Fossil gas and nuclear would have access to the same financing as renewables, inevitably crowding out financing for green transition. | Photo: Pexels

European Parliament votes to include gas and nuclear energy in taxonomy of sustainable finance

Gas gets sustainable investment label in European Parliament; NGOs and environmental lawyers move towards litigation against European Commission

After months of intense debate, the European Parliament has voted in favour of including gas and nuclear energy in the EU Taxonomy of sustainable activities. The total number of votes was as follows:  328 MEPs voted in favour of the European Commission’s proposal, 278 voted to reject it, and 33 abstained.

Scientists, experts & academia, and civil society  have widely criticised the European Commission’s proposal to include gas in what was to be the “gold standard” of sustainable finance. EU policy-makers as well as voices from Ukraine have shown their disapproval as EU wrestles with reducing its emissions and incentivizes investments, which include Russian fossil gas supplies.

A majority of financial players who reacted opposed classifying gas as a green investment arguing the decision is not based on science. With this move, fossil gas and nuclear would  have access to the same cheap financing as renewables and would inevitably crowd out financing for the green transition, making its progress slower.

Watered-down requirements 

The thresholds for GHG emissions proposed in The Delegated Act adopted on February 2, 2022 far exceed the science-based recommendations made by the European Commission’s Technical Expert Group, and lack credibility. Allowable emissions are averaged over 20 years, creating a loophole: a project that emits more than 550kg of CO2e/kW a year can still be taxonomy-compliant if the developers promise to decline the emissions over time, for example, through the use of carbon capture and storage (CCS) technologies, which are not yet commercially viable.

Compared to the proposal that was leaked on December 31, 2021, in the text published on February 2, 2022, some criteria have been weakened to make it easier for gas projects to achieve the sustainable label.

MEPs, member states and civil society ready for court

Members of the European Parliament (MEPs) from almost all political groups came together to vote to veto the European Commission’s proposal. Lawmakers and member states are already preparing to continue their opposition: a group of MEPs is readying to continue the fight against the inclusion of gas in the EU Taxonomy in court, on the grounds that the decision “is against primary legislation”. Austria and Luxembourg have also previously announced their intention to take the decision to court. Civil society is also moving in this direction, with Greenpeace announcing a legal challenge, Client Earth exploring legal pathways and WWF looking into different types of action.

At odds with EU actions for climate and energy independence

The inclusion of gas in the EU taxonomy is “at odds with the overall direction the EU is taking”, according to think-tank E3G. The EU is planning for longer-term energy independence, including with a REPowerEU plan to end all Russian energy imports by 2030 that would invest €290 out of  €300 billion of its allocated resources on renewables and energy efficiency, and only the remaining 10 on gas as a transitional fuel. Only a week ago, the EU took important steps forward in making its Fit for 55 a reality (the legislative package designed to make the EU reach its -55% GHG emissions goal by 2030), approving a package of green policies including a 2035 fossil fuel car ban and other measures to slash planet-warming emissions this decade.

“With gas in the taxonomy, the European Union has missed its chance to set a gold standard for sustainable finance. Instead, it has set a dangerous precedent. Politics and vested interests have won over science. The EU Taxonomy now falls short of its own initial goal, which was to prevent greenwashing in the financial system. Investors, companies and consumers, will now be looking elsewhere for the science-based clarity and credibility they need,” said Laurence Tubiana, economist architect of the Paris Agreement and CEO of the European Climate Foundation. 

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