EU considers labelling gas as sustainable in investor rule book

Brussels is considering classifying gas as a partially sustainable technology under its landmark green labelling system for investors who want to plough their money into sustainable finance. 

In a draft legal text, seen by the Financial Times, the European Commission has paved the way for controversial technologies such as gas generated by fossil fuels to be recognised in its “taxonomy for sustainable finance”, raising fears that Brussels is engaging in “greenwashing”. 

The EU’s taxonomy is designed to be the world’s first classification system for green financial products by establishing science-based criteria on what should count as truly sustainable economic activity. 

The exercise is being closely watched as the first major attempt by a regulatory power to create a labelling scheme that will help guide billions of euros of investment into green financial products. 

Brussels was forced to revise its proposals earlier this year after its first draft text was roundly rejected by EU governments for excluding technologies such as gas and nuclear power. 

The EU has committed to becoming the world’s first greenhouse gas neutral continent by 2050 and wants to ramp up its 2030 emissions cutting target to 55 per cent.

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But many of its 27 member states are fiercely protective over their right to use lower-emissions technologies such as gas and nuclear power as part of the transition to net zero. They fear that the taxonomy’s criteria would create a de facto blacklist of activities that are still needed to help bring down emissions in many economic sectors.

Environmental campaigners have, however, warned against attempts to create “shades of green” in the taxonomy, arguing for a total exclusion of fossil fuels from the highest green label. 

In an annex, the draft legal text recognises the use of gas and other liquid fossil fuels in power generation in cases where the technology replaces higher-emitting power sources and can cut emissions by at least 50 per cent per kilowatt of energy produced.

Bas Eickhout, a Dutch Green MEP, said the taxonomy risked becoming a “political bargaining tool instead of a science-based golden standard for green finance”.

“It is a very bad message to the rest of the world that is following this discussion closely and should in no way lead to new fossil lock-ins, making our climate neutrality targets impossible to meet,” he said. 

The European Parliament and EU member states have the power to reject the draft legal act within 30 days after it has been formally published by the commission next month.

The commission declined to comment. 

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