Environmental groups take European Commission to court over green labelling of LNG-fuelled ships

Green lobby groups have taken the European Commission to court to try to make it change the sustainable finance taxonomy regulation, so that LNG-fuelled ships cannot be labelled sustainable.

The challenge at the European Court of Justice centres around the European Union’s Corporate Sustainability Reporting Directive, and a definition in its taxonomy laying out how vessels can be labelled green.

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The NGOs Dryade, Fossielvrij NL, Protect our Winters Austria, CLAW and Opportunity Green argue that the current criteria enable the “greenwashing” of vessels constructed to use LNG.

They contend that financing to support the ordering of LNG-fuelled ships should not be labelled sustainable or green.

Opportunity Green interim legal director David Kay said investors and shipowners could take advantage of text stating that, if a vessel cannot make a “substantial contribution to climate change mitigation”, it can meet the sustainable criteria if it is 20 percentage points below the April 2022 requirements of the Energy Efficiency Design Index.

The index is an International Maritime Organization formula to calculate the fuel efficiency of a vessel’s design.

Kay said this rule allows LNG-fuelled ships to be labelled green even though there are still substantial emissions — and that is even before methane emissions are taken into account.

However, the taxonomy does include the note that gas-fuelled ships should “demonstrate the use of state-of-the-art measures and technologies to mitigate methane slippage emissions”.

The NGOs argue that these criteria violate the requirements of the Taxonomy Regulation, as they are “not based on conclusive science, do not support a 1.5C pathway and will hamper the development of low-carbon alternatives in these sectors”.

They claim that the methane slip from LNG dual-fuel newbuildings is not only huge, but — as methane is 80 times more powerful a greenhouse gas than CO₂ — far more potent.

“The Taxonomy is set to mobilise billions of euros of private finance,” said Kay.

“But the aviation and shipping criteria send completely the wrong signal to investors — directing investments to planes and ships that will pollute the climate for decades to come.

“How are investors supposed to have confidence that their investments are truly green? We believe the criteria are unlawful and the EU Commission needs to be held to account.”

However, Kay conceded that a challenge in the European Court of Justice could take two years to be processed, and even then all it can do is force the commission to review the taxonomy criteria, not change them.