The European Commission on Friday (20 November) launched “the world’s first ever ‘green-list’” of sustainable economic activities for private investors by publishing draft guidelines under the EU’s green finance taxonomy.
The guidelines are aimed at steering private investors towards environmentally sustainable companies, by laying down detailed emissions thresholds defining which economic activity can be considered “sustainable”.
The European Commission hopes this clarity will prevent greenwashing by providing investors with clear guidance about what is green and what is not.
“The EU’s Taxonomy Regulation is a key piece of legislation that is central to the European Green Deal. It will be instrumental in channelling investment to green and sustainable projects,” said Mairead McGuinness, the EU commissioner for financial services.
The two texts are now available on the Commission’s website and are open for a public consultation until 1 January 2020. It follows the EU’s Taxonomy Regulation, which came into force on 12 July this year.
The two texts published on Friday cover economic activities such as agriculture, forestry, manufacturing, plastics, energy, water supply, waste management, transport, construction, energy efficiency, communication and research activities.
A draft of the emissions thresholds adopted for each of these sectors has been circulating in Brussels in the past weeks, drawing criticism particularly from the gas industry, which has been denied a “transition” fuel status.
Without the EU’s green label, gas power plants could miss out on billions of euros of private funding unless they can produce less than 100g of CO2 equivalent per kilowatt hour to qualify for the all-important green label.
This is a particular issue in Eastern European countries, where combined cycle gas plants are aiding the transition out of coal. These produce around 300-350g of carbon, far higher than the taxonomy’s threshold.
“We fully expect natural gas to be classed as a ‘transition’ activity,” said James Watson, the secretary general of Eurogas, a trade association. “But the 100g threshold will unfortunately not allow this,” he told EURACTIV last week in comments about the draft text.
Transport will also be impacted by the taxonomy, with cars having to reach zero emissions by 2025 to be considered ‘sustainable’.
However, Greenpeace has criticised the Commission for providing a green label to cars that produce up to 50g of CO2/km, until 2025, saying this opens the door for hybrid cars, which still use fossil fuel.
WWF said that stepping away from fossil fuels was commendable, but criticised the Commission for considering the burning of trees for bioenergy as ‘sustainable’, saying it produces more greenhouse gas emissions than coal.
“By excluding fossil fuels, the Commission has shown it has listened to the climate science. But the proposed criteria for bioenergy undermine this scientific approach, and with it the Taxonomy’s credibility,” said Sébastien Godinot, WWF European Policy Office Economist.
Environmental groups also criticised the inclusion of new hydropower plants because of the damage they cause to biodiversity.
The European Commission’s Technical Expert Group, which provided guidance to the EU executive throughout the process, had advised against the inclusion of fossil fuels, small hydropower and bioenergy.
“The green recovery that EU leaders promised at the start of the pandemic is at risk of turning a muddy brown. Investing in gas, polluting cars and burning trees for energy won’t help Europe emerge stronger from the pandemic and will accelerate climate and ecological breakdown,” said Ariadna Rodriga, a spokesperson for Greenpeace.
Plastic manufacturing in the taxonomy has also come under criticism, with environmental groups saying the draft has been changed dramatically since the last version. Under the updated draft, plastics will count as sustainable if they are “fully manufactured by mechanical recycling of plastic waste” or by chemical recycling processes if minimum emission standards are met.
Zero Waste Europe has warned this will damage the Commission’s aim for a circular economy and that chemical recycling criteria will open loopholes.
The European Commission said it will consider the feedback received before finalising the adoption of the delegated act by 31 December.
The draft will then be subject to scrutiny by the European Parliament and the Council of Ministers representing the EU’s 27 member states. Once adopted, it will apply from 1 January 2022.
However, critics said member states’ supervisory powers over delegated acts are “very weak” because they have only an advisory role and no right to vote.
“All indications are that the taxonomy is like a bureaucratic superpower overseeing the European economy,” said Daniel Guéguen, a professor at the College of Europe.
[Edited by Frédéric Simon]