Investor group warns EU against labelling gas investments as green

© Reuters. FILE PHOTO: Austria's largest natural gas import and distribution station is pictured behind a field of rapeseed in Baumgarten May 2, 2014 REUTERS/Heinz-Peter Bader

By Kate Abnett and Simon Jessop

BRUSSELS (Reuters) - A coalition of investors managing 50 trillion euros ($56.81 trillion) has warned the European Union not to label natural gas investments as sustainable, saying Brussels' draft plan to do so would weaken its global leadership on green finance.

The European Commission drafted a plan late last year to label some gas and nuclear investments as green in the EU's "taxonomy," a long-awaited rule book to define which investments can be labelled as climate-friendly in Europe.

The Institutional Investors Group on Climate Change (IIGCC), whose 370 members include most of the world's biggest asset managers such as BlackRock (NYSE:BLK) and Vanguard, on Wednesday said doing so would undermine the EU's attempts to lead international efforts to set credible, science-based standards for green investments.

"We remain strongly opposed to any inclusion of gas within the scope of the Taxonomy," IIGCC Chief Executive Stephanie Pfeifer said in an open letter to European Union member states and the bloc's policymakers.

"It is our view that the proposals... would seriously compromise Europe’s status as a global leader in sustainable finance, potentially triggering a 'race to the bottom' which could dilute the level of climate ambition within emerging jurisdictional taxonomies."

Natural gas emits roughly half the CO2 emissions of coal when burned in power plants, and some EU states see it as key to curbing their reliance on coal. But gas infrastructure is also associated with leaks of methane, a potent planet-warming gas.

EU countries' debate over gas has intensified in recent months, as gas prices soared to record highs and amid tensions with Russia, the EU's biggest gas supplier.

Experts had advised the Commission not to label gas plants as green investments unless they met a 100g CO2e/kWh emissions limit. The Commission's initial proposal for the rules had included that limit, but it faced opposition from countries including Poland and Hungary.

The latest draft proposal, seen by Reuters, would set conditions including a 270g CO2e/kwh limit for gas plants until 2030.

IIGCC said that would allow energy companies to use the taxonomy's green label despite not being on track to reach net zero emissions by 2050 - the target scientists say the world must reach to avoid disastrous climate change.

"This in turn hinders the capacity of our members to align their portfolios with net zero, undermining the whole purpose of the Taxonomy," it said.

The letter cited the International Energy Agency's calculation that to reach net zero emissions by 2050 globally, natural gas demand must drop 8% below 2019 levels by 2030.

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