* Rift over gas as fossil fuel vs replacement of coal
* Investors split on how to view pro-gas lobbying
By Shadia Nasralla, Simon Jessop and Kate Abnett
LONDON/BRUSSELS, May 17 (Reuters) - Oil major BP has
lobbied for the EU to support natural gas, a move that exposes
divergent views among investors and reflects a wider European
dispute about the role of the fossil fuel in the transition to a
lower-carbon world.
The European Commission - aiming to reach net-zero
greenhouse gas emissions by 2050 - had planned to omit
gas-fuelled power plants from a new list of investments that can
be marketed as sustainable, but delayed the decision last month
following complaints from some countries and companies.
Britain's BP was among those lobbying against the plan. In a
December 2020 response to the Commission's public consultation
on the issue, it said the new rules could threaten financing of
gas projects, and obstruct a shift away from more polluting
coal.
BP called for an increase in the emission limits that gas
plants would have to meet to allow them to be labelled green
without requiring the immediate installation of carbon capture
and storage (CCS) technology, which is still deemed too
expensive for wide-scale use.
Natural gas emits roughly half the CO2 emissions of coal
when burned in power plants. But gas infrastructure is also
associated with emissions of the greenhouse gas methane.
When asked about its lobbying, BP said it strongly supported
the EU's climate goals. It added that natural gas was enabling
the transition from coal.
However investors gave mixed responses when asked whether
BP's championing of gas was at odds with its pledge to support
the Paris Agreement. As well as committing to bringing carbon
emissions from the barrels it produces to net zero by 2050, the
company has pledged to align its lobbying activities to support
net-zero carbon policies.
Natasha Landell-Mills, head of stewardship at asset manager
Sarasin and Partners, said BP's lobbying raised questions about
its commitments.
"If their capex (capital expenditure) was oriented towards
full decarbonisation by 2050, then you'd naturally expect to see
lobbying align with this goal. The fact it seems to be pushing
the other way suggests a problem," she added.
Others, though, pointed to the question of what aligning
with the Paris Agreement means in practice.
"It's not like a standard setter has said 'here, exactly, is
what Paris-aligned means, industry by industry'," said John
Streur, CEO at U.S. asset manager Calvert Research and
Management.
Another institutional investor, speaking on condition of
anonymity, said he did not see a problem with BP's response and
that there was no blueprint for what Paris-aligned means, adding
however it was not a good time "to stick your head out".
'FAIR TRANSITION'
The European Commission had originally said gas plants must
emit below 100g of carbon dioxide equivalent per kilowatt hour
(CO2e/kWh) to be labelled green - a level even the use of CCS
would make it tough to achieve, according to BP.
In its December submission to the Commission, BP urged the
EU to set a higher emissions limit to encourage power suppliers
to shift more capacity to gas from coal plants.
"Natural gas should have a dedicated threshold, above the
current 100g CO2e/kWh, to reflect its role to facilitate an
affordable and fair energy transition by enabling a shift away
from coal in power generation and heating, providing
dispatchable power to complement renewables and offering an
alternative fuel in transport," it said.
BP is far from alone in its support of gas.
At least nine EU countries, including Poland, Hungary and
the Czech Republic, lobbied the Commission to label gas plants
as sustainable, documents seen by Reuters showed. Other
governments including Denmark, Spain and Ireland urged Brussels
to exclude the fuel.
European oil and gas producer Eni criticised the 100 g/kWH
threshold as too low in December, while a group including Total
and Repsol signed an open letter from several
energy firms in support of gas as a means to replace coal in the
energy mix.
"Any tonne we don't emit today is much more valuable in
terms of avoiding global warming then a tonne that is with the
best intention avoided in 2040," said Mario Mehren, Chief
Executive of Wintershall Dea, who signed that letter.
'UNABATED GAS'
The Paris Agreement set a target to limit global warming to
2 degrees Celsius above pre-industrial levels, and aim for 1.5
degrees.
The EU aims to cut its net greenhouse gas emissions by 55%
by 2030, from 1990 levels, and eliminate them by 2050.
The role of gas depends on factors such as what volume of
emissions can be captured and stored in the future, and fixing
methane leaks from gas infrastructure, said Joeri Rogelj, a lead
author on Intergovernmental Panel on Climate Change (IPCC)
reports and Director of Research at the Grantham Institute at
Imperial College London.
"In that context, unabated gas, without carbon capture and
storage, is not part of the key sustainable investments," he
added.
Sandrine Dixson-Declève, co-president of the Club of Rome
think-tank and one of the EU's expert advisers on the
sustainable finance taxonomy, said the rules needed to reflect
climate science.
"No one is denying that gas can help the transition, but
that does not mean it is Paris Agreement compliant."
(Reporting by Shadia Nasralla and Simon Jessop in London and
Kate Abnett in Brussels; Editing by Simon Webb, Veronica Brown
and Pravin Char)
BP (BP.)