The European Union is poised to delay a decision on what it means to be “green” in certain sectors in an effort to defuse tensions over the roles of natural gas and nuclear in the clean energy transition.
Next week, the bloc will set out draft plans to highlight criteria for the first set of sustainable investments, potentially unlocking billions of euros for green projects. Almost every part of the EU’s economy will be assigned rules to qualify as environmentally sound; from iron and steel production to energy infrastructure. However, investors won’t have a clear view on how to treat gas and nuclear until the end of this year.
The process of taxonomy is crucial because it will keep the EU on track to meet its commitment to climate neutrality. The challenge for the EU is to ensure it gets political and social support while avoiding the risk of greenwashing or overstating the significance of emissions reductions.
“Lowering the EU standards would undermine the development of robust global standards for sustainable investment, and the leadership of the EU in this matter,” said Maia Godemer, an analyst at BloombergNEF.
Carbon Neutral
Europe wants to become the world’s first continent to reach net-zero emissions by the middle of the century under the Green Deal, an unprecedented overhaul that aims to make cleaner every corner of the economy. To help meet the goal and provide investor certainty, the bloc agreed to create a classification system for the environment- and climate-friendly activities.
The implementing measure due April 21 will list the criteria for getting a green label under the first two out of six objectives under taxonomy: climate change mitigation and adaptation.
The standards for the remaining four pillars, including circular economy and pollution, are to be proposed by the European Commission later this year. To be deemed green, an investment project will need to deliver on one of the objectives and mustn’t harm the other five.
“The EU taxonomy is a robust, science-based transparency tool for companies and investors, in order to ensure the transition in finance and to prevent greenwashing,” the commission said.
However, the thorny issue of natural gas’s role in the energy transition isn’t going to be dealt with quite yet. Initially, the commission was planning to label some new gas-fired power plants green under certain conditions. A move the EU regulatory arm was criticized for.
Natural Gas
Defending the role of natural gas as a bridge fuel, a group of 80 members of the EU Parliament representing various political groups and countries including Poland, Greece, the Czech Republic and Germany called on the commission earlier this week to further relax the sustainability criteria for new projects.
“We should not confuse our goals with our tools,” said Jerzy Buzek, a member of the EU Parliament who led the initiative. “Taxonomy was never itself a goal, it is a tool to reach our real goal.”
The EU is now planning to establish “specific screening criteria” for the fossil fuel and perhaps nuclear in a separate proposal, according to a document seen by Bloomberg News and due to be published on April 21.
“The taxonomy has become a kind of a proxy fight over the entire Green Deal and everyone wants to be on the green side,” said Bas Eickhout, a Dutch member of the EU Parliament and vice-president of the Greens group.
Source: Bloomberg
