EU to restrict support for gas projects, citing climate goals

BRUSSELS, Dec 10 (Reuters) - The European Union is planning to restrict its funding for natural gas projects because of the risk they pose to the bloc's climate goals, according to draft rules seen by Reuters.

The "TEN-E" rules define which cross-border energy projects can be labelled "Projects of Common Interest" (PCI), meaning they can receive EU funding and fast-tracked permits.

Last year, the EU handed nearly 1 billion euros to such projects, including power grids and a gas pipeline, money aimed at leveraging further cash from national governments and the private sector.

But as the European Commission seeks to slash Europe's greenhouse gas emissions, it is rewriting the TEN-E rules to make them greener.

A draft Commission proposal for the rules, due to be published next week, excludes dedicated natural gas and oil infrastructure.

"Considering that the future natural gas demand is estimated to significantly decrease in line with the Green Deal objectives, natural gas infrastructure no longer needs support through the TEN-E policy," it said.

Under the draft rules, "smart gas grids" could get funding if they support "the integration of renewable and low-carbon gases" into the gas network. Pipelines to transport hydrogen are also eligible.

Renewable energy groups and campaigners said this was a loophole that could support pipelines that carry mostly natural gas, with a small share of green gases, or pipelines that transport hydrogen produced from natural gas in a process that causes CO2 emissions. They called for rules that explicitly exclude natural gas in these scenarios.

"The text leaves the door open for fossil-based infrastructure. It should instead firmly prioritise electricity and renewable hydrogen infrastructure," said Giles Dickson, chief executive of WindEurope.

The Commission declined to comment on the draft, which is subject to change before publication.

James Watson, head of industry group Eurogas, called the TEN-E plan a "watershed moment for the gas industry".

By recognising the potential of low-carbon gases to cut emissions, the Commission is "confirming the long-term role of gas in the European energy mix," he said.

When burned in power plants, natural gas produces less CO2 emissions and air pollution than coal. But it is not a zero-carbon fuel, and therefore not compatible with the EU's plan to have net zero emissions by 2050.

The EU says its consumption of natural gas must drop by 30% this decade to meet climate goals. By 2050, the fuel would be mostly replaced by low-emission gases, such as hydrogen produced using renewable energy.

Separately, on Wednesday the EU agreed that a 17.5-billion-euro Just Transition Fund from its next budget will not be spent on fossil fuels, including gas.

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