A long-term strategy for biomethane in the EU: How do the Danes do it?

Abstract

As Europe grapples with the challenges of decarbonization, biomethane offers a viable path forward, especially in hard-to-electrify sectors. However, since this is based on available biomass streams, there is still a substantial limit to the potential amount available. Fully harnessing its potential requires a long-term and comprehensive strategy. Denmark’s gas package provides a model for how the EU can reduce natural gas use, shift households to electric heat pumps, focus biomethane on industrial use, and support green gases with robust policy frameworks through 2050.

Introduction

The EU’s ambitious climate goals require an energy transition that balances immediate needs with long-term sustainability. Biomethane, as mentioned in a previous column, is the only real alternative to natural gas currently available at scale and with proven technology. It has proven itself as a green alternative to natural gas, but its full potential has yet to be realized. Taking into account the limitations of available feedstocks, the potential is, according to the European Biogas Association, around 110 Billion Cubic Meters (BCM) per year or about a third of current natural gas demand. This may seem as too little, but if we are smart we can lower the natural gas demand significantly and utilize this renewable methane in places where it can make a real impact, such as industry. Denmark’s green gas strategy provides a clear blueprint for a comprehensive and coordinated approach that can be applied across Europe to achieve climate neutrality and help decarbonize Industry relatively painlessly.

So, how do the Danes do it?

Denmark’s green gas strategy aims to fully phase out fossil natural gas by 2050, focusing on promoting biomethane and other green gases in hard-to-electrify sectors such as heavy industry and transport. By 2030, Denmark’s gas consumption is expected to be 70% biomethane, with a clear goal of reaching 100% by 2035. This goal is fully supported by a long term funding and subsidy scheme to cover almost until the final goal in 2050. A rare unicum of political staying power and vision. This strategic approach to gas consumption reduction, replacement by biomethane (already almost 40% today!) and electrification provides a strong foundation for the EU to follow.

Reducing household gas demand

One of the key pillars of the Danish approach is the reduction of natural gas use in households by transitioning to electricity-based heat pumps and district heating systems. This shift drastically reduces the overall demand for gas, enabling biomethane to be concentrated on industrial processes where electrification is less feasible. Denmark's clear phasing-out of gas burners and the use of subsidies for heat pump installations offer an effective model that can be replicated across the EU.

Household heating is a significant contributor to natural gas demand across Europe, and reducing this demand is crucial for a successful biomethane transition. In Denmark, the government has set clear milestones for this transition, with an aggressive goal of phasing out household gas consumption by 2030. By providing targeted financial support and regulations, the EU could drive similar results, freeing up biomethane for sectors where it has the greatest value.

Focusing biomethane on industry

Industries such as steel, cement, chemicals, and refineries are difficult to decarbonize due to their need for high-temperature processes and the large scale of their operations. These sectors are the sweet spots for biomethane use as they do not have to change anything on their operational side. By focusing biomethane on industries that cannot easily switch to electricity, Denmark ensures that biomethane use is maximized where it has the highest impact on reducing emissions.

For the EU, replicating Denmark’s focus on industry can ensure that biomethane is prioritized where it is most needed. Introducing regulatory measures that incentivize industrial players to transition from coal and oil to biomethane is essential as well as fully supporting the establishment of biomethane producers and connectivity to the natural gas grid. Denmark's vision of ensuring gas plays a vital role in supporting industrial jobs while driving decarbonization is also relevant for the EU’s industrial sector.

Certificate of origins and trading schemes

A key aspect of Denmark’s green gas strategy is its use of a trading scheme based on certificates of origin. This scheme ensures transparency in the source of biomethane, allowing consumers and industries to know whether their gas is green. By certifying and trading biomethane as a renewable resource, the market is encouraged to grow, and businesses have an additional incentive to shift towards green energy. Enabling higher returns which will make the market more mature as institutional investors and larger players also enter the market. Something we have seen happening with Shell’s acquisition of Nature Energy.   

The EU could implement similar trading schemes to ensure that biomethane is fully integrated into the broader energy market. Such systems would help standardize biomethane use across borders, creating a well-functioning European market for green gases. Steps in this direction are being taken but this should be accelerated. 

Long-term support and planning

One of Denmark’s key strategies is the provision of long-term support and planning through 2050, ensuring that the biomethane market is sustainable and competitive in the long run. This includes subsidies for green gas production, infrastructure investments, and ensuring competitive tariffs for industries that rely on gas. The Danish government has also invested in infrastructure upgrades to handle the future integration of hydrogen and other renewable gases.

For the EU, adopting a similar long-term approach is crucial. Rather than short-term, reactive measures, the EU needs a clear pathway that includes incentives for biomethane production and infrastructure improvements. Denmark’s long-term commitment shows that by providing certainty to investors and industries, biomethane can become a critical part of the energy mix through 2050.

Conclusion

Denmark’s success with biomethane and green gas shows that a long-term, comprehensive approach can work. By reducing household gas demand through electrification, focusing biomethane on industries, implementing a trading system for green gases, and providing long-term support, the EU can follow Denmark’s lead in decarbonizing the natural gas dependent part of the energy system by balancing the potential maximum amount of biomethane available with the remaining demand. With the right policies in place, biomethane could become one of the cornerstone of Europe’s green energy transition, replacing natural gas in a way that is economically viable and environmentally sustainable.