EU backs gas as ‘green’ amid energy supply problems

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The European Commission on Wednesday (February 2nd) unveiled plans to include gas in its new guidelines for clean and sustainable finance – a move that responds to the bloc’s environmental goals and dramatically rising energy security concerns.

The so-called EU taxonomy will see certain gas and nuclear investments included in the category of “transition economic activities”.

  • Russian President Vladimir Putin’s ability to turn on – and turn off – Europe’s gas supply has added another element to the mix (Photo: kremlin.ru)

The commission insisted that gas has a key role to play in the green transition. But the categorization of this fossil fuel as a so-called transitional activity also follows intense lobbying by EU member states and industry.

The committee is pushing ahead with its plan despite criticism from a seemingly unlikely array of green groups and asset managers, as well as MEPs and some member states.

“We think gas has a role because you’re walking away from something that’s much worse,” EU Finance Commissioner Mairead McGuinness told a news conference.

She was referring to the replacement of coal-fired power plants with relatively cleaner alternatives like natural gas.

But McGuinness acknowledged the current dilemmas for Europe in overhauling the way it generates electricity.

“Since the increase in energy prices, we have perhaps difficult conversations in the Member States, but nevertheless essential conversations around our energy mix today and all the work we need to do to arrive at a much better place,” McGuinness said.

The new rules may be “imperfect” but they are “a real solution”, she added, especially as EU member states are at different stages of their transition to EU. use of cleaner energy.

France “wins” for nuclear power

Along with natural gas, a second controversial element of the proposal is the inclusion of nuclear power – which leaves hazardous waste but produces no emissions.

France, which generates the majority of its electricity from nuclear power and builds and operates nuclear power plants, has pushed for the inclusion of nuclear power in the taxonomy.

The French tactic to secure the inclusion of nuclear energy was to ally itself with a coalition of Southern and Eastern European governments to defend their continued use of gas in their energy mix.

But the current compromise does not suit a number of Member States.

Austria, which is strongly opposed to nuclear energy, and Luxembourg have threatened to sue the commission over this part of the proposal.

Meanwhile, Denmark, Sweden and the Netherlands are strongly opposed to the green label for gas.

Germany, for its part, opposes nuclear but has pushed for the inclusion of gas in the new rules. But Berlin is now under fire for weakening the conditions for gas to comply with the taxonomy, despite its three-party governing coalition, including the Greens.

Yet pressure to keep gas taps open has mounted on EU regulators since a sharp spike in gas and electricity prices since the autumn raised concerns about the country’s energy security. EU.

These concerns have only been heightened by growing geopolitical tensions between Ukraine and Russia – which could potentially lead to Russia blocking gas supplies to Europe.

Overall, imports from Russia account for around 40% of EU gas demand.

“Russian gas is cheap, certainly cheaper than liquefied natural gas but also Norwegian gas,” said Christian Egenhofer of the Center for European Policy Studies (CEPS) think tank. “And as we have learned now, gas prices matter,” he added, referring to record high energy prices last year.

With market prices indicating that gas could be one of the most expensive forms of electricity over the next few years, Europe would be better off providing a massive increase in renewable energy generation, according to the group’s Charles Moore Ember energy reflection.

Are you on the wrong horse?

Europe, by easing the gas, “supports the losing horse”, Moore said.

To add to the complexity, Europe would also continue to do business with a supplier, Russia, which has a history of using its gas supplies as a political and economic tool in dealings with other countries.

EU Trade Commissioner Valdis Dombrovskis raised concerns this week about Russia’s “weaponisation” of gas supplies, noting that “this problem…is not new”.

The EU and Germany are still considering giving Nord Stream 2, which would boost Russian gas supplies to the EU, permission to start deliveries. A decision on Nord Stream 2 was further complicated by the build-up of Russian troops along the Ukrainian border.

For CEPS’ Egenhofer, the interrelationships between the EU and Russia, as the EU’s largest supplier of natural gas, come at a price: not being able to impose sanctions on Russia without hurting ourselves.

“There was the belief that interdependence helps stabilize political relations. [But] the EU has forgotten that interdependence reduces foreign policy options,” Egenhofer said.

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