* Rift over gas as a fossil fuel vs coal substitution
* Investors are divided on how to view the pro-gas lobby
By Shadia Nasralla, Simon Jessop and Kate Abnett
LONDON / BRUSSELS, May 17 (Reuters) – Oil company BP has lobbied the EU to support natural gas, a move that exposes divergent views among investors and reflects a broader European dispute over the role of fossil fuel in transition to a fossil fuel – carbon world.
The European Commission – aiming to achieve net greenhouse gas emissions by 2050 – planned to omit gas-fired plants from a new list of investments that can be marketed as sustainable, but postponed the decision last month after complaints from some countries and companies.
British BP was among those lobbying against the plan. In a December 2020 response to the Commission’s public consultation on the matter, he said the new rules could threaten the financing of gas projects and prevent a more polluting coal shift.
BP called for an increase in the emission limits that gas plants would have to meet to allow them to be labeled green without requiring the immediate installation of carbon capture and storage technology (CCS), which is still considered too expensive to use in Large scale.
Natural gas emits about half of CO2 emissions from coal when burned in power plants. But the gas infrastructure is also associated with greenhouse gas emissions, methane.
When asked about its lobbying, BP said it strongly supports the EU’s climate goals. He added that natural gas was allowing the transition from coal.
However, investors gave mixed responses when asked whether BP’s defense of gas was at odds with its promise to support the Paris Agreement. In addition to pledging to bring carbon emissions from the barrels it produces to net zero by 2050, the company has pledged to align its lobbying activities to support zero net carbon policies.
Natasha Landell-Mills, head of management for asset manager Sarasin and Partners, said the BP lobby raised questions about its commitments.
“If your capex (capital expenditures) were geared towards total decarbonization by 2050, then you would naturally expect to see the lobby aligned with that goal. The fact that it appears to be pushing the other way suggests a problem, ”she added.
Others, however, pointed to the question of what alignment with the Paris Agreement means in practice.
“It’s not like a standards maker says ‘here, exactly, is what the Paris alignment means, sector by sector’,” said John Streur, CEO of US asset manager Calvert Research and Management.
Another institutional investor, speaking on condition of anonymity, said he saw no problem with BP’s response and that there was no plan for what Paris alignment means, adding, however, that it was not a good time “to put your head out”.
The European Commission had originally said that gas plants must emit less than 100g of carbon dioxide equivalent per kilowatt-hour (CO2e / kWh) to be labeled green – a level that even the use of CCS would make it difficult to achieve, according to BP.
In its December presentation to the Commission, BP urged the EU to set a higher emission limit to encourage energy suppliers to transfer more gas capacity from coal plants.
“Natural gas must have a dedicated limit, above the current 100g CO2e / kWh, to reflect its role in facilitating an affordable and fair energy transition, allowing for a change in coal in the generation and heating of energy, providing dispatchable energy to complement the energies renewable energy and the offer of an alternative fuel for transportation, “he said.
BP is far from being the only one to support the gas.
At least nine EU countries, including Poland, Hungary and the Czech Republic, have pushed the Commission to label gas plants as sustainable, documents seen by Reuters showed. Other governments, including Denmark, Spain and Ireland, have asked Brussels to exclude fuel.
European oil and gas producer Eni criticized the 100 g / kWH limit as too low in December, while a group including Total and Repsol signed an open letter from several energy companies in support of gas as a means of replacing coal in the matrix energy.
“Any ton that we don’t emit today is much more valuable in terms of preventing global warming than a ton that is avoided with the best intention in 2040,” said Mario Mehren, chief executive of Wintershall Dea, who signed the letter.
‘GAS NOT ABATED’
The Paris Agreement set a target to limit global warming to 2 degrees Celsius above pre-industrial levels, and aims at 1.5 degrees.
The EU aims to reduce its net greenhouse gas emissions by 55% by 2030, compared to 1990 levels, and eliminate them by 2050.
The role of gas depends on factors such as what volume of emissions can be captured and stored in the future and fix methane leaks from the gas infrastructure, said Joeri Rogelj, lead author of the reports of the Intergovernmental Panel on Climate Change (IPCC) and Director of Research at the Grantham Institute at Imperial College London.
“In this context, the undiminished gas, without carbon capture and storage, is not part of the main sustainable investments”, he added.
Sandrine Dixson-Declève, co-chair of the Club of Rome studies institute and one of the EU’s specialized consultants in sustainable finance taxonomy, said the rules need to reflect climate science.
“No one is denying that gas can help with the transition, but that does not mean it is in compliance with the Paris Agreement.” (Reporting by Shadia Nasralla and Simon Jessop in London and Kate Abnett in Brussels; Editing by Simon Webb, Veronica Brown and Pravin Char)