scope 1 emissions.

CSRD and the Omnibus Package

Concerns about complexity and administrative burden have led to revisions under the “Omnibus Simplification Package”. These revised rules have set higher reporting thresholds, applying to companies with more than 1,750 employees and a net turnover of more than €450,000,000 during the financial year. The package also extended preparation time for certain large non-listed companies and listed SMEs, simplified datapoints, and provided greater flexibility during initial reporting years. These adjustments aim to ensure that reporting remains robust without overwhelming companies.

The Climate Standard (ESRS E1) governs disclosures on climate change, including Scope 1, 2, and 3 GHG emissions and energy consumption. Crucially, it requires detailed reporting on biogenic CO2 emissions separately from Scope 1 GHG emissions. It also requires the reporting of methane (CH4) and nitrous oxide (N2O) within the relevant scopes that arise during the combustion or degradation of biomass. This has direct implications for the consumption of biomethane, as it involves biogenic CO2 emissions. Companies must therefore clearly distinguish biogenic from other emissions throughout the value chain and report them transparently.

What this means for the market

While Europe is progressing on production traceability, significant bottlenecks remain on the consumption side. Once biomethane is injected into the gas grid, renewable and fossil gas molecules are physically indistinguishable. Without harmonised EU rules or interoperable cross-border certificate systems, industrial consumers struggle to determine:

• When biomethane purchases can legitimately reduce their Scope 1 emissions.
• Which certification frameworks are acceptable for reporting under CSRD and ESRS.
• How to reconcile national systems with EU-level sustainability disclosures.

This regulatory fragmentation risks creating a situation where biomethane is traceable at the production source but too complex to claim credibility at the point of use. If reporting rules are unclear, biomethane consumption is disincentivised, as corporations are unable to benefit from the usage of the renewable gas. Consequently, clients are currently hesitant to purchase biomethane certificates, as the regulatory stakeholders do not clearly recognise and accept such purchases.

Harmonisation and proactive engagement

To address these challenges, the European Commission could issue voluntary sector-specific guidelines. These would help companies assess their risks, opportunities and impacts in specific sectors, and facilitate the application of ESRS within a given sector. To enable the full value of biomethane for decarbonisation, Europe must complement production transparency with harmonised biomethane procurement rules, cross-border certificate interoperability, and a clear and credible system for reducing emissions through the consumption of biomethane.

By aligning producers, consumers, registries and auditors around clear rules, Europe can ensure that biomethane delivers its full potential in achieving emissions reduction while enhancing energy security and supporting EU climate goals.

At the same time, proactive action by consumers can play a crucial role in driving and accelerating regulatory change. Early adoption and feedback can highlight gaps in existing frameworks. By purchasing biomethane and biomethane certificates early on, consumers provide valuable signals to policymakers, helping shape regulations that are more responsive, effective, and aligned with real demands.

Final thoughts: Aligning for impact

By aligning producers, consumers, registries and auditors around a single set of clear rules, Europe can ensure that biomethane meets its full potential. This alignment will not only reduce emissions but also enhance energy security and support broader EU climate goals.

The path forward requires both regulatory evolution and corporate courage. As the frameworks for the CSRD and ESRS continue to be refined, businesses that engage with these topics now will be the best prepared for the mandatory reporting requirements of the future.

How to get started

Establishing a resilient renewable energy strategy requires a thorough understanding of both technical requirements and evolving ESG standards. Taking proactive steps to integrate biomethane into your decarbonisation and defossilisation plans can help your organisation remain adaptable as reporting frameworks continue to develop.

South Pole’s consultants provide the technical and regulatory expertise needed to clarify the impact of your investments and ensure alignment with the CSRD. Learn more here.

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About the Author 

Cäcilie Khevenhüller Metsch - Associate Consultant for Renewable Energy Solutions at South Pole. 

Cäcilie supports the development of renewable energy strategies aimed at reducing emissions related to energy procurement, covering both technical and administrative requirements. Cäcilie provides advisory services on biomethane and supplier engagement. She holds a BSc in Renewable Energy Engineering and an MSc in Energy Management.

About South Pole 

South Pole is a leading climate solutions provider and carbon project developer. Since 2006, we have worked with businesses and governments worldwide to realise deep decarbonisation pathways and protect the environment.

 

Sources:

[1] European Commission: Biomethane production targets

[2] European Parliament: Corporate Sustainability Reporting Directive

[3] EFRAG: ESRS E1 Climate Standard