Biomethane: 2025 mid-year market update for corporate buyers

The medium-term outlook for certified biomethane looks unequivocally bullish. However, the market remains complex due to a lack of harmonised rules and common standards, which poses a barrier to scaling this solution. For instance, rules for cross-border trading are not yet harmonised between registries, and the acceptance of certificates across different systems is not guaranteed.

Despite these hurdles, procurement models such as biomethane purchase agreements (BPAs) are expanding rapidly. BPAs offer corporate buyers long-term contracts for new plants, similar to power purchase agreements (PPAs). While that is true, the window to secure long-term contracts for certified low-carbon biomethane is narrowing as the regulatory environment is tightening.

While the European biomethane market continues to mature, regulatory inconsistencies persist across member states. Buyers pursuing either voluntary climate claims or compliance obligations (e.g., under the EU Emissions Trading System) must consider the risks of regulatory variability.

Key regulatory uncertainties include: 

• Ongoing discussions within the GHG Protocol (GHGP) regarding biomethane’s classification as a market-based instrument for scope 1 emissions reductions.
• Lack of harmonised rules for cross-border biomethane trading across registries.
• Inconsistent acceptance of biomethane certificates between national systems.

As regional trading hubs, notably the Association of Issuing Bodies (AIB) and the European Renewable Gas Registry (ERGaR),advance cross-border trade frameworks, the upcoming Union Database (UD) is expected to play a pivotal role in standardising verification once its rules and procedures are finalised.

A significant market driver for biomethane is the EU Emissions Trading System II (EU ETS2), initially set to reshape the European fuel landscape from 2027, but recently postponed to 2028 by the European Council. The system will substantially increase the cost of fossil fuel consumption, extending carbon pricing to emissions from road transport, building heating, and smaller industrial sectors.

However, industrial consumers with EU ETS obligations can avoid the cost of carbon by replacing their natural gas consumption with biomethane. To take advantage of this cost avoidance, there are specific requirements in the EU ETS that vary from country to country. 

The general rule for the use of biomethane in EU ETS is that the biomethane needs to be RED II/III certified, meaning the project has to carry a biomass sustainability certification that verifies the biomethane was produced from sustainable feedstocks and meets specific GHG reduction criteria.

As the regulatory and market landscape for biomethane evolves, engaging an experienced advisor such as 3Degrees can ensure your organisation stays ahead of compliance requirements while meeting ambitious decarbonisation goals.

Read the full analysis in the Fall 2025 edition of our Global Market Insights Report.