UPDATE 2-EU's 'green' gas and nuclear investment rules head for final vote

(Updates after European Parliament debate)

By Kate Abnett

BRUSSELS, July 5 (Reuters) - A European Union plan to label investments in natural gas and nuclear power plants as climate-friendly will be put to a final vote on Wednesday when lawmakers decide whether to accept or reject proposals that have divided governments and investors.

The vote is the final hurdle in the EU's long-delayed decision on whether to add the two energy sources to its "taxonomy", a rulebook determining which investments can be marketed in Europe as sustainable.

Designed to guide private capital towards truly green projects, the rules aim to set a European standard for sustainable investment and stamp out greenwashing.

But the debate has grown into a broader political standoff over which fuels Europe should invest in to fight climate change. Opponents say natural gas, a fossil fuel that produces carbon dioxide when burned, should not be labelled "green." Backers say gas is cleaner than other fuels like coal and Europe must use it while transitioning to renewable energy sources.

The invasion of Ukraine by Russia, Europe's top gas supplier, has sharpened that debate.

Supporters say the proposal would aid infrastructure to import more non-Russian gas. Critics point out the rules cover power plants, but not the liquefied natural gas (LNG) terminals that would facilitate extra imports.

A debate in the Parliament on Tuesday, ahead of Wednesday's vote, laid bare those divisions.

Socialist lawmaker Simona Bonafe, an opponent of the proposal, said it would mislead citizens and investors by labelling gas as climate-friendly.

"It labels as green something that isn't green," she said.

European People's Party lawmaker Christian Ehler, a supporter, said the rules reflected Europe's pathway towards renewable energy.

"Welcome to reality. We know that for a transitional time we need gas and nuclear," he said.

Officials expect a tight vote. A majority of the European Parliament's 705 lawmakers would be needed to block the rules.

Rejection would be a blow to the European Commission, which has spent more than a year redrafting the rules amid lobbying from governments and the gas and nuclear industries.

EU financial services commissioner Mairead McGuinness on Tuesday defended the proposal, which she said imposed strict criteria on gas and nuclear projects seeking the green investment label.

"There is no obligation on any private investor to invest in nuclear or gas," she added.

Critics, including the Commission's advisers, have said gas plants would need to meet far tougher emissions limits than those in the Commission proposal to align with the steep CO2 cuts needed to avert severe climate change.

The Commission had included a lower emissions limit in an early proposal in 2020 but amended it after backlash from some of the bloc's 27 member states.

($1 = 0.9595 euros) (Reporting by Kate Abnett; additional reporting by Marine Strauss; editing by John Chalmers, Jason Neely and David Gregorio)