The future of European biomethane and regulatory barriers in the EU market — analysis by Dentons
Biomethane is a central element of the European Union’s strategy for decarbonizing the gas system while leveraging existing infrastructure. Despite significant investments and ambitious goals, the creation of a single, liquid pan-European market currently faces serious structural and regulatory barriers.
We are sharing a review of the article by the international law firm Dentons titled “Challenges affecting the development of a PAN-EU biomethane market” (April 2026). The UABIO team is grateful to Dentons, a member of our Association, for this insightful analysis. Maksym Sysoiev, who is also a member of the UABIO Expert Council, is a partner at the Dentons Kyiv office.
This analytical report reflects the political and market landscape as of January 2026. Given the rapid evolution of biomethane regulations in the EU, Dentons recommends reviewing current legal provisions and national implementation deadlines.
Key data on the EU biomethane market
By the end of 2023, EU biomethane production had reached approximately 4.9 bcm (~52 TWh). With installed capacity of around 7 bcm per year and more than 1,600 biomethane plants operating across 25 Member States by end-2024. Against the backdrop of such rapid growth in the industry, there is a veritable investment boom underway. According to the EBA Biomethane Investment Outlook (June 2025), €28 billion has been allocated to invest in biomethane production, projected to deliver 7.3 bcm per year of capacity to Europe by 2030. Of this total, €26 billion is designated for developments within Europe: €7.5 billion in 2025-2026, with another €17.7 billion for 2027-2030.
All of this is aimed at achieving the ambitious goal of the REPowerEU plan, which calls for increasing production to 35 billion cubic meters by 2030. However, biomethane production remains highly geographically concentrated. As of 2022, the most mature and largest markets were Germany (13 TWh), Denmark, and France (6–7 TWh). At the same time, Spain has significant potential, as it aims to fully meet its national target of 20 TWh per year exclusively with biomethane.
The main problem facing the sector remains the fact that today less than 5% of all biomethane produced in the EU is consumed outside the country of origin. Developing a genuine pan-EU biomethane market requires enabling biomethane produced in one Member State to be traded, certified, and used for compliance purposes in another, whilst avoiding double counting and ensuring coherent interaction between production and demand-side incentives. However, due to a number of structural issues, this vision has not yet been realized.
FuelEU Maritime and bio-LNG bunkering: a key driver of demand
The new FuelEU Maritime regulation, which took effect in 2025, has become a powerful driver for the market. It sets strict limits on greenhouse gas emissions for ships with a gross tonnage of over 5,000 tons calling at EU ports: from a limit of -2% in 2025 to a radical -80% by 2050. This move is creating massive demand for liquefied biomethane (bio-LNG) in maritime transport due to its unique characteristics:
- Bio-LNG offers “drop-in” compatibility with existing LNG-fuelled vessels without any engine modifications.
- Bio-LNG reduces greenhouse gas emissions by 65–90% compared to fossil marine fuels.
- Renewable gas can use existing LNG bunkering infrastructure with minimal modifications.
- Manure-based biomethane can even achieve negative emissions, allowing ships to accumulate “excess compliance” for future years or sell it to other operators through pooling mechanisms.
As a result, bio-LNG has become the primary short-term solution for complying with environmental requirements while low-carbon e-fuels are still gaining traction. The main demand is concentrated in major European ports such as Rotterdam, Antwerp, Zeebrugge, Hamburg, Barcelona, Algeciras, Marseille, Piraeus.
Key challenges for the integration of the single market
Regulatory fragmentation
The 35 bcm target for 2030 is non-binding at EU level, leaving implementation to individual Member States. As of 2026, there is no single EU-wide mandatory green gas blending standard. While the EU has established a comprehensive regulatory framework through the Hydrogen and Decarbonised Gas Market Package-consisting of Regulation (EU) 2024/1789 and Directive (EU) 2024/1788-it relies on voluntary targets, certification systems, and national-level mandates rather than a unified blending percentage for the entire bloc. EU countries have until 24 February 2027 to fully transpose these directive rules into their national laws. In the absence of an EU-wide standard, individual Member States are developing their own blending mandates: the Netherlands is implementing a blending obligation starting 1 January 2027, Austria aims to substitute nearly 10% of gas volume with renewable gases by 2030, and France’s green gas obligation is expected to become effective in 2026.
National restrictions as barriers
- France’s bio-LNG export restrictions: Subsidised biomethane cannot be liquefied at French LNG terminals for use outside the country; French bio-LNG must be exported via mass-balancing to other terminals in the EU. This means French ports (Marseille, Dunkirk, Montoir-de-Bretagne) cannot become major bio-LNG bunkering hubs for subsidised biomethane, despite France being the largest biomethane producer in Europe by capacity.
- Physical delivery requirements: The Netherlands’ draft Fuel Transition Obligation which transposes RED III requires bio-LNG to be “unsubsidised, certified, and physically delivered” to qualify for domestic compliance. This discriminates against mass-balance bio-LNG produced at foreign EU terminals (e.g., Zeebrugge) using biomethane from Dutch or other EU sources.
In contrast, Belgium’s Zeebrugge terminal and the Netherlands’ Gate terminal in Rotterdam have successfully implemented mass-balance bio-liquefaction for export and maritime bunkering. Spain, with €4.8 billion in planned biomethane investments and over 50 plants in development, is positioning itself as a future renewable gas export and maritime hub.
