Legal and Economic Challenges to the Future of Natural Gas Export Infrastructure in the EU in the Light of its Policy on the Energy Transition

The EU policies that have been introduced to achieve energy transition pose long-term challenges for gas infrastructure financing. In view of these new policies the lenders will need to re-evaluate possible risks while considering other alternatives for their investments elsewhere in the energy sector. This paper will examine the interplay of various factors and trends in the context of energy transition, including the EU energy law and policy and the security of gas supply considerations, using natural gas pipeline financing as a case study.This paper will not focus specifically on such issues as the demand for gas infrastructure or over capacity. It will consider these as elements likely to impact project developers' decisions to invest in infrastructure. The main purpose is to demonstrate that gas infrastructure projects in the EU are increasingly seen as not commercially attractive. Often even projects that have a strategic importance in terms of security of supply (and supply diversification) require direct support of the key stakeholders - States - through subsidies. The paper will discuss whether gas pipeline infrastructure can be developed by using market instruments alone, thus shifting the risk of stranded assets, carbon locking and so forth to the private sector. Then it will focus on the difficulties the gas sector may face in attracting funds in the light of energy transition policies, looking in particular at the sustainable finance package and an increasing carbon price. This paper will apply some of its findings and lessons drawn from dealing with natural gas infrastructure to future decarbonised gas infrastructure