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Should natural gas be labeled as sustainable?

April 28, 2022
 min read

The EU taxonomy sets the standard for which economic activities can be considered as sustainable. This assessment is based on strict technical screening criteria. The taxonomy’s aim is to establish harmonized criteria for sustainability, prevent greenwashing, and to direct finance towards sustainable activities.

The taxonomy will cover many industries, including energy, manufacturing, construction, and transport. However, there has been debate over which economic activities should or should not be included.

One of the more controversial sectors is natural gas. In the first draft of the Climate Delegated Act, the EU had considered the inclusion of gas, but this drew a lot of criticism and was not included in the final version. The EU stated that natural gas would be included in the later delegated act. The proposed technical screening criteria for electricity generation from natural gas received criticism from both sides; proponents for natural gas argued they were too strict, while opponents argued against allowing the categorisation of gas as green at all. 

EU climate chief Frans Timmermans pointed out the role of natural gas in replacing coal while helping to build a hydrogen infrastructure at least cost. Natural gas could play an important role in the transition to a net-zero emission energy system relying chiefly on renewable electricity. Poland has been a particular advocate of this approach. Poland has planned to replace its stock of coal power stations with gas plants, which emit on average half the amount of CO2. The industry argues that the taxonomy could play an important role in directing investment towards these new plants which would serve as a transitional stage between coal and a completely carbon neutral energy system. 

Critics have pointed out that allowing new gas plants to be labeled as green and directing finance towards those projects would be financing long-lived assets that are not compatible with the goal to achieve a climate neutral economy by 2050. Encouraging new investments in gas could draw finance away from other sustainable projects and technologies.

Sandrine Dixson-Declève, co-president of the Club of Rome and member of the European Commission advisory Platform on Sustainable Finance argues that natural gas, “should not be classified as “green” and should not be included in the EU taxonomy Climate Delegated Act.”. She goes further to suggest that the move to include natural gas as a transitional activity “is completely misleading, may lead to a serious mis-selling of risk, and will undermine the EU’s efforts to transform its economy”. 

The discussions over the role of gas in the taxonomy have continued after the revision to the Climate Delegated Act. In 2020, a group of ten pro-gas countries (Bulgaria, Croatia, Cyprus, Czechia, Greece, Hungary, Malta, Poland, Romania, and Slovakia) threatened to block the taxonomy as it did not include natural gas as a transition fuel. These countries wanted natural gas to be recognized as a sustainable energy source during the transition to a carbon neutral economy.

In August, a draft of the Environmental Delegated Act was released with a call for feedback by the EU. This draft includes electricity generation and cogeneration of heat/cool and power from natural gas as potentially sustainable transitional activities. European Commission President Ursula von der Leyen has also announced that they will soon table proposals on the inclusion of gas as a sustainable activity under the taxonomy.

Whether natural gas will be included in the final draft of the Environmental Delegated Act, or what form the inclusion may take is not yet clear. What is clear is that the EU is currently at a watershed moment, deciding on the role of fossil gas in the green transition in Europe. The decisions made now will have lasting impacts - not just on the credibility of the taxonomy as an instrument to combat greenwashing - but on energy and climate policy across Europe at a critical time.

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