Revealed: Gas companies dominate distribution of billions in EU public money

18th June 2020, London – Almost ninety percent of all EU money for fossil gas projects has gone to ventures backed by companies yielding enormous power over how the funds are distributed, according to a new investigation by Global Witness.

Pipe Down today reveals how a group of gas companies under the auspices of the European Network of Transmission System Operators for Gas (ENTSOG) have overestimated forecasts of Europe’s gas needs – holding the EU back from meeting its climate commitments and steering taxpayer money to subsidise harmful and unnecessary gas projects.

The report also shows how these gas companies help pick which projects – like pipelines or import terminals – the EU will back, and how they have received over €4 billion in subsidies for these projects.

This inappropriate influence ENTSOG have over how taxpayer money is distributed is enshrined in an EU law that determines which energy projects the EU supports. Changes to this law – called the TEN-E Regulation – are currently under review and Global Witness is calling for ENTSOG to be stripped of its powers, removing a damaging conflict of interest. 

Murray Worthy, Head of the EU Gas Campaign at Global Witness, said:

“The crisis brought on by COVID-19 means the EU will need to rebuild its economies, but we simply cannot carry on with the old way of powerful fossil fuel companies writing the very rules they benefit from. In the wake of the pandemic we need to ensure public money goes to building the clean energy systems of the future, not the damaging dying industries of the past.

“Unless this sort of damaging influence is reigned in, Europe will be condemned to decades more of fossil fuel consumption; a climate catastrophe the world may never be able to reverse. Breaking up the power of these big companies will be a key test of the EU’s commitment to fighting the climate crisis.”

Responding to Global Witness’ findings, ENTSOG has denied there is a conflict of interest, says its forecasts are improving, and that it is the EU that decides which projects to support and subsidize.

Since 2013, the European Commission has chosen gas infrastructure projects that get fast-track treatment and access to subsidies – called “Projects of Common Interest” (PCIs). But these projects must first be suggested by ENTSOG, meaning the Commission overwhelmingly picks PCIs that benefit ENTSOG companies like Snam from Italy and GAZ-SYSTEM from Poland. In addition, the methodology for how PCIs are assessed is developed by ENTSOG.

Likewise, the Commission is influenced by ENSTOG’s projections for gas demand in its decision-making. However, Global Witness reveals the group has consistently produced overinflated forecasts: in the six years to 2019, ENTSOG’s estimates were up to 21 percent higher than actual demand.  A recent analysis found that Europe does not need new gas projects, with existing infrastructure sufficient to meet demand until at least 2030 – even if Russia threatens supplies.

Murray Worthy, said:

“Fossil gas companies are going all out to mask themselves as the clean alternative, but in the EU carbon emissions from gas are now higher than coal. We can’t tackle climate change while still building more fossil fuel infrastructure.”

“As citizens increasingly demand action on the climate crisis from their politicians, knowing that billions of Euros in scarce resources risk being wasted on unnecessary fossil fuel infrastructure will rightly cause anger. The EU must curb gas companies’ power or it will quickly find itself out of kilter with the public is represents.”

Recommendations:

The European Commission should amend the TEN-E Regulation to remove ENTSOG’s policy-making influence, including:

• ENTSOG’s forecasting responsibilities should be transferred to an independent public body.
• ENTSOG members should be prohibited from taking part in meetings where PCI candidate projects are put forward.
• The European Commission should develop its own methodology for analysing the costs and benefits of PCIs under consideration.  
• All fossil fuel projects should be excluded from becoming Projects of Common Interest and prohibited from receiving subsidies. 

Key Facts:

• 87 percent of all EU fossil gas subsidies since 2013 has gone to gas projects ENTSOG members are involved in. This amounts to over €4 billion of public EU money. For full information see Global Witness’ investigation Pipe Down.
• Seven to 17 percent: Overestimate by ENTSOG of gas needed in EU each year from 2015 to 2019.
• 30 percent: Amount by which Europe must reduce gas consumption by 2030 to meet the EU’s current climate targets.
• 40 percent: Amount by which global gas production and consumption must drop to achieve the Paris Agreement goal of keeping warming under 1.5°C, according to Global Witness’ 2019 investigation Overexposed.
• 50 percent:Portion of the increase in greenhouse gas emissions for which gas is responsible since 2016.
• Carbon emissions from gas in the EU, are now higher thancoal.