EU does not exclude funding gas, highways under green recovery plan

Pipeline valves and LNG terminal in Swinoujscie, Poland. The European Commission is currently preparing a guidance document to explain “which kind of conditions can be attached to gas investments” in order to make them “compatible with” the ‘Do No Significant Harm’ principle attached to the EU’s recovery fund. [Mike Mareen / Shutterstock]

The grants and loans provided to EU countries under the bloc’s €750 billion recovery plan will not automatically exclude funding for gas infrastructure or highways, as long as these are part of a coherent national decarbonisation strategy with clear milestones, EU officials have said.

The European Parliament will vote on Tuesday (9 February) on the EU’s €672.5bn Recovery and Resilience Facility, the central pillar of the EU’s recovery plan from the coronavirus crisis.

Eighteen EU countries have already submitted draft “National recovery and resilience plans” to the European Commission, which is currently in the process of assessing them.

Getting those national plans approved at European level is a precondition to access EU funds and will be “very important given the very large amount of money” involved, said a senior EU official who briefed the press on Monday.

Under a budget deal struck in December by EU leaders, 37% of funding provided under the recovery facility will go towards meeting the bloc’s objective to become “climate neutral” by 2050.

However, that does not necessarily exclude funding for “transition” technologies such as natural gas, or even highways, EU officials said.

While investment in coal and lignite would “certainly” be excluded from the fund, “the situation for gas will obviously be more difficult,” an official explained, saying: “Gas in some regions of the EU is a necessary fuel for the transition.”

“You can’t move your old energy system from coal and lignite to renewables from one day to the next,” the official explained in reference to Poland, whose electricity system is currently 80% reliant on coal. Gas emits roughly half the carbon dioxide of coal when burned in a power plant.

The European Commission is currently preparing a “guidance document” on how to apply the so-called Do No Significant Harm (DNSH) principle, which applies to the entire fund. Under that rule, EU money will be prevented from going to polluting technologies, which are considered harmful for the environment.

The guidance document will explain “which kind of conditions can be attached to gas investments” and make them “compatible with that principle,” the official said.

Among the conditions are assurances that gas is part of a wider transition plan to renewables and guarantees that investments in gas facilities do not create a “lock-in” effect into fossil fuels – for instance, “making sure that infrastructure is also suitable for the use of clean gases,” the official said.

All these must be part of “a very clear and credible plan for decarbonisation,” with milestones and deadlines, the official stressed.

Natural gas is a 'caveat' in energy transition, EU admits

While fossil fuel projects are in theory excluded from EU funding, natural gas will continue to play a key role in replacing coal while helping to build a hydrogen infrastructure at least cost, EU climate chief Frans Timmermans said on Thursday (28 May).

On highways, the same logic would apply. “Roads are not green, clearly. And simply building a road might raise issues with the Do No Significant Harm principle,” the official said.

However, there are ways of addressing these issues “by having a credible sustainable transport and mobility plan; by also having infrastructure to decarbonise transport” such as charging stations for electric vehicles; and “by also investing in other means of transport that are less detrimental to climate,” the official explained.

There are also built-in safeguards in the procedure for releasing the funds. The final decision on the disbursement of grants and loans to member states will be taken by EU countries voting by a qualified majority.

“The first thing to recall is that this programme is performance-based. If there is no delivery on milestones and targets,” the funds won’t be disbursed, said another EU official. “So that in itself is already a rather strong protection”.

To be eligible, national plans must contain milestones and targets for the overall duration of the spending period. And EU countries will also have to put in place an internal audit and control system to ensure money goes where it’s supposed to.

Moreover, the Do No Significant Harm principle will apply across the entire fund.

“This is not simply a declaration saying ‘No measure in my plan will hurt the climate’,” the first EU official explained. Rather, EU governments will “have to have a clear methodology to demonstrate that none of the measures indeed would jeopardise attaining the climate neutrality objective for 2050.”

The objective is to avoid repeating the mistakes made after the 2008 financial crisis where billions of euros went to financing the fossil fuel industry, the official said.

'Do no harm': EU recovery fund has green strings attached

The European Union’s proposed €750 billion fund to help the bloc recover from the coronavirus crisis will have green strings attached, with 25% of all funding set aside for climate action, the European Commission has said.

Environmentalists, for their part, warned that investments in gas infrastructure are highly risky and might not stand the test of time.

“Any new gas infrastructure carries high risk of ending up as stranded asset. That is why public funds should not be invested in fossil fuels – especially those funds that are supposed to support the fast economic recovery of Europe,” said Julian Popov, a former Bulgarian environment minister who is now fellow at the European Climate Foundation, a non-profit group.

“The idea of natural gas as a transitional fuel is misleading and opens the door for unjustified public spending. It suggests that gas is a mandatory step between coal and renewables. This is simply not true. We see that in most cases declining coal generation is replaced by energy efficiency, renewables and market integration. It would be more correct for gas to be called fuel of last resort, rather than transitional fuel.”

This is not the view shared by the EU’s 27 leaders, though. After a night-long summit in December, EU heads of states agreed tougher climate goals for 2030 but insisted that it was up to national governments “to decide on their energy mix and to choose the most appropriate technologies to achieve collectively the 2030 climate target, including transitional technologies such as gas.”

The explicit mention of gas as a transition technology was inserted at the request of central and east European countries, which argue gas is ideally suited as a transition fuel for coal-reliant countries like Poland as they make decarbonisation their main priority.

Gas wins recognition as ‘transitional technology’ to climate neutrality

The lower carbon intensity of natural gas – which produces half the emissions of coal when burned in power plants – and the emergence of new technologies like hydrogen are setting gas apart from other fossil fuels in the clean energy transition.

[Edited by Zoran Radosavljevic]

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