As the EU moves towards a decarbonised energy system, the role of gas is evolving. The clean energy transition aims to reduce fossil gas dependence while supporting security of supply, affordability and competitiveness. Decarbonising the natural gas market remains a key opportunity to support the EU’s 2050 climate neutrality target, as the gas sector accounts for around 20% of EU greenhouse gas emissions.

This ACER report examines the key challenges, trade-offs and policy dilemmas linked to decarbonising the EU natural gas market. The report is structured around four dilemmas: 

Dilemma 1. Can renewable gases (such as biomethane or low-carbon hydrogen) reconcile the EU’s objective of reducing gas import dependency with the need to maintain energy prices affordable?

Dilemma 2. Will the rising cost of natural gas contribute to persistently high electricity prices during the energy transition?

Dilemma 3. Can the EU decarbonise its gas sector without further affecting industrial competitiveness?

Dilemma 4. How can methane emissions be tackled, given the potential for low-cost abatement but rising implementation risks?​

The report explores how the EU can balance gas decarbonisation with the three pillars of EU energy policy, namely sustainability, security of supply and industrial competitiveness and affordability.

What did ACER monitoring find? 

• There are two strategies to decarbonise the gas market: Displacing natural gas and/or reducing its carbon footprint. The former means reducing gas demand and/or switching from gas to renewables. Reducing carbon footprint means using carbon capture and storage and/or addressing methane leaks, as methane is a potent greenhouse gas.

• Sustained gas demand reductions are not guaranteed. EU gas demand reached 340 bcm in 2025, up 2% from 2024, which could slow progress towards the EU’s decarbonisation goals. Despite ambitious demand-reduction targets under REPowerEU plan, progress has somewhat stalled: gas still provides system-flexibility, renewable generation remains weather-dependent and reducing industrial gas demand could affect competitiveness. As a result, gas decarbonisation will likely rely not only on electrification, but also on a mix of mature and emerging technologies, including biomethane, hydrogen, carbon capture and storage.

• Gas still shapes electricity prices. Fossil gas continues to provide important flexibility to the electricity system. In 2025, gas-fired power plants were economically competitive in 40% of hours. Member States with low-carbon electricity mixes paid on average 40% less than more carbon-intensive peers, underlining the affordability benefits of power-sector decarbonisation.

• Natural gas accounts for one third of EU industrial final energy consumption. Decarbonisation options differ widely by industrial sector, while carbon pricing and global competition shape the pace and feasibility of the EU’s industrial transition.

• 85% of methane emissions linked to EU gas and oil consumption occur outside the EU. This makes the EU Methane Regulation key to reducing emissions across the gas supply chain. However, implementation remains challenging due to regulatory uncertainty, producer and supplier hesitancy, and delays in national penalty frameworks.

• Biomethane remains promising but limited. Biomethane is currently the most mature renewable gas option, but with 4.3 bcm of output in 2024, it represents only 2% of gas network injections. Expanding domestic renewable production could strengthen the EU’s security of supply, but its competitiveness depends on carbon prices and the value of sustainability certificates (which allow consumers to claim its sustainability value).

• A balanced portfolio to decarbonise the gas sector is needed. No single solution can decarbonise the gas sector. Delaying action may ultimately cost more than deploying new technologies and transition pathways.