ACCELERATING THE FOSSIL GAS TRANSITION TO NET ZERO

The report contends that fossil gas cannot be considered a transition fuel due to significant methane leakage and the need for rapid decarbonisation by 2030. It argues that the EU's Complementary Delegated Act threatens the credibility of the EU Taxonomy by allowing fossil gas as a transitional activity. The document advocates for a rapid shift to low-carbon hydrogen, prioritised for hard-to-abate sectors, and warns against 'gas blending' as an inefficient decarbonisation strategy. It recommends the use of additionality requirements for electrolysers to prevent them from cannibalising renewable energy growth and suggests various financial mechanisms, including Carbon Contracts for Difference (CCfDs) and green public procurement, to mobilise investment. The report also emphasizes the need for a Just Transition to protect workers and low-income households from the regressive effects of carbon pricing.

• Fossil gas is not a viable transition fuel because methane emissions from the energy sector are significantly underreported, being 70% higher than official figures. Just 3% of methane leakage can make the carbon intensity of gas-fired power equivalent to that of a coal-fired power plant.
• The EU's Complementary Delegated Act (CDA) undermines the EU Taxonomy's credibility by proposing criteria that allow fossil gas-fired electricity to be labelled as a green transition activity, potentially locking in high-carbon trajectories and creating stranded asset risks.
• Gas blending is an inefficient and regressive strategy; for example, a 5% hydrogen blend by volume only displaces 1.6% of fossil gas. This approach creates stranded asset risks and does not align with the need for rapid decarbonisation by 2030.
• Low-carbon hydrogen should be prioritised for 'hard-to-abate' sectors with the highest emissions reduction potential, such as steel production (which can see 98% reductions), rather than for decentralized heating where direct electrification is more cost-effective.
• To prevent the cannibalisation of renewable energy intended for grid decarbonisation, the EU must implement 'additionality' requirements, ensuring that electrolysers are linked to new dedicated renewable energy installations.
• The transition of the fossil gas sector requires a massive realignment of investment; the EU energy transition is estimated to increase investment needs by EUR390bn per year over the next ten years.
• Carbon pricing alone is insufficient to make green hydrogen competitive; fossil gas may remain the cheaper option unless carbon prices rise above EUR200/tCO2, and renewable hydrogen may require prices of EUR300/tCO2 to break even.
• A Just Transition is necessary to mitigate the regressive effects of carbon pricing on low- and middle-income households and to reskill the fossil gas workforce, noting that 40% of offshore wind project lifetime costs have synergies with the offshore oil and gas sector.
• The report recommends the use of Carbon Contracts for Difference (CCfDs) to provide revenue certainty for low-carbon electricity and hydrogen generators, protecting them from volatile wholesale prices.

APA

Burge, L. (2022). ACCELERATING THE FOSSIL GAS TRANSITION TO NET ZERO. Climate Bonds Initiative. https://www.climatebonds.net/files/documents/publications/Accelerating-the-Fossil-Gas-Transition-to-Net-Zero.pdf

Chicago

Burge, Lily. ACCELERATING THE FOSSIL GAS TRANSITION TO NET ZERO. Climate Bonds Initiative, 2022. https://www.climatebonds.net/files/documents/publications/Accelerating-the-Fossil-Gas-Transition-to-Net-Zero.pdf.

Wikipedia

{{cite report |last1=Burge |first1=Lily |title=ACCELERATING THE FOSSIL GAS TRANSITION TO NET ZERO |publisher=Climate Bonds Initiative |date=May 2022 |url=https://www.climatebonds.net/files/documents/publications/Accelerating-the-Fossil-Gas-Transition-to-Net-Zero.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{burge2022accelerating, author = {Burge, Lily}, title = {{ACCELERATING THE FOSSIL GAS TRANSITION TO NET ZERO}}, institution = {Climate Bonds Initiative}, year = {2022}, month = may, url = {https://www.climatebonds.net/files/documents/publications/Accelerating-the-Fossil-Gas-Transition-to-Net-Zero.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }