As the consequences of Europe’s problematic dependency on cheap Russian fossil gas have become all too clear, the European Parliament is facing a watershed moment: whether or not to mark unabated fossil gas investments as green. Not only would such a green marking be in direct conflict with the aims of the REPowerEU Communication, but it would also stand to benefit only a handful of countries. It would be particularly damaging for the green transition in the Central Eastern European (CEE) region and would contribute to continued tight gas markets, enabling the continued financing of the ongoing Russian aggression in Ukraine. There is only one way forward: to veto the Taxonomy CDA in Parliament next week. In his keynote speech opening Bellona, CAN Europe and E3G’s 28th of June Taxonomy event, MEP Christophe Hansen explained:
This last of a four-part event series was moderated by Esther Bollendorff, EU Gas Policy Coordinator at CAN Europe. All recorded events can be accessed here.
In direct contrast to the REPowerEU and EU Climate Targets
The REPowerEU Strategy sets out how to end Europe’s problematic dependency on fossil fuels, and in particular Russian fossil gas. The strategy primarily relies on a faster roll-out of renewable energy, and energy savings. Both measures will require substantial funding, public and private. The Taxonomy CDA goes headfirst against the objectives of the REPowerEU. Rather than incentivising a faster roll-out of renewables, it places them at a disadvantage by making renewables compete with fossil gas on the basis of sustainability, for sustainable investments. This creates a massive opportunity cost that the EU simply cannot afford.
Energy savings through increased energy efficiency are at the very core of REPowerEU, as the quickest and cheapest way to address the gas crisis. Yet the Taxonomy CDA in its current form does the opposite. By allowing gas power plants to claim net-zero compliance today if they plan to make a shift to renewable and low carbon gases by 2035, the Taxonomy encourages the inefficient use of scarce renewable energy. This would cannibalize vast amounts of renewable electricity better used directly. It would be wholly inefficient, since a Taxonomy-compliant power plant using 100% renewable energy would use 2.8 times the electricity it would produce. As shown below, the Taxonomy CDA achieves the opposite of the REPowerEU’s goals: it makes Europe further dependent on fossil gas supplies, thereby undermining energy security in Europe, and locks Europe into fossils fuel-based assets on the long-term, making the aim of limiting global warming to 1.5C ever more unattainable.
According to the International Energy Agency’s 2021 Net-Zero report, currently planned and operating fossil gas facilities are simply incompatible with our 1.5-degree Paris target. Moreover, once again the Intergovernmental Panel on Climate Change made it clear in its recent assessment: without immediate and deep emissions reductions across all sectors, limiting global warming to 1.5C is beyond reach.
The Taxonomy CDA’s attempt to boost investments into unabated fossil gas could not possibly qualify as an ‘immediate and deep emission reduction’. Put simply, the goal to limit global warming to 1.5 degrees in accordance with the Paris agreement is undermined by the Taxonomy CDA.
¹ EUR-Lex – 52022DC0230 – EN – EUR-Lex (europa.eu)
² EUR-Lex – C(2022)631 – EN – EUR-Lex (europa.eu)
Much needed rethink necessary following new geopolitical reality
The foreseen significantly lower reliance on unabated fossil gas, redefines the green transition as intended – making it clear that unabated fossil gas cannot serve as a relatively cheaper and accessible bridging tool in the green transition. REPowerEU is a welcome strategy and realignment, and with it comes an obligation to readdress the proposed Taxonomy CDA’s greenwashing of unabated fossil gas.
The Strategy sets to reduce the EU’s reliance on Russian fossil gas by 2/3rds by the end of the year, and to complete a full phase-out by 2027. Currently close to €1 billion flow into Russia every day as revenues from European energy imports, indirectly financing the ongoing war in Ukraine, posing a threat to the national security of all European countries.
Russia’s recent aggression against Ukraine has shone a light on just how vulnerable Europe’s economies are to external shocks, especially those based on fossil fuels. As a result of sanctions and price speculations, wholesale gas prices were six times higher in the first quarter of 2022 than the year before, even before Russia’s invasion of Ukraine.
