Biomethane is rapidly becoming a strategic pillar in Europe’s energy transition, offering an effective combination of energy efficiency, sustainability, and circularity. This renewable gas is produced by upgrading biogas, which is generated via the anaerobic digestion of organic waste, including agricultural residues, food waste, and sewage sludge. Once purified, biomethane achieves a high methane content, with chemical and energy properties almost identical to conventional natural gas. Its use provides immediate carbon neutrality when replacing fossil gas in heating systems or industrial processes, and can reduce greenhouse gas (GHG) emissions by up to 90% in the transport sector when used as Bio-CNG or Bio-LNG.

Beyond its energy value, biomethane contributes significantly to the circular economy by converting waste into a valuable energy source and producing digestate, a low-carbon biofertiliser that reduces dependence on chemical fertilisers. Biomethane’s versatility allows it to be injected into existing gas grids, utilised for combined heat and power (CHP) generation, or deployed as a renewable fuel for transport.

Strong Growth in the European Biomethane Market

The European biomethane sector is undergoing strong expansion, establishing itself as a global leader. The worldwide biomethane market was valued at USD 7.99 billion in 2024 and is projected to grow at a compound annual growth rate (CAGR) of 13.5% between 2025 and 2030, reaching an estimated USD 23.99 billion by the end of the forecast period. Europe currently dominates, accounting for over 45.6% of global revenue in 2024.

Germany stands out within Europe, with its biomethane market expected to reach USD 3.42 billion by 2030, growing at a CAGR of 14.3%. Other notable contributors to regional growth include Denmark, Poland, and Italy. The EU has set a non-binding target of 35 billion cubic metres (bcm) of biomethane production by 2030 under the REPowerEU initiative, aimed at reducing reliance on imported fossil gas. This ambitious target, combined with favourable regulation and heightened concerns over energy security, signals a mature and investable market. The European Biogas Association anticipates around €27 billion in private investment flowing into the biomethane sector by 2030, supporting the development of approximately 950 new biomethane plants across Europe over the next five years.

Key Drivers Accelerating Biomethane Uptake

Several critical factors are accelerating the widespread adoption of biomethane in Europe:

1. Tightening Environmental Regulations
   The EU’s climate commitments, particularly the reduction of GHG emissions, are a major driver. Agriculture accounts for roughly 10% of total EU GHG emissions, highlighting the need for sustainable waste management solutions. Biomethane production aligns with the EU’s Circular Economy Action Plan by converting organic waste into clean energy and fertiliser. Biogas can reduce lifecycle emissions by up to 85% compared with fossil fuels.
2. Rising Demand for Renewable Energy
   Renewable energy consumption in Europe increased by 15% between 2020 and 2022, with biomethane playing an increasingly important role. Under the Renewable Energy Directive (RED III), the EU has mandated a 42.5% share of renewables by 2030, with an aspirational top-up target of 2.5%. These requirements are fuelling investment in biogas infrastructure and elevating biomethane’s strategic importance.
3. Energy Security and Independence
   Geopolitical tensions have underscored the EU’s need for energy self-sufficiency. Biomethane offers a domestically produced alternative to fossil fuel imports, enhancing energy resilience and local energy sovereignty.
4. Carbon Pricing Policies
   The EU ETS and CBAM are helping to make biomethane more competitive. At a carbon price of USD 50 per tonne, 280 bcm of biomethane could become economically viable globally. If carbon pricing rises to USD 70 per tonne, this figure could grow to 400 bcm.
5. Strong Policy Support and Incentives
   Many European governments are actively supporting the biomethane sector through subsidies, tax incentives, grants, and renewable fuel mandates. For instance, Sweden’s carbon tax has played a key role in mobilising investment in biogas infrastructure, narrowing the cost gap with fossil gas.

The Strategic Role of Bio-Tickets (Guarantees of Origin)

Bio-tickets, particularly Guarantees of Origin (GOs), play a pivotal role in ensuring transparency and traceability in the biomethane market. GOs certify the renewable origin of gas injected into the grid and allow businesses and consumers to support the green transition voluntarily. Each GO represents one megawatt-hour (MWh) of biomethane and can be traded independently from the physical gas itself. These instruments are central to many corporate decarbonisation strategies and are widely recognised across Europe.

However, ongoing discussions regarding the recognition of GOs for Scope 1 emissions (direct emissions from owned or controlled sources) under the GHG Protocol highlight a critical discrepancy. While GOs confirm renewable origin, they are not currently accepted as a method to reduce Scope 1 emissions. This limits their impact on corporate emissions reporting and encourages companies to physically switch to biomethane use or invest in on-site generation. Recognition of GOs for Scope 1 would significantly increase demand, whereas their continued exclusion may push companies towards physical biomethane procurement, influencing GO market liquidity and pricing.

To support traceability and reduce fraud risk, the Union Database (UDB) will be used to track all biomethane, bioliquid, and biofuel volumes. Registration in the UDB is mandatory for all biomethane intended to count towards EU sustainability targets. In addition, the increased use of Biogas Production Certificates (BPCs) and Biogas Purchase Agreements (BPAs) is enabling more sophisticated investment and cross-border trading models, unlocking capital flows and enhancing liquidity.

Market Challenges and Constraints

Despite its promise, the biomethane market faces several constraints:

• High Capital Costs: Developing a biomethane plant requires significant investment, between €1 million and €5 million depending on scale and technology. This is a major hurdle, particularly for small municipalities or farms.
• Higher Production Costs: Biomethane production remains expensive, ranging from USD 36/MWh to USD 108/MWh, up to five times more than natural gas. This cost disparity highlights the need for continued public support and high carbon pricing to remain competitive.
• Feedstock Supply and Quality: Access to consistent and high-quality feedstock remains a bottleneck. Competition for organic waste from other bioenergy applications further strains supply, while variability in feedstock composition complicates operational efficiency. Advances in pre-treatment technologies have helped, but feedstock security remains an ongoing risk.

AFS Energy’s Role in Advancing Europe’s Biomethane Future

AFS Energy is uniquely placed to support the expansion of the biomethane sector in Europe. The company offers clients direct access to biomethane markets and facilitates the trading of bio-tickets, helping businesses realise financial and sustainability gains. AFS Energy provides expert guidance on policy developments, including RED III and EU ETS integration, and tailors procurement strategies to each client’s sustainability goals.

Its services include end-to-end solutions covering logistics, compliance, and regulatory reporting. The firm supports clients in developing robust business cases for biomethane switching, navigating supply chain complexities, and optimising sourcing to ensure long-term supply stability.

AFS Energy's global supply network and deep sector knowledge enable clients to mitigate risks, reduce emissions, and turn regulatory challenges into strategic advantages. Through a comprehensive suite of services that combines digital innovation with market expertise, AFS Energy empowers organisations to go beyond compliance and make biomethane a cornerstone of their decarbonisation roadmap.

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Biomethane offers a scalable, flexible, and practical pathway to clean energy, transforming organic waste into a circular and carbon-neutral energy source. For businesses seeking a high-impact and compliance-ready solution, biomethane is not only viable, it is strategic.

By partnering with expert providers such as AFS Energy, companies can turn sustainability ambitions into actionable results, gaining a competitive edge in Europe’s rapidly evolving low-carbon economy.