A coalition of investors managing 50 trillion euros ($56.81 trillion) has warned the European Union against labeling natural gas investments as sustainable because Brussels' plan to do so would weaken its global leadership in green finance.
The European Commission unveiled a plan late last year to designate some gas and nuclear investments as green under the 'EU taxonomy', a long-awaited set of rules designed to determine which investments in Europe should be classified as can be described as climate friendly.
The Institutional Investors Group on Climate Change (IIGCC), whose 370 members include most of the world's largest asset managers such as BlackRock (NYSE:BLK) and Vanguard, said on Wednesday that such a move would undermine the EU's attempts to Lead efforts to set credible, science-based standards for green investing.
"We remain firmly opposed to the inclusion of gas within the scope of the taxonomy," IIGCC Executive Chair Stephanie Pfeifer said in an open letter to European Union member states and bloc policymakers.
"We believe the proposals... would seriously jeopardize Europe's status as a global leader in sustainable finance and potentially trigger a 'race to the bottom' that could dilute the level of climate ambition within emerging legal taxonomies."
Natural gas emits around half as much CO2 as coal when burned in power plants, and some EU countries see it as key to reducing their dependency on coal. However, the gas infrastructure is also linked to the release of methane, a gas that warms the earth greatly.
The debate in EU countries over gas has intensified in recent months as gas prices have soared to record highs and tensions with Russia, the EU's largest gas supplier.
Experts had advised the Commission to only designate gas-fired power plants as green investments if they comply with an emission limit of 100 g CO2e/kWh. The Commission's original proposal for the rules included this limit, but met with opposition from countries such as Poland and Hungary.
The latest draft proposal, which Reuters has seen, stipulates, among other things, that gas-fired power plants must comply with a limit value of 270 g CO2e/kWh by 2030.
According to the IIGCC, this would allow energy companies to use the taxonomy's green label even though they are not on track to reach net-zero emissions by 2050 - the goal scientists say the world must meet in order to avoid catastrophic climate change avoid.
"This, in turn, impedes our members' ability to align their portfolios to net-zero emissions, thereby undermining the entire purpose of the taxonomy," it said.
The letter cites calculations by the International Energy Agency that natural gas demand must fall 8% below 2019 levels by 2030 to achieve net-zero global emissions by 2050.
A Commission official said it had taken into account scientific advice and feedback from member states, and that what ultimately matters is that the EU meets its climate targets.
"The inclusion of nuclear energy or natural gas comes with clear and strict conditions linked to their use in line with our climate goals and guarantees against significant environmental damage," the official said.
