EU Parliament pushes for stricter fossil fuel exclusions under green finance rules

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BRUSSELS — The European Parliament will push for stricter limits on allowing oil and gas companies to be classed as green investments under the EU’s updated sustainable finance rules, according to a document obtained by POLITICO ,

The position will set up a fight with member countries, which want to loosen restrictions on fossil fuel companies under the Sustainable Finance Disclosure Regulation — an EU law that aims to prevent greenwashing to support sustainable investment decisions.

Under the SFDR’s new “transition” category — which covers companies that are switching from dirtier to cleaner business models — lawmakers state that fossil fuel companies should only be included if they invest more in green activities than in new fossil fuel projects over a three-year period.

That would likely rule out French oil major TotalEnergies, for example, because it allocates 35 percent of its capital expenditure to new oil and gas activities, and only around one quarter to low-carbon energy.

The European Commission’s initial proposal suggested a blanket exclusion of the fossil fuel industry, a tougher stance than the Parliament. Member countries propose the most lenient rules, agreeing in June that oil and gas companies could be included in the transition category if they spend one fifth of their capex on green activities, as defined under the EU taxonomy.

MEPs in the economic committee will vote on the Parliament’s position on Sept. 10, before a plenary vote the following week. If approved, it will open the way for member countries and lawmakers to begin negotiations to reach a compromise.

An overhaul of the SFDR was tabled by the Commission in November, following greenwashing concerns and complaints from fund managers about its complexity and costliness.