The European Parliament is preparing to draw a hard line on which fossil fuel companies can be marketed as sustainable investments. A draft position obtained by POLITICO shows that lawmakers will require oil and gas groups to spend more on green activities than on new fossil fuel projects over a rolling three-year period to qualify for the new "transition" category under the Sustainable Finance Disclosure Regulation (SFDR).
The rule would effectively bar TotalEnergies, France's largest energy company, from the transition label. According to the document, TotalEnergies directs roughly 35% of its capital expenditure to new oil and gas development while only about a quarter goes to low-carbon energy. That split falls short of the more-than-half threshold the Parliament is proposing.
Three competing visions for the transition label
The Parliament's stance sits between two more extreme positions. The European Commission's initial proposal, tabled in November 2025, recommended a blanket exclusion of the fossil fuel industry from the transition category altogether. Member states, meeting in the Council, took the opposite tack in June: they agreed that oil and gas companies could enter the transition category if they devote at least 20% of capex to activities recognised as green under the EU taxonomy.
Parliament's compromise, more than 50% of capex to green activities over three years, is stricter than the Council's 20% floor but stops short of the Commission's total ban. The economic and monetary affairs committee will vote on the text on 10 September, with a plenary vote expected the following week. If both approve, the Parliament will enter trilogue negotiations with the Council and Commission to hammer out a final text.
Why the transition category matters
The SFDR overhaul aims to curb greenwashing by creating clearer categories for financial products. The transition label is intended for companies that are not yet green but are on a credible path to decarbonisation. Asset managers use these classifications to decide which funds can be sold as sustainable, directing billions of euros in retail and institutional capital.
If the Parliament's threshold holds, many European oil majors would be excluded. TotalEnergies is the most cited example, but other integrated producers with similar capex splits would also fall outside the transition category. That would limit the pool of fossil fuel companies eligible for sustainable investment funds and could raise their cost of capital.
TotalEnergies' numbers under the microscope
TotalEnergies has positioned itself as a leader in the energy transition, rebranding from Total in 2021 and setting a target of 100 gigawatts of renewable capacity by 2030. Yet its capital allocation tells a different story. The 35% figure for new oil and gas projects reflects continued investment in upstream expansion, including liquefied natural gas and deepwater developments off Namibia, Suriname and Brazil.
The company's low-carbon spending, covering renewables, batteries, biofuels and carbon capture, stands at roughly 25% of capex. The remainder goes to refining, marketing and other activities not counted as either new fossil or green under the taxonomy. Under the Parliament's rule, the green share would need to exceed the fossil share, a gap of at least ten percentage points from today's allocation.
Industry and investor reaction
Oil industry groups argue that a strict transition label will starve the sector of capital needed to maintain energy security during the transition. They contend that natural gas, in particular, plays a bridging role and that excluding gas-heavy portfolios undermines the EU's own energy security objectives. Investor associations have warned that overly complex or divergent definitions across jurisdictions increase compliance costs and fragment the sustainable finance market.
Green NGOs, by contrast, say the Parliament's proposal still contains loopholes. They point out that the three-year averaging period could allow companies to front-load green spending while deferring fossil investment, and that the taxonomy's definition of green activities remains contested, notably the inclusion of certain gas-fired power plants as transitional.
Next steps and likely compromises
The 10 September committee vote is the first formal test. A centre-right majority in the economic committee could water down the threshold, while Greens and Socialists will push to keep it. The plenary vote a week later will reflect the broader Parliament balance. If the Parliament adopts the current text, trilogues will likely focus on the precise capex percentage, the averaging period and whether gas investments count as green under the taxonomy.
Organisations
European Parliament · European Commission · TotalEnergies · Council of the European Union
