Two of Europe's largest power groups have called on the EU to refrain from backtracking on plans to essentially exclude natural gas from its green taxonomy, a guide for investors that is supposed to drive vast amounts of capital into climate-friendly activities over the coming decades.

The CEOs of Spain's Iberdrola SA and France's Electricité de France SA told Frans Timmermans, the European Commission's executive vice-president for the European Green Deal, during a virtual conference March 23 that natural gas should not be labeled as green under the framework, which is being closely watched globally as the first attempt to create an official classification system for green financial products.

"We know we do not need any more gas infrastructure," EDF Chairman and CEO Jean-Bernard Lévy said during the Clean Energy Summit. "We still see a lot of gas-based projects that are being supported by member states and by the EU [and] I think we should give credible and long-term signals to investors, and not focus on the short term," Lévy said.

Ignacio Galán, Iberdrola's chairman and CEO, concurred, adding that Europe risks spending valuable new resources, like the billions in recovery funding being made available, on assets that have lower emissions than coal but will still stand in the way of the EU's target to reach climate neutrality in 2050.

"The choice is low carbon or zero emission," Galán said. "Don't use scarce resources investing in things that are not going to have a future."

Iberdrola is one of the largest renewable energy investors in the world, while the vast majority of EDF's power is generated by nuclear plants. Other utilities whose portfolios are currently still more dependent on fossil fuels are strongly in favor of including natural gas in the taxonomy.

The executives' comments come as the commission, the bloc's executive, is reportedly adjusting a draft of the taxonomy to label gas as partially sustainable. The Financial Times reported March 22 that a new draft text of the rulebook recognizes the use of gas and other liquid fossil fuels in power generation wherever the technology replaces higher-emitting sources and can cut emissions by at least 50%.

The revision comes after a first draft of the framework was met with heavy opposition from some member states over the de facto exclusion of both gas and nuclear power. Environmental groups and some members of the bloc say the technologies have no place in the taxonomy and warn that including them would amount to "greenwashing."

But the commission has said that gas is a necessary transition fuel, particularly for Eastern European member states that currently rely on coal to a large degree. Timmermans said at the summit that the issue of gas "remains difficult."

"In some of our member states, the switch from coal, wood — especially for heating or housing — to renewables is just one step too far at this stage," Timmermans said, adding that any use of gas must be temporary and eventually ease the transition to renewables. "We have to be very careful about that."

But he also emphasized that the rules will be an important tool for investors and cannot go too far in opening the door to legacy investments.

"We have to be really strict, because otherwise the green bonds will be fake green bonds, and the market will not want them," Timmermans said.

James Watson, secretary general at Eurogas, a lobby group, urged the commission to follow the example set by the European Investment Bank, which has adopted a new lending policy that excludes gas projects with emissions above 250 grams per kilowatt-hour. Watson said that limit makes more sense than the 100 g/kWh proposed by the commission in its first draft of the taxonomy.

"Let's not throw the baby out with the bath water," Watson said.

Aside from criticizing gas, EDF's Lévy also emphasized that all "low-carbon technologies" available should be supported by the taxonomy — a hint at the company's vast fleet of aging nuclear reactors that will need to be replaced in the next two decades.

"The European taxonomy is being watched by the whole world, and we need to make sure the taxonomy is fully aligned with [the EU's] climate objectives," he said.