Europe has led the way on sustainable finance... but don’t import their gas(lighting).

As the consultation on the EU’s Sustainable Finance Taxonomy Regulation closed this week, many in Europe are waiting with bated breath. They’re about to see how the drawn-out process of ‘determining what is really sustainable’ will conclude in the final act, given the twists and turns that resulted in Europe planning to call new investment in gas infrastructure “green”.

It’s the end of a long process (involving huge effort over the past four years from a host of experts who ultimate advice might be ignored). It's been so complicated and distorted, that by the time the answer arrives, many may have forgotten what the original question was.

How on earth did we get here? Peeling back the layers of this mess involves unwrapping a Faustian pact between the countries cooperating with the nuclear lobbyists (who need new investment to defray the costs of decommissioning their existing fleet) and the gas lobbyists (who just want to get as much gas infrastructure built until the music stops to keep governments and citizens path-dependent on fossil fuels). Politicians speeches refer to not banning infrastructure investments that might be necessary. Which is oddly irrelevant to a regulation designed to clarify and classify what is called “sustainable” finance. 

In a bid to ‘prevent greenwash’ the EU has come up with a scheme which calls fossil fuels green, which most people would recognise a fairly clear example of greenwashing. The EU’s position is tantamount to gaslighting – saying something in a manipulated way in order to provoke others to question their own sanity. Technical clauses that ‘qualify’ gas as sustainable relate to new gas plants replacing infrastructure that is more carbon intensive. But much of that existing infrastructure is rusting piles of old coal generation plant, well past its close-by date in any case. So the comparison shouldn’t be whether it is lower carbon than what it is replacing, but how it compares to alternative replacements. Especially since whatever is built will probably last for the next 25+ years.

There may be debate as to whether gas has served as a transition technology in the past, but it seems far-fetched to consider gas as a credible transition strategy now. Clean renewable technologies with lower-cost storage options trounce the gas arguments from a long-term economic and ecological perspective. There might be worse things than gas if you look to the past, but that doesn’t mean it’s good for the future. I dread to think what that would mean for the EU when they put together their social taxonomy later this year – would they classify practices as socially positive on the basis of replacing more anti-social activities? 

What about classifying nuclear as green on the basis of it being low-carbon? This  judgment makes light of the near-term high-carbon impacts of concrete infrastructure, the supply chain emissions from fuel production, and the long term concerns on waste disposal and safety. Nuclear may be low-carbon in its generation phase but that’s not enough to squeeze it into a sustainable taxonomy. It’s like the difference between wisdom and knowledge: knowledge is knowing that a tomato is a fruit; wisdom is not putting one in a fruit salad. What else is the point of a taxonomy of classification if you don’t properly sort what should go in it?

There’s plenty that the EU has shown leadership on and many dedicated individuals progressing the sustainable finance agenda. It has much that other countries and regions of the world can learn from, especially its clear articulation and focus on ‘double materiality’.  But other countries, like the UK (whose Green Taxonomy Advisory Group is considering how to shape the UK taxonomy) and financial institutions striving to set a genuinely sustainable path to net zero, would be wise to not avoid the gaslighting from the EU on nuclear and gas. It's not too late to give this proposal the red light - which in my taxonomy means 'stop' rather than 'go' (just to be clear).