EU Nations Make Last-Ditch Bid to Stop Green Label for Gas

(Bloomberg) -- Four countries made a last-minute plea for the European Union to keep its coveted green label off some natural gas projects, highlighting divisions over how to manage the energy transition.

In a letter sent to the European Commission, the Netherlands, Austria, Sweden and Denmark argued there's a lack of scientific evidence to include gas in the so-called taxonomy. The nations asked the bloc's executive arm to reconsider the plan just a day before it's expected to be adopted, following consultations with experts and member states.

Countries around the world are looking to the EU for clues on how to shift to cleaner fuel sources. But with an unprecedented energy crisis rippling across the continent, governments are more willing to consider gas and nuclear as key to keep the lights on, a move criticized by environmental groups. South Korea has recently come under fire for including gas in its taxonomy.

“We call upon the European Commission to not include any fossil gas activities as sustainable in the current Taxonomy, as long as these activities are not subject to the same standards as other energy technologies,” energy ministers from the four countries wrote in the letter to Financial Markets Commissioner Mairead McGuinness.

Europe's energy shortages have underscored the challenges of phasing out fossil fuels and nuclear power, and relying on intermittent renewable supplies before batteries or other forms of storing electricity become readily available. Gas is also seen as a way of helping to wean poorer EU countries like Poland off coal, which pollutes much more.

The objections are unlikely to derail the Commission's plan to provide some gas and nuclear projects a green label, so long as they are approved by 2030 and 2045 respectively, and adhere to other emissions and transition criteria, such as replacing coal-fired power stations. Yet, the latest bout of criticism to the draft proposal, expected to be unveiled Wednesday, again puts the bloc's ambition to set the “gold standard” for environmental finance in doubt.

Finland and Sweden sent a separate letter to McGuinness criticizing the proposal for nuclear energy, saying the screening criteria fail to take into account advances in the disposal of waste in the countries. They added that the Commission should remove deadlines for investment in nuclear and clarify that the operation of existing facilities is in line with the taxonomy.

Once adopted, member states and the European parliament have a chance to reject the proposals, but the bar to do so is high. At least 20 of the EU's 27 member states -- representing no less than 65% of the bloc's population -- would need to unite against the plan for it to fail. Equally, a majority in parliament could also veto the plans, though it's unlikely that enough lawmakers will vote against it.

Last week, the Platform on Sustainable Finance, one of two groups consulted by the Commission, slammed the plans on gas, saying that they could undermine the EU's climate neutrality target by 2050. How the region would deal with the possible environmental impacts from nuclear waste was also unclear, it said. A growing body of investors and banks, including the European Investment Bank, have said they will most likely shun the technologies in portfolios.