EU wants to label gas as green investment, but the science doesn’t lie

The European Commission’s proposal to identify parts of the gas industry as sustainable has irked climate scientists, geopolitical pressures will now ensure that the world’s first green taxonomy is not on the same side as science

On 2 February, the European Commission announced a proposal to include “specific nuclear and gas energy activities” in the European Union (EU) taxonomy for sustainable activities. Broadly, the taxonomy establishes a list of environmentally sustainable activities in order to meet the EU’s climate targets for 2030 and the objectives of the European green deal. It underscores the role of gas as a transitional fuel to move from coal to renewables and sets out certain conditions under which construction of gas infrastructure would be allowed. But this has drawn serious criticism given its dissonance with climate science—both IPCC recommendations and the EU’s own stated goal of net-zero by 2050. 

Ever since the taxonomy proposal to allow green financing for gas was leaked last year, scientists, civil society groups, and even financial institutions have criticised the plan, saying “the taxonomy itself would become a greenwashing tool” given the warming potential of methane. Elaborating on similar concerns, Gunnar Luderer, head of the Energy Systems Group at Germany’s Potsdam Institute for Climate Impact Research said it is important to “conceptually distinguish” between things that are inherently sustainable, i.e. in-line with net-zero targets, and those that are merely bridging solutions like gas so that the credibility of all the other items in the taxonomy is not undermined.”

Even the President of the European Investment Bank expressed similar concerns when he said “If we lose the trust of the investors by selling something as a green project, which turns out to be the opposite, then we cut the feet on which we are standing when it comes to financing the activities of the bank.”

In the process of combustion at power stations, gas emits less CO2 than coal. But this is only part of the climate change picture. 

‘Gas is creating a wall, not a bridge’

Extraction and transportation of gas is associated with emissions of methane, which has a warming potential about 86 times greater over a 20-year period than CO2. So when the short-term warming impact of methane is taken into account, “it diminishes any advantage gas has over coal and sometimes disappears altogether,” said Greg Muttitt, senior policy adviser, Energy Supply at International Institute for Sustainable Development (IISD). 

In addition to taking into account all the greenhouse gases that are emitted in the process of gas production, there is also a need to look at the entire process, i.e. including in the process of transportation of gas via pipelines that result in heavy methane leaks. 

Investments in new unnecessary gas infrastructure could also divert money away from renewable energy projects that are available today. So while gas could displace some coal from the energy system, it also gets rids of renewables which are much better for the climate. “Increasingly, what we see is that gas power is cost-competitive more often with renewables than with coal. So gas is acting like a wall, not a bridge, in the move to clean energy systems,” Muttitt said.

A 2016 paper warned of “potential for delays” in the deployment of renewable energy systems. These could offset climate benefits from replacing coal with gas, especially in cases where methane leaks are high, the paper stated. So, Muttitt said, the EU characterisation of gas as a green fuel is “damaging and misplaced,” especially given the responsibility that industrialised countries like those in Europe and North America bear to lead the energy transition away from fossil fuels. 

Neither consistent with 1.5°C, nor in line with net-zero targets

The 2018 Special Report of the Intergovernmental Panel on Climate Change (IPCC) called for deep reductions in emissions if the goal of limiting warming to 1.5°C is to be maintained. Terming new constructions of gas infrastructure as “inconsistent with the 1.5°C goal,” Drew Shindell, a coordinating lead author for the IPCC Special Report, explained that building gas infrastructure in the 2020s “is a financially unsound choice—to build something now and shut it off in the near term.” Shindell is a professor of Earth sciences at Duke University. 

In the 1.5°C scenarios studied in the IPCC Special Report, the median scenario’s energy from gas went down around 40% from 2020-2050 in scenarios with little or no overshoot of the 1.5°C target, and went down by about 30% even in scenarios with high overshoot. (Overshoot describes a scenario in which global mean temperatures temporarily exceed the 1.5°C target before returning below.) 

In response to questions CarbonCopy raised about greenhouse gas emissions from gas, a spokesperson for the European Commission referenced the role of carbon capture and storage technologies as a screening criteria for inclusion in the taxonomy and said that gas plants would have to “integrate a rapid conversion towards renewables with a clear commitment for a full switch to renewables by 2035.”

But while there are a few 1.5°C-consistent scenarios that account for more energy from gas in the next 30 years, “these tend to rely on very rapid and large-scale deployment of carbon dioxide removal, so are, in my opinion, extremely risky,” Shindell said. 

