Continued petitions could impact other sustainability policies, InfluenceMap warns.
The report outlines how the world’s largest gas companies engaged in policy-influencing behaviours to “insert fossil gas into Europe’s energy future” throughout 2020 and 2021. Nine out of ten of the most engaged companies actively pushed for gas to be included in the taxonomy, including Shell, BP and TotalEnergies.
“We found evidence of gas companies working to defend the industry and disassociate from negative terminology around fossil fuels, as well as taking coordinated action to encourage the insertion of gas in EU policies that otherwise didn’t reflect gas-based technologies as sustainable – with the taxonomy being the most recent example,” William Aitchison, EU Strategy Manager at InfluenceMap, told ESG Investor.
The Commission formally proposed the inclusion of the Complementary Climate Delegated Act in the taxonomy this week, noting that gas and nuclear are “bridge technologies” to help the EU meet its net zero greenhouse gas (GHG) emissions by 2050 target. If gas is included in this list, investors may be able to include gas companies in their ESG-labelled funds, limiting progress to transitioning to renewable alternatives.
Nathan Fabian, Chair of the Platform on Sustainable Finance (PSF), the Commission’s official advisory body, said the decision undermined the “integrity” of the taxonomy, while accepting the role of gas in the transition to a low-carbon economy.
Behind closed doors
Gas companies have been able to “regularly gain an audience with EU policymakers”, said Vivek Parekh, Climate Change Analyst at InfluenceMap.
Over the course of 2020-21, gas companies logged 52 meetings with the EU Commission. These were largely engineered by industry associations, said Parekh.
“These associations are giving companies more of a platform, making sure that their message reaches the intended target,” he noted.
Industry associations such as Eurogas, Gas Distributors for Sustainability (GD4S) and the Association of International Oil and Gas Producers (IOGP) were all engaging “intensively” across sustainability-related policy streams in Europe, including the taxonomy, the report said.
Of the aforementioned top ten gas companies, nine retain memberships to at least three of these industry associations, it added.
“The Sustainable Finance Taxonomy was found to be the most heavily targeted policy by the gas sector narratives, with strong narrative emphasis on promoting fossil gas as a low-carbon energy source as well as arguing that it is important for ensuring energy security,” the report noted.
Lobbying by these companies is out of step their net zero commitments and energy transition plans, such as the strategy outlined by Shell, which won the backing of shareholders at last year’s AGM.
InfluenceMap has previously identified a surge in online anti-climate lobbying by fossil fuel companies, with corporates using social media, paid search and third-party media outlets to promote climate denial content and make unsubstantiated claims about their efforts to transition to net zero.
Investors have been more closely scrutinising companies’ climate-related lobbying activities.
Sixty-five percent of investors said alignment of corporate and trade association lobbying with the goals of the Paris Agreement is a minimum expectation for firms claiming to be transitioning to more sustainable products and operations, according to a 2021 survey published by the Institutional Shareholder Services (ISS).
Italy’s Enel, one of the top ten engaging companies identified by InfluenceMap, was found to be broadly supportive of limiting the role of gas in favour of a stronger renewables outlook.
“Enel has focused its high-level messaging on supporting renewable electrification as the primary tool for decarbonising the energy mix, and pushing for a move away from fossil fuels, including fossil gas,” the report said.
The energy company has also made commitments such as reducing its Scope 1 emissions by 80% by 2030 compared to 2017 levels.
“Ideally, we’d like to see lobbying disclosures around climate and other sustainable policy areas regulated as part of company reporting,” said Aitchison.
InfluenceMap is concerned the taxonomy win for the gas sector would set a precedent across the EU’s Sustainable Finance Strategy.
“Gas companies are picking holes across the whole spectrum of the Green Deal,” said Aitchison.
The gas industry has already gained support for fossil gas and hydrogen blending in the Commission’s Gas Package, preferential tax treatment for fossil gas in the Energy Taxation Directive and has so far avoided a phase-out date being set for fossil fuels in heating within the Energy Efficiency Directive, InfluenceMap said.
The inclusion of gas in the taxonomy will likely have significance beyond Europe’s borders, the report warned, citing other regions’ efforts to finalise their own taxonomies.
“The South Korean Taxonomy has mirrored EU Sustainable Finance Taxonomy developments, initially excluding fossil gas then later moving to include it,” the report said.
Industry experts have previously emphasised the importance of ensuring global alignment between global taxonomies to ensure a united transition to net zero.
“The gas industry’s several wins across EU policy shows that companies keep finding ways to keep gas in the energy mix,” said Parekh. “With this in mind, it was unsurprising to see gas companies win once again and secure a place in the taxonomy.”