Fossil fuel companies are already in talks with banks over potential sales of green bonds, which typically come with lower borrowing costs given high demand for ethical assets. That would be a boon following the proposal by the European Commission to grant a green label to some gas projects to help shift the continent away from dirtier fuels like coal.
It’s a move that’s going to be controversial for many ethical funds, which may shun such debt offerings by fossil fuel companies. It’s also likely to further dent the ambition of the EU to make its green rulebook a “gold standard” for environmental investing.
To be labeled a European green bond, the proceeds would need to align with the EU’s so-called taxonomy, a set of criteria for investments covering a host of economic activities compatible with a target to reach climate neutrality by 2050. While the rules on gas require eligible projects to replace a coal facility and abide by emissions caps, the decision has led some to question whether that climate goal can now be met.