While REPowerEU aims to remove monetary means that allows the continuation of the war, the Taxonomy does the exact opposite: it indirectly boosts the financing of the war, while further locking Europe into polluting assets that simply have no place in a net-zero world. If the Taxonomy CDA goes into effect, it will not only contribute to a drain of finances towards fossil gas, from actual renewable and low-carbon solutions, but it will also contribute to a continued high gas demand, a tight market and continued capital flows financing the Russian aggression in Ukraine. As stated by the Russian minister of Energy, Nikolay Shulginov, the Taxonomy CDA offers a range of opportunities for Russia – and as highlighted by Ukrainian Member of Parliament Inna Sovsun, this opens the door for selling more Russian gas-based products also in the future.³
Similarly, the Taxonomy CDA would encourage further investments to flow into fossil gas activities – under the guise of sustainability. Including gas in the CDA would also encourage investment into an energy vector that is clearly vulnerable to geopolitics and market volatilities, continuing Europe’s dependency on fossil fuels, and exacerbating current risks.
Energy security will inherently be linked to geopolitics as long as Europe remains dependent on finite fossil-based energy. Swapping Russian fossil gas for other foreign fossil gas will only continue this dependency, as well as Europe’s vulnerability to new geopolitical realities and potential weaponization of energy supplies. Renewables are not only sustainable and the key to reduce emissions, but they are also so-called “freedom energies” that can truly guarantee energy security. According to a recent study by E3G, Bellona Europa, EMBER and RAP, boosting clean energy and energy efficiency measures, Russian fossil imports can be phased-out by 2025 without developing new gas infrastructure or extending the use of coal power beyond its intended end-of-life. To wean Europe off fossil fuels, the Taxonomy must facilitate investments into renewable and low carbon solutions. We cannot risk these vital solutions being side-tracked by diverting investments towards greenwashed unabated fossil gas.
Handful of countries stand to gain, leaving crucial CEE region behind
As highlighted in the event co-organized by Bellona Europa, CAN Europe and E3G on the 28th of June, the full effects of the Taxonomy CDA’s painting of fossil gas and nuclear as green are not known. But, based on current estimates it has become clear that only a handful of countries will in fact be able to paint its construction of new fossil gas and nuclear as green – a notable exception being the CEE region.
With representatives from the CEE region speaking at the event, it became clear that the Taxonomy CDA and its consequences has not only been misunderstood in many CEE countries, but it has also been instrumentalised. Mihnea Catuti, Head of Research at the Bucharest-based think tank Energy Policy Group (EPG), explained that the Taxonomy CDA has been used as a communication tool by the gas industry, in particular in Romania, to position fossil gas as a vital part of the green transition.
This narrative, that fossil gas is a necessary steppingstone to move from coal to renewables, was described as unhelpful and damaging by Tsvetelina Kuzmanova, Policy Advisor at E3G: “It is really condemning the region to this shift from coal to gas, which will in a decade have to again be switched to renewable energy sources”. Kuzmanova further explained that the result is stranded assets, and a damaging narrative to the whole region caught in a political game between specific countries benefiting from the Taxonomy CDA, while the region itself is being condemned to several decades of new geopolitical risks, financial risks and economic dependencies on other imported energy sources.
Speaking on the uneven distribution of the Taxonomy CDA, Kuzmanova added that: “there is really this misalignment and disproportionate impact of the gas and nuclear included in the Taxonomy CDA across EU Member States, especially for the CEE region who are the most vulnerable to Russian influence and susceptible to foreign influence in terms of energy security and geopolitical risks”. Kuzmanova further explained that many countries in the CEE region, who were 100% reliant on Russian gas before the Russian invasion of Ukraine, would remain vulnerable if the Taxonomy CDA goes through, only substituting one geopolitical and economic dependency with another, while leaving the cost of energy to be produced even higher. “The idea of switching from coal to gas, a criterion in the Taxonomy CDA, is not helpful – to say the least” Kuzmanova stated.
With the upcoming vote on the Taxonomy CDA, it is crucial to ensure that the different aspects, and potential consequences of painting fossil gas green as part of the Taxonomy CDA are highlighted and made clear. CEE MEPs stand to play an important role, as shown in recent EU ETS and CBAM votes. Leaving the stage to the fossil gas industry to sneak itself into the debate as part of the green transition should be countered at all costs.