Aussie gas lobby called out over taxonomy claims

AEP challenged for mischaracterising the EU’s approach to fossil fuels

Australia’s fossil-fuel lobby has been called out for attempting to use the EU Taxonomy to justify labelling gas activities as green.  

The trade body for Australian Energy Producers (AEP) is pushing the Australian Sustainable Finance Initiative (ASFI) to rethink its decision to ban gas from the country’s upcoming green taxonomy, because it says the EU considers the energy source to be compatible with a low-carbon economy. 

“The ASFI’s recommendation not to adopt the EU’s classification of natural gas as a transition and environmentally sustainable activity should be reconsidered,” AEP argued in its response to a consultation on the proposals, published over the summer. 

“The EU’s regulated classification aligns natural gas with the Paris Agreement’s long-term climate goals… It recognises proven mitigation approaches, such as reducing emissions at point sources (including fugitive emissions), enhancing energy efficiency, and integrating CCUS.”

Europe’s taxonomy, which is essentially a list of business activities that policymakers and scientists believe are aligned with the region’s climate goals, is the first major attempt to quantify and regulate credible green activities. 

A recent study by Climate Policy Action found that 54 jurisdictions are now involved in developing localised versions. 

Among them is Australia, where ASFI has been mandated by the country’s financial regulators to help develop the necessary details. 

EU scandal

Early last year, the European Commission added gas into the EU Taxonomy after political pressure from countries including Germany. 

The decision prompted outrage from scientists, environmentalists and investors, and the European Court of Justice will rule next year on whether to annul the law as part of a legal challenge by NGOs. 

But the decision to include gas comes with a number of strict criteria and carbon-intensity thresholds.  

“The EU Taxonomy recognises the role that certain nuclear and gas activities can play under specific conditions in the transition to climate neutrality,” a European Commission spokesperson told Real Economy Progress. 

These include “activities that cannot yet be replaced by technologically and economically feasible low-carbon alternatives, but do contribute to climate change mitigation and with the potential to play a substantial role in the transition to a climate-neutral economy, in line with EU climate goals and commitments, and subject to strict conditions, without crowding out investment in renewables”.

Nathan Fabian, who chaired the expert body that advised the Commission on the development of the EU taxonomy, told Real Economy Progress that gas was included to address “some specific energy-system transition challenges, primarily in central Europe”. 

Some parts of the region rely heavily on coal-fired district heating systems, which cannot currently be replaced by renewable energy and are therefore being encouraged to upgrade to gas in the interim. 

“Australia does not have the same heating needs, or the same precinct heating networks, making these criteria somewhat redundant,” said Fabian, who is also a senior executive at the UN-backed body the Principles for Responsible Investment. 

He added that “economies may use some gas for electricity, but that doesn’t mean it can be claimed as an environmentally-friendly activity”. 

All of the EU’s advisory bodies urged the bloc not to include any fossil fuels, including gas, in its green taxonomy. Most recently, the European Scientific Advisory Board on Climate Change recommended in January that the taxonomy should “treat investments in natural gas as non-sustainable”. 

Earlier this week, European Commission President Ursula von der Leyen told a press conference that “the only way to ensure our long-term competitiveness is to shift away from fossil fuels”.  

The AEP did not respond to a request for comment.