European Parliament does not reject the gas and nuclear act in the EU taxonomy

On 6 July 2022 the European Parliament did not adopt a motion objecting to the complementary delegated act to the EU taxonomy, which covers selected investments in natural gas and nuclear energy. Rejecting the act required an absolute majority of MEPs (353 votes), which was not reached. This means that, provided the Council also does not object, the act will enter into force and apply from 1 January 2023. For the biogas industry the decision is important as part of the financial environment, although renewable gases have separate criteria in the taxonomy.

What is changing

The EU taxonomy classifies economic activities according to whether they make a substantial contribution to environmental objectives. The complementary act, adopted by the Commission in early February 2022, allows selected gas-fired and nuclear power plants to be recognised as transitional activities if they meet conditions: life-cycle emission limits, deadlines for obtaining permits, and plans for switching to renewable or low-carbon gases. An objection would have needed the support of at least 353 MEPs, and this threshold was not reached.

The act concerns selected activities, not the whole gas sector. In particular, it does not change the criteria for biogas, biomethane, the fermentation of biowaste and networks for renewable gases, which have applied since the beginning of 2022 and require, among other things, a high reduction in life-cycle greenhouse gas emissions and sustainable sourcing of feedstocks.

Significance for the industry in Poland

From the outset Poland has supported recognising gas as a transitional fuel and treats it as an important element of the transformation of heating and power. For investors in biogas and biomethane the conclusions are as follows:

• the financing of gas projects under the taxonomy will depend on their "readiness" for renewable gases, which increases the importance of biomethane availability,
• biogas plants and biomethane plants remain in the taxonomy as an activity contributing to climate change mitigation, provided the criteria are met,
• banks will also assess projects through the prism of the "do no significant harm" principle, which covers digestate management and water protection.

For companies reporting taxonomy alignment, the key will be distinguishing which revenues come from transitional gas activities and which from renewable gases.

How the delegated act procedure works

Delegated acts are adopted by the Commission, and Parliament and the Council have the right to challenge them within a set period. Rejection requires an absolute majority of MEPs or a qualified majority in the Council (at least 20 countries representing 65% of the population), which means that in practice it rarely happens. Therefore the ultimate success or failure of the dispute depends not on the debate about gas itself but on voting arithmetic, and any legal dispute will be fought later before the Court of Justice of the EU.

What next

If the Council does not object, the act will be published in the Official Journal of the EU and will start to apply at the beginning of 2023. Some countries, including Austria and Luxembourg, are announcing a complaint to the Court of Justice of the EU. The biogas industry should follow both this dispute and the subsequent delegated acts of the taxonomy, which will cover further environmental objectives.