EU Proposes Funding Shift Away From Natural Gas

BRUSSELS (Reuters) - The European Commission on Tuesday proposed rules to restrict funding for natural gas projects and instead funnel cash into low-carbon technologies to meet climate goals.

The EU's "TEN-E" rules define which cross-border energy projects are eligible to receive certain EU funding and fast-tracked permits.

The Commission on Tuesday proposed a rewrite of the rules, which guided 4.7 billion euros ($5.71 billion) in EU cash to energy projects over the last decade, including power grids and gas pipelines.

The proposal excludes dedicated oil and gas infrastructure from the rules, confirming draft plans previously reported by Reuters.

"The closer we move to our climate neutrality target, the more natural gas will be replaced by renewables and low-carbon gases," EU energy commissioner Kadri Simson said, referring to the bloc's goal to eliminate its net greenhouse gas emissions by 2050.

The rules, which need approval from EU countries and European Parliament, would make more low-carbon technologies eligible for funding.

These include pipelines to carry hydrogen, offshore power grids to link wind farms at sea to countries' electricity systems, and "smart gas grids" that integrate low-carbon gases into the network.

EU funding under the TEN-E rules aims to leverage cash from national governments and the private sector, to help mobilise the massive investments needed to meet Europe's climate aims - including 65 billion euros in hydrogen infrastructure investments this decade, by the EU's own estimates.

Some EU lawmakers and campaigners said the rules failed to block funding for fossil fuels, since they could support pipelines to carry hydrogen produced from natural gas in a process that causes CO2 emissions.

"This would only deepen the gas lock-in effect," said Esther Bollendorff, NGO group Climate Action Network's Gas Policy Coordinator, referring to concerns that building fossil fuel-based infrastructure could "lock in" planet-warming emissions for decades.

The Commission said projects should also face mandatory sustainability assessments, after the EU Ombudsman last month said the Commission had failed to properly assess the climate risk of gas projects under the current TEN-E rules.

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