Dr. Joeri Rogelj, coordinating lead author for the chapter on mitigation pathways in the IPCC Special Report, agrees that the decision to continue the use of fossil gas alongside large-scale deployment of carbon dioxide removal measures could have adverse impacts on other sustainability goals. For instance, carbon removal practices that focus on the production and growth of biomass are water-intensive because of irrigation needs, which could then lead to limitations on water availability for biodiversity.

A February 2022 report by IISD, Oil Change International (OCI) and Greenpeace drew a similar conclusion from an analysis of net-zero pathways outlined by the International Energy Agency (IEA). The report stated that the IEA’s conclusions may be “conservative,” given its reliance on “extremely rapid growth” in carbon capture and storage (CCS) technologies. There is no pathway to scale up technologies such as CCS to the level that some energy scenarios are projecting. 

Kelly Trout, a research analyst at OCI and co-author of the February, 2022 report pointed out that the cautionary approach would be to look at the remaining carbon budget as an absolute limit and “make investments in energy systems without relying on riskier technologies that could prolong the fossil fuel era.” 

The representative from the European Commission did not respond to follow-up queries on risks related to carbon capture technologies and other adverse impacts like water usage. 

EU jeopardising its own goals

In addition to not being in line with IPCC recommendations, the EU’s taxonomy could also jeopardise its stated goal of reaching net-zero emissions by 2050. In a 2021 report, the Global Energy Monitor said new gas projects in Europe could “threaten to lock-in emissions well beyond 2050.” 

The first element of the EU net-zero strategy, Luderer explained, “is to ensure that power systems are almost carbon-free in industrialised countries like ours as soon as possible… within this decade. But by stating that “there is a role for private investment in gas” and thereby enabling the build up of more gas infrastructure via reclassification as ‘green investment,’ the taxonomy proposal seems out-of-sync with the net-zero goal.

The commission’s proposal will now have to be scrutinised by the European Parliament and the European Council, who have a period of around four months to deliberate.

Geopolitical quicksand 

On March 8, 2022, the European Commission laid out a plan to “make Europe independent from Russian fossil fuels well before 2030, starting with gas, in light of Russia’s invasion of Ukraine.” The plan entails “diversifying gas supplies.” Even the IEA called on Europe to “replace Russian supplies with gas from alternative sources” to the tune of 30 billion cubic metres within a year. Suffice to say, this is easier said than done, especially given the coal-heavy energy mix in countries like Bulgaria, Czechia, Hungary, Poland, Romania and Slovakia, which consider Russian gas as an alternative. Incidentally, domestic politics in many of the same countries also display simmering Euro-scepticism, making the EU’s arbitrations on energy with its eastern members particularly sensitive, with potential implications for the stability of the bloc. 

Given the urgent priority of finding alternate sources, the EU might choose the safer option to retain the “green” tag given to gas as a “transition fuel”. The first explicit signs that public support for fossil fuels will continue indefinitely came in the Council of European Union statement on export credits offered to fossil fuel projects. Contrary to earlier commitments of ending public finance to unabated fossil fuel projects by the end of the year, the council statement dated March 1 specifies that member states will determine their own science-based deadlines for ending export credits offered to fossil fuel projects beyond 2023. This would also have repercussions across the Organization for Economic Cooperation and Development (OECD) because in the same March 1 statement the council called on the European Commission to launch negotiations at the OECD for similar discussions. The EU’s approach to OECD negotiations on its “Arrangement of financial mechanisms” (where there is already a position limiting coal investments but not yet a position on oil and gas) it considers the EU taxonomy as the relevant benchmark to identify environmentally sustainable projects. 

But this completely contradicts other parts of the same statement, Bronwen Tucker of OCI pointed out. For instance, the statement notes that EU countries and the OECD are expected to work towards “ending officially supported export credits for projects in the fossil fuel energy sector, beyond coal and including oil and natural gas projects, unless in limited and clearly defined circumstances that are consistent with a 1.5°C warming limit and the goals of the Paris Agreement.”

The EU green taxonomy is among the first in the world and so is likely to be used as a guide for similar exercises aimed at categorising investments in other parts of the world. The EU’s implicit denial of the damaging potential of gas for climate action is a worrying portent that could extend dependence on fossil fuels by decades.The IPCC’s AR6 WG3 report, which discusses mitigation options and pathways, is due to be released in two weeks and the ongoing recalibrations of energy strategies will likely be an important aspect during plenary negotiations on the key messages of the report, particularly with respect to the continuation of fossil fuel dependence and the role of carbon removal technologies. The cues, however, are clear. Rapidly evolving political considerations have set the stage to drive yet another nail in the coffin of science-based climate policy.

About The Author

Rishika Pardikar

Rishika is a freelance journalist from Bengaluru.

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