EU taxonomy rule book may classify gas as sustainable investment

green investmentGas-fuelled plants that generate power as well as heating or cooling could be classified as sustainable investments by new EU taxonomy guidelines, if Brussels adopts a draft document currently doing the rounds. The document, which has been leaked to Reuters is part of the EU’s Sustainable Finance Taxonomy, which defines what economic activities can be marketed in Europe as sustainable investments from next year.

Designed to be the world’s first classification system for green financial products the EU taxonomy is an attempt to establishing science-based criteria on what should count as truly sustainable economic activity. The exercise is being closely watched as the first major attempt by a regulatory power to create a labelling scheme that will help guide billions of euros of investment into green financial products.

The EU taxonomy rule book, which will cover all types of energy sources including nuclear, will instruct investors how to treat a range of assets from green bonds to bank loans and investment products. Brussels said the framework would help stamp out so-called ‘greenwashing’, when countries and companies seek to make their environmental credentials look better than they are.

fossil fuel pollutionThe EU hopes that directing more capital into environmentally friendly projects will accelerate its drive to slash the greenhouse gas emissions. Natural gas produces roughly half the carbon dioxide (CO2) emissions of coal when burned in a power plant and EU member states including Germany and Poland would like to increase their use of its as alternative. On the downside  gas is not entirely emissions-free and there are growing concerns that leaks of potent planet-warming methane from gas infrastructure could cancel out the benefits of switching to gas from coal.