29 November 2021
At this moment in our fight against climate change, the way public money is allocated could be make or break. Yet the European Commission is ploughing ahead with new State aid guidelines that may end up allowing national governments to fund gas and gas-based hydrogen, even as new evidence emerges about how toxic gas is for the climate.
Badly judged subsidies, tax breaks, or interest-free loans granted by governments or public authorities to companies within the EU can derail our efforts to fight climate change. That’s why State aid, as these financial boosts are known, needs to be allocated in the right way.
But the upcoming State aid guidelines proposed by the Commission, branded as the Climate, Energy and Environmental Aid Guidelines, leave the door wide open for Member States to bet on climate-harming gas using taxpayers’ money.
How has this happened? The Commission’s draft guidelines published in June make an artificial distinction between on the one hand what they call “the most polluting fossil fuels” – such as coal, oil and diesel – and on the other hand, gas and its derivatives.
But gas is a fossil fuel and it’s not a ‘light’ alternative to the others. Scientific studies are showing, again and again, that energy from gas can be as climate-damaging as that from coal. Methane, which is its key component, is a highly potent greenhouse gas, around 86 times worse for the climate than carbon dioxide over a 20-year period. Even the Commission knows that: it pledged to reduce global methane emissions, saying it “is regarded as the single most effective strategy to reduce global warming in the near term”.
Supporting gas in the State aid guidelines while recognising that “it aggravate[s] negative environmental externalities in the longer term, compared to alternative investments” such as renewables and storage, will strongly undermine the EU’s pathway to climate neutrality and a sustainable economy.
New gases, notably hydrogen, are being marketed by the gas industry as clean, soon-to-be alternatives to gas.
But there are many shades of hydrogen, including ‘blue’ or ‘low-carbon’ hydrogen – produced by splitting natural gas at high temperatures and storing carbon dioxide – which many industries argue is the go-to quick decarbonisation solution. But blue hydrogen still releases large amounts of carbon dioxide and methane into the atmosphere. In fact, new research found that it may be worse than gas or coal.
The draft guidelines, however, put blue hydrogen and ‘green’ hydrogen – the latter produced from renewable energies, with low associated carbon emissions – on an equal footing, while their climate impact is clearly vastly different.
Ultimately, hydrogen of all kinds will also require infrastructure to be built in the short term. This may be used as an excuse to build more gas infrastructure and to continue using gas for years – which risks diverting attention and resources from genuinely clean alternatives like efficiency, wind and solar power.
Whilst the guidelines propose safeguards “for investments in natural gas to be seen as having positive environmental effects”, they are too weak and vague to prevent a lock in.
Alarmingly, operators would only need to pledge that the subsidised gas infrastructure is “fit for use” for hydrogen and decarbonised gases. What “fit for use” exactly means is the million-dollar question but it does not mean that one will actually use hydrogen. Too often, the “fit for use” justification has been used by the industry to build more infrastructure. “Carbon Capture and Storage-ready” gas infrastructure has mushroomed, which so far has not led to the deployment of CCS.
Besides, for another category of measures that incentivise new investments in energy or industrial production based on gas, operators would first, need to demonstrate that the project contributes to the 2030 and 2050 climate targets. Second, for limiting its harmful environmental impact, the project would need to integrate at least one of a host of decarbonisation solutions such as “CCS, renewable, low-carbon gas or close the plant on a timeline consistent with the Union’s climate targets”. These are not safeguards as most of them won’t prevent new gas investment.
The International Energy Agency couldn’t have been clearer: we’ll only reach climate neutrality by 2050 if we start a massive deployment of renewables and stop investing in fossil fuels – full stop. The way we allocate public money shouldn’t be a blind spot in the EU’s climate policy. On the contrary, it should be a laser focus. The Commission urgently needs to address the current flaws of its draft State aid guidelines – otherwise, it’s setting the EU’s green goals up for failure.