EU agrees its green transition fund will not support natural gas

Peter Altmaier, German Federal Minister of Economic Affairs and Energy, and Kadri Simson, European Commissioner for Energy. [Copyright: European Union]

The European Union’s flagship fund to wean regions off fossil fuels will not finance natural gas projects, EU governments said on Wednesday (16 December), ending a debate over whether to make the fuel eligible for support.

Gas emits roughly 50% less CO2 than coal when burned in power plants, but it is associated with leaks of methane, a potent greenhouse gas.

Envoys from the EU’s 27 member countries endorsed the deal on Wednesday, which was struck between EU governments and the European Parliament last week.

Under the deal, the fund cannot be used to support any investments linked to fossil fuels, including natural gas. The Just Transition Fund will not back investments in nuclear energy either.

Some EU countries and lawmakers pushed to secure support for gas. Lawmakers said the final deal was a trade-off, which secured a gas-free Just Transition Fund in exchange for letting gas projects receive a smaller amount of funding under certain conditions from a separate European Regional Development Fund.

Fossil fuels axed from EU's just transition fund, but loophole remains for gas

The European Parliament reached a provisional agreement with EU member states on Wednesday (9 December), which sees fossil fuels axed from the EU’s just transition fund but finding their way back into EU regional development funding until 2025.

The Just Transition Fund will target regions dependent on most-polluting fuels, such as coal and peat, with Poland, Germany and Romania expected to be the biggest beneficiaries.

German Green lawmaker Niklas Nienass said he had supported this compromise as a way to minimise funding for fossil fuels.

“The margin to actually spend money on gas in the ERDF is quite small,” he said.

The Just Transition Fund will have 17.5 billion euros ($21.33 billion) from both a coronavirus recovery fund and the EU’s budget for 2021-27. The money is meant to attract further private sector cash to support green industries and retrain workers from polluting sectors.

“We cannot implement the European Green Deal without mitigating the consequences for those most affected by the decarbonisation of our economy,” German Economy Minister Peter Altmaier said in a statement, referring to the EU’s plan to eliminate its net greenhouse gas emissions by 2050.

EU shifts energy infrastructure funding away from gas, into electricity grids

The European Commission on Tuesday (15 December) proposed rules to restrict EU funding for natural gas infrastructure and instead funnel cash into electricity and low-carbon energy networks to meet climate goals.

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