Urszula Szalkowska, managing director for European Markets at EcoEngineers, part of LRQA, examines how biomethane is now embedded in the EU's carbon compliance architecture and what this means in practice for operators under ETS1 and ETS2. Biomethane has quietly crossed a threshold. It is no longer discussed primarily as a renewable gas alternative to natural gas; it has become a recognised instrument within the EU's carbon compliance architecture, and the implications for industrial operators, fuel suppliers and gas traders are beginning to materialise in ways that are both financial and operational. The numbers provide a sense of the scale of what is changing. About 29% of the biomethane used in the European Union (EU) today falls within EU Emissions Trading System 1 (EU ETS 1) sectors, such as power generation and heavy industry, while an additional 43% is used in sectors covered by the newly operational EU Emissions Trading System 2 (ETS2), which includes buildings, road transport and smaller industries. Together, close to three-quarters of EU biomethane consumption now intersects with the EU ETS in some form. The EU currently produces around 19 billion cubic metres of biomethane, representing roughly 6% of total EU gas consumption. With 90% of EU gas still imported, biomethane is increasingly being positioned by policymakers as both an energy security asset and a strategic substitute for fossil fuels. This analysis draws on work developed alongside Julian Auderieth, president of the European Renewable Gas Registry (ERGaR), and covers the compliance mechanics, financial value and policy developments that operators in the sector should be tracking. Under ETS1, the compliance benefit of biomethane flows from a straightforward principle. Operators report total calculated emissions, and where biomethane is used, they must determine the biomass fraction of their fuel mix and demonstrate that it meets the sustainability and GHG savings criteria set out in the Renewable Energy Directive (RED). When those conditions are satisfied, biomethane can be assigned a zero-emission factor, meaning the emissions associated with its combustion do not require allowances. More eligible biomethane in the fuel mix means a lower fossil fraction, fewer reportable emissions, fewer allowances to surrender and a lower compliance cost. The zero rating is not automatic; it depends on RED compliance and requires the same certification and traceability evidence that underpins proofs of sustainability. On the operational side, ETS1 also permits a simplified methodology for grid-delivered biogas. Rather than physically tracking individual molecules through the grid, operators can use purchase records of equivalent energy content alongside registry evidence. This is permitted only where the operator can demonstrate that no double counting occurs, that a shared grid connection exists between the producer and the operator, and that compliance with applicable sustainability criteria is achieved. For many ETS installations using grid-sourced biomethane, this flexibility represents a meaningful reduction in administrative burden. ETS2 introduces a different point of obligation. Rather than sitting with the emitter, compliance costs fall upstream on the fuel supplier releasing fuel for consumption. The same zero-rating principle applies where RED sustainability conditions are met, reducing the total volume of allowances that must be surrendered. One distinction worth noting: ETS is not a life-cycle accounting system, and a negative carbon intensity score for a given biomethane pathway does not reduce ETS compliance emissions below zero. The full life-cycle benefit of high-performing pathways is captured under RED accounting rather than within the ETS framework itself. The ETS2 timeline is now pressing. The monitoring phase began in 2025, and 2026 is the first full reporting year. By April 2027, regulated entities must submit emissions reports to relevant member state authorities, with the first surrender of allowances due in May 2029. Interest from industrial players and fuel suppliers in using biomethane to manage ETS exposure is rising, but operational readiness across the market remains uneven. Traders generally understand which certificates are needed, yet many face practical challenges with registry interoperability and cross-border transfers. Suppliers may be familiar with monitoring plans in their home markets while lacking the expertise to navigate certificate requirements in the member states where they supply. Some national authorities responsible for verifying ETS compliance are still building familiarity with how biomethane accounting functions in practice. There is a degree of reassurance in the legal architecture, however. The Monitoring and Reporting Regulation (MRR) is a regulation rather than a directive, which means it is directly binding on all member states without requiring national transposit