Members of the European Parliament are set to start negotiations on setting up the Just Transition Fund — the backbone of the €1 trillion ($1.18 trillion) European Green Deal — to mitigate the social impact of greening the economy by offering support to some gas projects.

The move has been welcomed by industries that have been pivoting towards the cleaner fossil fuel.

Prompting heavy criticism from environmental groups, the European Parliament voted this week to allow gas projects — under strict conditions — to get support from the green transition fund.

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The move — criticised by the World Wide Fund for Nature (WWF) as incompatible with the EU’s climate neutrality target — paves the way for challenging talks with the European Commission and national governments, some of which have already agreed to exclude the fuel.

Katie Treadwell, energy policy officer at WWF European policy office, said: “MEPs just agreed that taxpayer money can be used to pay for gas, risking locking us in to stranded assets and climate pollution and ramping up the cost of the transition.

“It’s a massive blow to those the fund was supposed to support in the move to climate neutrality. All those who want a just and green recovery from the economic crisis should rise up and condemn the European Parliament,” she said.

Key role for gas

However, the executive vice president for the European Green Deal, Frans Timmermans, warned critics in a press conference in June that gas will have to continue to play a key role in replacing coal in the European energy mix.

He said the European Union’s proposed recovery plan from the Covid-19 crisis will steer away as much as possible from fossil fuel projects, but highlighted the role of gas in shifting some nations away from coal and bringing about net-zero emission energy systems.

Using cash from the bloc’s Covid-19 recovery fund and budget, the EU now wants to launch the €17.5 billion Just Transition Fund (JTF) to push countries towards net zero emissions goals by 2050, and a new, tougher 2030 emissions-cutting target recently proposed.

MEPs adopted Parliament’s position on the EC's proposal on the JTF with 417 votes in favour, 141 against and 138 abstentions.

Moreover, MEPs confirmed key provisions for the cash, including the creation of a “Green Rewarding Mechanism”, which allows 18% of the total JTF resources to be allocated to member states that reduce their greenhouse gas emissions more quickly than others.

Another provision was the broadening of the scope of the fund to include micro-enterprises, sustainable tourism, social infrastructure, energy storage technologies, low-emission district heating, smart and sustainable mobility, digital innovation, as well as culture, education and community building.

Conditions for support

In addition — and somewhat controversially — MEPs confirmed a derogation for investments in activities related to natural gas “for regions heavily reliant on the extraction and combustion of coal, lignite, oil shale or peat, if they qualify as environmentally sustainable” in accordance with the Taxonomy Regulation and only if such projects comply with six additional cumulative conditions.

Nevertheless, only 50% of the national allocation will be available for countries that have not yet committed to a 2050 national target for climate neutrality, until such a target is adopted.

Aiming at transformation

Commenting on the JTF, MEP Manolis Kefalogiannis said: “The EU is aiming, as part of the European Green Deal, to socio-economically transform regions relying on fossil fuels and carbon-intensive industries.

“The JTF will become a key component of the EU’s cohesion policy. We are now ready to kick off inter-institutional negotiations”.

Natural gas emits, on average, 50% less carbon dioxide than coal when burned in power plants, although it is also associated with leaks of methane, a potent planet-warming greenhouse gas.

Eighteen of the EU’s 27 member states still use coal, according to climate thinktank Ember.

Research from Ember released ahead of the vote found that “climate laggards” — such as Bulgaria, Croatia, the Czech Republic, Germany, Poland, Romania and Slovenia — would mostly be rewarded under the fund.

Binding targets

Industry association Eurogas — representing 48 member companies in Europe, including Germany’s Wintershall Dea, Norway’s Equinor, Italy’s Eni and France’s Total — said “a climate-neutral Europe by 2050 is possible if we pursue all available options without prejudice”.

“Europe must maintain its leading position on clean gas technologies to deliver on carbon neutrality, as well as relaunch the economy, secure jobs, and ensure investor certainty,” Eurogas said.

In support of the European Commission’s green push, the European gas industry called this week for a binding 20% greenhouse gas intensity reduction target and an 11% EU-wide binding target on renewable gas by 2030.

The industry believes that “establishing the target will provide incentives for the uptake of renewable and decarbonised gases across the EU and set a clear path to achieve climate neutrality by 2050”.

Political compromise

Rules to decide who gets the money need to be finalised by the European Parliament, EC and national governments.

While the inclusion of some gas projects has been seen by environmentalists as a ‘U-turn’ by the EU MEPs, most have called it a “ wise compromise”.

According to Pascal Canfin, French environment MEP, “there is no majority in the European Parliament to exclude gas projects in principle because for many MEPs, especially for countries from Eastern and Southern Europe, but also a majority of German MEPs, it is a transitional energy to get out of coal faster”.

Canfin said in a LinkedIn post, cited by other Brussels observers, the compromise reached is that gas is excluded, in principle, but it can nevertheless be financed in some very specific cases.

“Gas projects are supported by the far right, conservative groups, the right and the centre right, as well as by a third of the socialists and central (Renew Europe) groups,” he said.

“Under these (agreed) conditions we are only talking about a few gas projects likely to be eligible in 15 regions, out of 280 in Europe, which fall into the category heavily dependent on coal… and the fund is only accessible to countries which pledge to achieve climate neutrality by 2050 at the latest.”