Last reviewed 19 May 2022

The Government is planning to classify natural gas as a sustainable “green” investment, in a bid to increase North Sea production.

It has been reported that Business Secretary Kwasi Kwarteng is considering reclassifying natural gas as “environmentally sustainable”, according to an article in The Daily Telegraph newspaper.

A Whitehall source told the Telegraph: “Kwasi considers natural gas a transition fuel, and he accepts the reality of the situation which is that we will need gas for decades to come and we need more developments in the North Sea.”

“A lot of investors with ESG [environment, social and governance] targets are divesting from fossil fuels — we don’t want that to be done at the detriment of natural gas,” the source added.

The move would force a change in the UK “Green Taxonomy” which the Chancellor of the Exchequer, Rishi Sunak, announced in 2020 as part of the Government’s efforts to help clamp down on greenwashing, where companies make unsubstantiated or exaggerated claims that an investment is environmentally friendly.

Speaking at the time, John Glen, Economic Secretary to the Treasury, said: “We want investors and businesses to play their part in greening our economy and transitioning to net zero, so it’s crucial we have a clear common definition of what green means”.

Changing the green investment criteria has raised concerns for some investment groups. The UK Sustainable Investment and Finance Association (UKSIF), which represents more than 270 organisations including banks, financial advisory firms, investors and pension funds, described the Government’s definition of natural gas as “green” as “extremely concerning”.

UKSIF’s chief executive, James Alexander, said: “The inclusion of natural gas would fundamentally change the taxonomy’s purpose as a science-based tool to define for investors what is ‘green today’, and directly conflict with the UK’s ambitious decarbonisation targets”.

Commenting on Twitter, BEIS secretary Kwasi Kwarteng defended his decision to redefine natural gas as “green” gas, saying: “Yes, we’ll continue to back North Sea gas for energy security. It would be complete madness to turn off our domestic source of gas. But the long-term solution is obvious: gas is more expensive than renewable energy, so we need to move away from gas.”