Funding a just transition or fuelling a climate catastrophe?

Opinion piece by ClientEarth Fossil Fuel Infrastructure lawyer Bellinda Bartolucci and WWF Energy Policy Officer Katie Treadwell

To tackle the climate crisis, the European Commission has committed to help EU countries transition away from greenhouse gas-intensive industries. To ensure the transition to a climate-neutral economy is fair across the EU, the European Commission has promised in its Green Deal (EGD) to leave no one and no region behind.

Despite these commitments, ongoing negotiations among the EU institutions on how to support affected people and regions in this transition risk granting projects linked to gas, a fossil fuel, continued access to public funds. This goes against the ethos of the EGD.

Future investments in gas would breach the EU’s climate obligations, place the cost of delaying the energy transition on its taxpayers – and risk leaving regions and communities behind once again.

If investing in fossil gas projects risks the future wellbeing of people and nature, then why are EU decision-makers debating whether to include them in ensuring a ‘just transition’?

The future of the climate in the balance

The new €17.5 billion Just Transition Fund (JTF) aims to support people and communities and address the socioeconomic effects of moving to a climate neutral economy. It is one of the first laws to implement the EGD, setting the benchmark for a more resilient future. The even bigger €240 billion European Regional Development Fund (ERDF) and Cohesion Fund will also be key for regional development.

While the Commission intended to exclude any fossil fuel projects from the scope of the funds, the ongoing negotiations with the European Parliament and the Council of the EU pose a risk of political horse-trading, with fossil gas being excluded from one of the funds but included in the other. Not only is this not what the EU promised, the move could also be illegal.

No place for gas in a ‘just transition’

Using public money to fund the gas industry would directly contradict the EGD’s aim to leave no one and no region behind in the shift towards a renewable energy system. Investing in gas-related projects would do exactly that.

The existing gas infrastructure for energy supply is already sufficient to meet demands. This means that any new gas projects would be short-lived as they would need to be replaced by renewables to reach the EU’s 2050 climate neutrality target. This would produce high costs and stranded assets for the most vulnerable regions, putting them at a financial and technological disadvantage.

Fossil fuel investments are also inconsistent with the ‘just transition’ goal to create sustainable, stable jobs. Renewable energy investments are equal in cost to – or even cheaper than – new fossil gas projects.

They also create more than three times more jobs than those in fossil fuels and these jobs are more local than in the fossil gas sector – supporting regional development. New jobs in the gas industry would mean a further, destabilising transition in 10 years’ time as these positions again become obsolete.

Financing gas projects would be an irresponsible use of limited public money. Regions in transition deserve better.

Funding gas: a breach of the EU’s legal obligations

Under the European Treaties, the EU is legally required to make sure its policies and regulations are consistent with one another, including how public money is spent.

To meet its climate goals under the Paris Agreement, the EU has repeatedly committed to reduce its emissions and facilitate clean energy investments. The EU also has a duty to reach net-zero emissions ahead of certain countries due to its relatively high share of historical emissions and its economic and technical ability to cut them.

Giving the green light to financing gas projects would also go against the EGD’s 2050 climate neutrality target. Its future European Climate Law will likely foresee emission cuts of at least 55% by 2030 – far short of the emissions reductions science requires. Stepping up ambition demands concerted action, but is more than possible with the right policies and financial support.

The argument that funding gas-related projects would help achieve lower greenhouse gas emissions is also inconsistent. Fossil gas has disastrous impacts on people’s health, our environment and the climate. Not only does it generate high carbon dioxide (CO₂) emissions, but it also leaks methane gas, which, over the short and medium term, is far more climate-damaging than CO₂.

Funding fossil gas would be in clear breach of the EU’s obligations. It would also put EU countries at risk of illegal activity as they are also obliged to act consistently with, and in support of, the commitments made by the EU on their behalf under the Paris Agreement.

At stake: the future of the EU’s climate laws

The upcoming decisions on the JTF and ERDF will test how serious EU decision-makers are about translating the EGD’s commitments into a concrete framework. There is no other option than to exclude fossil fuels from future funding. It will spell the difference between meeting and not meeting climate goals – and reveal whether the EU is serious about leaving no one and no community behind.