Certification and traceability
A unified biomethane market requires interoperable systems for Guarantees of Origin (GOs) and Proofs of Sustainability (PoS). The distinction between these two instruments, and the chain-of-custody systems underlying them, has become increasingly important.
| Feature | Proof of Sustainability (PoS) | Guarantee of Origin (GO) |
|---|---|---|
| Primary Purpose | Regulatory compliance (RED III targets, ETS obligations, FuelEU Maritime) | Consumer disclosure and marketing claims |
| Chain-of-Custody System | Mass Balance (physical linkage to gas flow required) | Book-and-Claim (environmental attributes traded separately from physical commodity) |
| GHG Emission Data | Mandatory – includes detailed E-values (specific GHG emission factors) | Optional or limited detail |
| Issuer | Voluntary certification schemes recognised by the European Commission (e.g., ISCC, REDcert, CertifHy) | National competent bodies and official registries (e.g., ERGaR, AIB) |
| Feedstock & Pathway Information | Detailed and granular (feedstock type, production pathway) | Basic information only |
| Bundling Requirement | Must remain bundled with GO if both are issued for the same gas batch | Must remain bundled with PoS if both are issued for the same gas batch |
| Use for Compliance | Required for meeting regulatory obligations under RED III | Not sufficient alone for regulatory compliance |
In Europe, two partially overlapping certification systems coexist: ERGaR (focused on gas networks) and AIB (historically established for electricity). Certificates are transferred between them with significant delays. For example, transactions within ERGaR take 5–10 days, while transfers from ERGaR to AIB, due to manual processing, can take 25 days or more, which increases commercial risks and raises transaction costs.
At the same time, the Union Database (UDB) is being developed in the EU; starting in 2026, it will become a mandatory central tool for tracking renewable gases from feedstock to consumption, with the aim of preventing fraud and double subsidies. The Delegated Regulation on feedstocks was adopted at the end of 2025, and the revision of Implementing Regulation 2022/996 will be completed by the end of 2026 (it will allow for the retroactive revocation of PoS in the event of violations). However, the UDB itself is merely a technical tool and does not automatically remove countries’ discriminatory restrictions.
Other challenges
In addition to trade restrictions, the sector’s development is hampered by lengthy permitting procedures and the high cost of integrating into the infrastructure. Bureaucratic delays in obtaining permits to build plants can take two to three years or longer. Due to procedural delays and shifting policies, investors have already canceled or suspended projects worth approximately €101 million.
The cost of connecting to the networks is distributed unevenly. In France, the producer covers 40% of the costs (60% is subsidized), while in Italy, developers previously paid 80%. However, Italy’s 2026 Budget Law changed the rules. Now, network operators are required to cover 70% of connection costs and 100% of the costs for gas metering and compression, which has significantly improved the economics of the projects.
The development of a pan-European market for biomethane by-products — primarily digestate (biofertilizer) and biogenic CO2 — faces significant regulatory, logistical, and technical barriers. Although the EU is striving for a circular economy, the “secondary” nature of these products means they are often entangled in complex cross-border trade restrictions and fragmented standards.
National support mechanisms
E-CUBE (2024) notes that “new models of biomethane support mechanisms have begun to replace feed-in tariff systems, primarily based on consumption incentives,” including transport GHG/renewable fuel quotas, gas grid blending obligations, and tax exemptions. By end-2023, 1,510 biomethane plants were operational in Europe. The EBA Investment Outlook reveals a remarkable 7% increase in greenfield investments, with 85% of total capital (€24.2 billion) allocated to fully new plants. Nearly €1.3 billion is allocated to infrastructure upgrades, including bio-LNG for transport.
Top-3 countries with planned investments:
- Spain: €4.8 billion (17.3 TWh/year) — emerging export and maritime hub.
- Denmark: €3.14 billion (10.3 TWh/year) — largest exporter, maritime demand driver.
- United Kingdom: €2.43 billion (6.8 TWh/year) — significant exporter to EU.
Dentons’ recommendations for market reform
To transition from today’s fragmented, subsidy-driven landscape to a liquid, pan-EU biomethane market, the EU and Member States must:
- Remove national export restrictions: France’s prohibition on liquefying subsidised biomethane for export and ex-domain-only GO exports should be eliminated. Member States should recognise that subsidised biomethane, once injected into the grid, can be allocated via mass balance to LNG terminals anywhere in the EU for liquefaction and bunkering, provided appropriate PoS and UDB tracking are in place.
- Eliminate physical delivery requirements: Member States must fully recognise mass balance for domestic compliance where RED II/III permits it, relying on UDB and enhanced auditing for traceability rather than physical delivery requirements that may violate EU internal market principles.
- Harmonise certification systems: Establish full interoperability between ERGaR and AIB systems, harmonise GO cancellation rules, integrate both with the Union Database, and eliminate ex-domain cancellation requirements.
- Complete UDB implementation: Including full operationalisation of upstream raw material tracking and connection to all national GO registries. Recognise that UDB alone will not remove national restrictions unless accompanied by policy alignment or legal enforcement.
- Commission guidance and enforcement: The European Commission should issue interpretative guidance clarifying that mass balance must be recognised for domestic compliance, that physical delivery requirements constitute improper transposition unless strictly justified, and that national rules must not discriminate against biomethane from other Member States. Where Member States maintain discriminatory requirements, the Commission should consider infringement proceedings.
- Additional measures: Harmonise FuelEU Maritime compliance; establish EU-wide blending standards; scale up demand-side policies; streamline permitting and grid connection (€101 million in planned investments were cancelled primarily due to procedural delays); design subsidies compatible with cross-border trade; clarify regulatory treatment of bio-methane production by-products and sustain political commitment.
Technically and financially, the European biomethane sector is ready for a breakthrough—investors have committed €28 billion in capital, and nearly 900 new plants are scheduled to come into operation over the next five years. However, political decisions by individual countries (such as restrictions in France or regulatory conditions in the Netherlands) are artificially confining markets within national borders. Achieving the common European target of 35 billion m³ by 2030 is only possible if bureaucratic and legal barriers to cross-border trade are immediately removed.
