The European Union has passed the first part of its rulebook on climate friendly investments, which from next year will define which activities can be labelled as green in sectors including transport and buildings.
The first section of the EU’s sustainable finance taxonomy will apply from Jan. 1 2022, having passed a scrutiny period that ended on Wednesday night.
The rules set environmental criteria for investments including renewable energy, shipping and car manufacturing – with zero-emission vehicles the only type that can be labelled green from 2026.
By restricting the green investment label to only those activities deemed truly climate-friendly, the EU aims to steer cash into low-carbon projects and stop companies or investors from making unsubstantiated environmental claims.
“This will help channel sustainable finance towards projects and businesses to help reach our climate targets,” EU financial services chief Mairead McGuinness said in a tweet on Thursday.
I warmly welcome that @EUCouncil has cleared the EU Taxonomy Climate Delegated Act.
This will help channel sustainable finance towards projects and businesses to help reach our climate targets 🌱
— Mairead McGuinness (@McGuinnessEU) December 9, 2021
Roughly a dozen countries – among them France, Poland, Finland and Hungary – had objected to the rules, but did not have the majority needed to block them, EU officials said.
The most politically sensitive part of the EU taxonomy is still to come.
The EU is due to decide this month whether to label gas and nuclear energy investments as green. The decision has split EU countries and been delayed by a year amid intense political lobbying.
EU climate policy chief Frans Timmermans said the rules would need to reflect that gas and nuclear are needed for the EU’s transition to reach net zero emissions by 2050.
“I think we need to find a way of recognising that these two energy sources play a role in the energy transition. That does not make them green,” he told a Brussels event on Wednesday evening.
Pro-nuclear countries including France cite the energy source’s low CO2 emissions, while opponents warn of the environmental impact of radioactive waste.
Gas is similarly divisive, with countries split between those that say gas investments are needed to help them quit more-polluting coal, and those that warn labelling a fossil fuel as green is not credible.
Luca Bonaccorsi, director of sustainable finance at NGO Transport & Environment, said labelling gas as green risked “destroying the credibility of the EU’s sustainable finance agenda as a whole”.
“France and its cronies tried to bully the EU Commission into including nuclear and gas in the second Delegated Act, but this blackmail has fallen flat,” said Sebastien Godinot, senior economist at WWF European Policy Office.
“Critically, the Commission’s hands are now untied, and it can and must deliver a science-based taxonomy regulation that excludes fossil gas, nuclear, and factory farming. Otherwise, the credibility of the taxonomy would be ruined, it would do worse than the existing green bond market, and would demolish the EU’s claim to global green finance leadership,” Godinot said.