The European Union is using taxes on pollution to fund a gas pipeline in Romania, claiming it will reduce emissions compared to coal
While the European Union pushes for a phase out of fossil fuels on the world stage, it is continuing to hand public money meant for climate projects to gas pipelines within its borders.
While it no longer funds the extraction of fossil fuels, the EU backs gas pipelines in Eastern Europe using money generated from taxes on pollution.
When polluting European companies are taxed through the EU’s emissions trading scheme, some of the money goes to the Modernisation Fund.
The fund’s slogan is “accelerating the transition to climate neutrality” and it is aimed at ten Eastern European countries which are among the bloc’s poorest.
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But it is giving €86 million ($92m) to the Tuzla-Podisor pipeline which will transport gas from a new field in Romania’s Black Sea to three Romanian gas power plants and perhaps to Romania’s neighbours soon too.
‘Transition fuel’
Justifying the funding, an EU official told Climate Home that the gas will help Romania get off coal and “as such can contribute to emissions reductions”.
They added that the investment only covers gas transmission capacity “that corresponds to the amount of gas that can be estimated to replace coal-fired electricity generation”.
But critics told Climate Home that the project would increase emissions and damage the EU’s reputation on climate.
Simon Dekeyrel is an analyst at the European Policy Center. He said the EU’s backing for the project is “a negative development, especially since this pipeline is linked to the development of a new gas field [Neptun Deep] in the EU”.
He added that the idea of the emissions trading scheme is “putting a price on greenhouse gas emissions” and “if the money obtained is then spent on the development of a new gas field within the EU, that is obviously incompatible with that core idea”.
Leaky pipelines
Romanian Greenpeace campaigner Alin Tanase said that gas pipelines often leak methane, a particularly damaging greenhouse gas.
A recent investigation by the Clean Air Task Force found that of nine European countries studied, Romania had a particular problem with methane leaking from its gas infrastructure.
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Faten Aggad from the African Climate Foundation said the gas backing would further damage the EU’s climate credibility, already weakened from its decision last year to put gas in its list of green investments.
“While the EU is singing the phase-out song internationally, it is keeping options open to leverage them for self-interest,” she said. “There is no single meeting in Africa on energy transition that I attended where Europe’s hypocrisy isn’t pointed out.”
The decision to back the pipeline was made in March by the fund’s investment committee, a group of 15 officials from the ten Eastern European beneficiary governments, three other EU member states, the European Commission and the European Investment Bank.
The minutes of the meeting when the investment was approved do not note any disagreement among the committee’s members. The investment was approved by the European Commission.
Sliding in before the deadline
A spokesperson for the European Investment Bank (EIB) told Climate Home “the selection and submission of investment proposals rest entirely with and is the responsibility of” the Eastern European states that benefit from the fund.
The spokesperson added that the EIB has only a “limited and legislatively specified role in the Modernisation Fund”. The bank does a technical check and financial due diligence.
The spokesperson said that Romania was so far the only country to ask for money for gas transmission projects.
It has also been granted €8m ($9m) for the Ghercești-Jitaru pipeline as well as €276m ($294m) towards two gas power plants in Turceni and Isalnita, on the basis they will replace coal.
The EIB itself, which is run by EU member states, loaned the Tuzla-Podisor pipeline developers €150 million ($160m) in 2018.
The following year, the bank announced it was phasing out support for fossil fuels to become a “climate bank” but, as it had already been announced, the support for this pipeline will go ahead.
The pipeline could also win funding from the EU’s Connecting Europe Facility, as it will be unaffected by new regulations which mean that will stop backing gas pipelines next year.
