Wed, May 29 2024 29 May, 2024

NGOs take EU Commission to court over green gas label

A group of NGOs has filed a case in the Court of Justice of the European Union over the EU Commission’s ‘green’ gas label.

Floating LNG terminal in the Eemshaven (Photo credit: Adobe Stock/sanderstock)

A group of NGOs are bringing the EU Commission to court over its decision to include natural gas among ‘green’ energy sources in its sustainable finance taxonomy by launching a green gas label.

Client Earth, the WEF European Policy Office, Transport and Environment (T&E) and Friends of the Earth Germany filed on April 18 a case in the Court of Justice of the European Union against the EU’s Taxonomy’s Complementary Delegated Act (CDA), adopted in July 2022, as it classifies certain uses of gas as environmentally ‘sustainable.’

The NGOs argue that the CDA clashes with EU laws such as the Taxonomy Regulation itself and European Climate Law, as well as being in contrast with the EU’s Paris Agreement obligations.

The EU Commission’s move to include gas in its sustainable finance rulebook also appears at odds with many financial institutions’ policies on gas, include the European Investment Bank’s 2019 Energy Lending Policy, which “effectively ruled out fossil gas financing,” they say.

The EU Commission “violated the EU Taxonomy Regulation” by “classifying fossil-based activities as transitional” and as such ‘sustainable,’ rendering the label “unlawful,” Marta Toporek, an in-house lawyer at environmental law charity ClientEarth, told Gas Outlook.

According to the Taxonomy Regulation, an activity can qualify as transitional only if it meets certain ‘screening criteria,’ she added.

“The Commission did not correctly examine technologically and economically feasible low-carbon alternatives to fossil gas,” she said.

“It also failed to ensure that the technical screening criteria were based on conclusive scientific evidence and the precautionary principle” as well as taking into account “the lifecycle of the activities and the risk of certain assets becoming stranded as a result of the transition to a more sustainable economy.”

Moreover “it failed to set or to adequately establish criteria that ensure that the fossil gas-based activities that contribute to climate change mitigation do not significantly harm certain environmental objectives.”

Furthermore, she argued that the taxonomy violated European Climate Law by being in contrast with EU 2030, 2040 and 2050 climate targets.

Role of gas disputed

“The Taxonomy is not an instrument of EU energy policy…It does not mandate investments and does not prevent any economic sector from receiving investments” and “Member States remain fully responsible and competent for deciding their own energy mix,” a spokesperson for the EU Commission told Gas Outlook, adding that the Commission “stands ready to defend (the decision) in front of the Court.”

Asked about the rationale behind including natural gas in its taxonomy, he said that “taking account of scientific advice and current technological progress as well as varying transition challenges across Member States, the Commission considers there is a role for natural gas and nuclear as a means to facilitate the transition towards a predominantly renewable-based future but in any case low-carbon energy systems.”

“Within the Taxonomy framework, this means classifying these energy sources as compatible with the Taxonomy Regulation, but only for a defined period and insofar as they contribute to the transition to climate neutrality.”

“The inclusion of nuclear or natural gas comes with clear and tight conditions associated with its use in line with our climate targets and with safeguards against significant environmental harm,” he continued.

Moreover “the existing energy mix in Europe today varies from one Member State to another” as “some parts of Europe are still heavily based on high carbon-emitting coal.”

“The Taxonomy provides for energy activities that enable Member States to move towards climate neutrality from such different positions,” he said.

The EU Commission is set to update its guidance every three years to reflect technology developments, he added.

The NGOs had already tried to overturn the decision to include gas in the taxonomy through a so-called ‘informed appeal’ against the Commission in 2022, however their request was turned down, Joanna Peltzman, an associate at Paris-based law firm Osborne Clarke, told Gas Outlook.

Launching a proceeding before the European Court of Justice represents “the last chance to remove gas” from the taxonomy, she added.

“There is a confusion between the concepts of ‘sustainability’ and the EU ‘green’ taxonomy,” she said.

While the Commission’s position is that natural gas is needed in the energy mix in order to reach carbon neutrality, the taxonomy “is in fact a ‘green’ label” giving the green light for investments in fossil fuels.

At the same time, it encourages institutional investors such as funds, which are increasingly pulling out of fossil fuel investments, to hang on to their shares in gas projects, she said.

A final decision by the EU Court of Justice on the matter is expected in 2025.

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