5. At the end of last year, the European Commission published a new EU taxonomy proposal classifying efficient unabated gas-fired power plants as transitional investments, which could be a moment of truth for the global gas industry.

Expert advisers have until 21 January to provide feedback which may result in changes to the proposed text.

Claire Spencer, Research Associate, European gas research, stated:

As it stands, financial and non-financial investors will be able to increase their corporate ‘green scoring’ by investing in gas, including outside Europe, disclosure will be key

Other countries developing similar taxonomies would be emboldened to include gas too, particularly in Asian markets where coal still dominates

However, the EU recognition of gas power plants as a transitional investment is no panacea for the gas industry

Wood Mackenzie predicts that gas prices will need to come down to accommodate increased investment in gas use. 

The proposed CO2 emission cap of 270 Gr. per kWh for facilities that have a construction permit by 2030, alongside the commitment to use at least 30% of renewable or low carbon gas by 2026 and 100% by 2035, means that the use of conventional natural gas would need to reduce over time if a gas-fired power plant is to be classified as transitional. 

The use of unabated natural gas in the EU is set to decline, even if the EU classifies investments in gas-fired plants as transitional investments.