Fossil gas in taxonomies: what lies beneath

This report by the Climate Bonds Initiative examines the role of fossil gas in sustainable finance taxonomies, arguing that fugitive methane emissions significantly increase the climate impact of gas-fired power generation, often making it comparable to coal. It analyzes various global taxonomies and concludes that the strict criteria for fossil gas inclusion in the EU Taxonomy make such projects economically unviable compared to renewable energy alternatives.

• Fugitive methane emissions from fossil gas operations significantly increase lifecycle emissions, potentially making gas-fired power generation as damaging to the climate as coal or oil. For instance, adding just 3% of fugitive emissions to a modern combined cycle gas turbine (CCGT) plant's average emissions intensity of 360–380 gCO2e/kWh makes its greenhouse potential almost comparable to coal.
• Methane leakage rates vary by region; in the US, average leakage is estimated between 1.4% and 3.7%, while in Canada, the rate is at least 2.7%, which is double previous estimates.
• Most sustainable taxonomies exclude hydrocarbon-related activities. In cases where fossil gas electricity generation is included, it is typically restricted by time constraints (sunset dates between 2030–2035) and rigorous carbon intensity thresholds, often 100g CO2e/kWh.
• The EU Taxonomy includes two fossil gas-related activities: electricity generation from fossil gaseous fuels (activity 4.29) and high-efficiency co-generation of heat/cool and power from fossil gaseous fuels (activity 4.30). These were added via a Complementary Climate Delegated Act to facilitate a shift from more polluting activities like coal.
• Compliance with EU Taxonomy criteria for fossil gas is practically unachievable without Carbon Capture and Storage (CCS) because current best-in-class CCGT plants have direct emissions of 320–350g CO2/KWh, far exceeding the 100g CO2e/kWh lifecycle threshold or the 270g CO2e/kWh direct emissions threshold.
• Implementing the EU Taxonomy's requirements for fossil gas makes new power plants economically unviable. The levelised cost of energy for gas plants with CCS is estimated to be nearly twice as high as current alternatives like renewable energy combined with storage.
• The US Inflation Reduction Act (IRA) of 2022 addresses methane emissions by imposing fees of USD 900 per tonne by 2024, increasing to USD 1,500 post-2026, and allocating USD 850 million for reduction technology and USD 700 million for conventional well emissions.

APA

Korostikov, M., & Boule, B. (2023). Fossil gas in taxonomies: what lies beneath. Climate Bonds Initiative. https://www.climatebonds.net/files/documents/publications/Fossil-Gas-in-Taxonomies-What-Lies-Beneath.pdf

Chicago

Korostikov, Mikhail, and Bridget Boule. Fossil gas in taxonomies: what lies beneath. Climate Bonds Initiative, 2023. https://www.climatebonds.net/files/documents/publications/Fossil-Gas-in-Taxonomies-What-Lies-Beneath.pdf.

Wikipedia

{{cite report |last1=Korostikov |first1=Mikhail |last2=Boule |first2=Bridget |title=Fossil gas in taxonomies: what lies beneath |publisher=Climate Bonds Initiative |date=November 2023 |url=https://www.climatebonds.net/files/documents/publications/Fossil-Gas-in-Taxonomies-What-Lies-Beneath.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{korostikov2023fossil, author = {Korostikov, Mikhail and Boule, Bridget}, title = {{Fossil gas in taxonomies: what lies beneath}}, institution = {Climate Bonds Initiative}, year = {2023}, month = nov, url = {https://www.climatebonds.net/files/documents/publications/Fossil-Gas-in-Taxonomies-What-Lies-Beneath.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }