German coalition talks stumble over role of gas in EU taxonomy

The role of gas in the EU taxonomy, still a topic of debate in Brussels, appears to be a stumbling block in Berlin as well, as the negotiations for the country's first-ever three-way coalition continue. [EPA-EFE/CLEMENS BILAN]

The scramble over the role of gas and nuclear in the EU’s sustainable finance rules has become a source of tension in the German government talks as the country’s first ever three-party coalition is being negotiated in Berlin.

The social democrat SPD, the Greens and the business-friendly liberal FDP are currently in the midst of negotiating a so-called “traffic light” coalition, with a final agreement expected on paper in the last week of November.

But the coalition negotiations have now hit a stumbling block, according to media reports. A fundamental disagreement has appeared between the social democrats (SPD), who support the inclusion of gas in the EU’s sustainable finance rules, and the Greens who vehemently oppose labelling gas as a green or “transitional” investment under the taxonomy.

“Investment into fossil gas and nuclear should not be greenwashed by putting it in the taxonomy,” said Sven Giegold, a Green MEP who is one of the core negotiators of the coalition agreement.

“We accept that there will be some investment in – on an interim basis – fossil gas plants in order to help the coal phase-out,” Giegold told EURACTIV. “However, gas must not to be included in the taxonomy,” he insisted, saying there is plenty of capital available to finance new gas or nuclear plants without including them in the taxonomy.

“If France wants to build new nuclear plants, they can. If Germany wants to invest in fossil gas, it can. And I would say, even in Eastern Europe, the capital will be found,” Giegold added, saying there are ample volumes of cheap financing capital available on the market to finance investments in gas and nuclear.

“Interest rates are at zero for OECD countries, big companies can refinance themselves equally cheaply on the market” without having to include gas or nuclear in the taxonomy, Giegold stressed.

Green MEP: Germany 'may need some additional gas turbines' to stabilise renewables

Sven Giegold, a Green MEP who is one of the key negotiators in the German government coalition talks, told EURACTIV that Germany will need “small volumes” of additional gas capacity in order to “stabilise” renewable power on the electricity grid. However, he is opposed to the inclusion of gas in the EU’s green finance taxonomy.

In October, European Commission President Ursula von der Leyen announced that the EU executive would soon table proposals on gas and nuclear as part of the bloc’s sustainable finance taxonomy.

The EU taxonomy regulation spells out conditions under which economic activities can be considered sustainable, sending a signal to investors about what is green and what is not.

But while the Greens and the SPD both reject nuclear, they are divided when it comes to the classification of gas under the EU’s green finance taxonomy. 

“If we cannot finance gas, coal will be prolonged,” said Svenja Schulze, Germany’s caretaker environment minister, who spoke at the COP26 in Glasgow on 11 November.

Schulze’s declarations added to a long string of pro-gas messages from top-level SPD politicians. While the German energy transition is focused on renewables, “using gas would also be part of it for a long time,” said Olaf Scholz, the German Chancellor-in-waiting. 

This means that Germany would have to “build new gas-fired power plants,” Scholz told a conference on 27 October.

Gas plays an important role in the transition to clean energy, which “should of course be reflected in the taxonomy,” said SPD lawmaker Bernd Westphal at an event hosted by think-tank Agora Energiewende on 7 October.

Germany's SPD pushes for inclusion of gas in EU green finance taxonomy

The role of gas in the energy transition should be reflected in the EU’s green finance taxonomy, according to the economy and energy spokesperson of Germany’s social democratic SPD party, which is expected to lead the next German government coalition.

The debate over gas has become a sore point in the coalition talks.

A leaked draft of the coalition treaty reads: “The German government will campaign against the inclusion of nuclear power and gas as sustainable technologies,” reported the German newspaper Handelsblatt.

Aspiring chancellor Olaf Scholz has come under pressure over his role in the negotiations surrounding the EU’s green finance taxonomy, which he oversaw as finance minister since discussions started at EU level in 2019.

The finance ministry, unlike the energy and economy ministry under Peter Altmaier, has not clearly positioned itself on how gas should be treated under the bloc’s sustainable finance rules, one of the negotiators told EURACTIV.

Additional gas plants are considered a must by SPD politicians and German power utilities who underline the huge challenge of phasing out coal and nuclear power while increasing the country’s overall electricity production capacity to meet new demand coming from the transition to electric mobility.

The next German government would have to “advocate in Brussels for the use of natural gas to be considered sustainable in the taxonomy, at least temporarily, until fossil gas can be replaced by carbon-free gases and hydrogen,” said Ingbert Liebing, director of local utility union VKU, who spoke to Handelsblatt.

[Edited by Frédéric Simon]

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