The Fossil Gas Debate Turns to the Courts: Alignment under the EU Taxonomy
The Step Towards Banning EU labelling of fossil gas as ‘sustainable’ in the EU Taxonomy.
In January of this year, fossil gas electricity generation was included in the EU Taxonomy as one of many activities that could potentially be considered green if they met certain technical criteria. As we anticipated, utility companies are facing significant challenges to demonstrate alignment, given the regulation’s stringent technical criteria.
Indeed, large European utilities with fossil gas operations, including Endesa, Fortum Oyj, and Verbund (p.160), have been unable to demonstrate alignment with the Taxonomy criteria in their 2022 annual reports.
This development is noteworthy as four NGOs are taking legal action against the European Commission to stop it from labeling fossil gas as ‘sustainable’ under the EU Taxonomy.
While we understand the perspective of the NGOs and would encourage a sustainability framework that considers all views, the reality is that the inclusion of fossil gas will have minimal impact on capital allocation decisions or investment portfolios, which is the main objective of the EU Taxonomy.
To explore previous insights on fossil gas regulations, read our latest article, “EU Taxonomy: How to Report on Fossil Gas-Related Activities.”