Emission thresholds in EU green finance taxonomy are too high. Here’s why

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV.COM Ltd.

Even though facilities emitting less than 100g of CO2 per kWh contribute to emissions reduction, it is not correct to claim that they are contributing substantially to meeting the climate change objective, the authors write. [Deacon MacMillan / Flickr]

Carbon dioxide emission limits in the EU taxonomy suggested by the technical expert group are too high and will make it virtually impossible to reach EU climate goals for 2030 and 2050, argues a group of Swedish lawmakers.

The following op-ed is authored by Karin Karlsbro, Swedish MEP for the Renew Europe political group in the European Parliament, Arman Teimouri, energy spokesperson at the Swedish Liberal Party, and Joar Forssell, spokesperson for capital markets at the Swedish Liberal Party.

The taxonomy for sustainable investments is a classification system intended for determining what economic activities should be considered in line with sustainable development principles. It is based on six objectives: climate mitigation, climate adaption, protection of water and marine resources, circular economy, pollution, and biodiversity.

To be classified as sustainable, an activity must substantially contribute to achieving at least one of the objectives, while not doing any significant harm in achieving the others. There is also a requirement of exceeding a minimum level concerning corporate social responsibility.

The commission gathered a technical expert group and tasked it with defining limits for when different activities should be considered contributing substantially, and when they should be considered as doing significant harm. These limits are referred to as screening criteria. They cover a range of activities from agriculture through energy production to transport. The expert group has presented a proposal which is generally thorough and solid. However, the suggested emission limits for the main source of carbon dioxide, the energy sector, are surprising.

The technical expert group suggests that an energy facility which over its whole life-cycle emits less than 100 grams of carbon dioxide per generated kWh should be considered giving a substantial contribution to the objective of climate change mitigation.

Though a round figure, it did not materialise out of thin air. Rather it arrives from the assumption that the energy sector will need to have zero emissions in 2050 and that the sector will strongly contribute to achieving the 2030 reduction goal. This gives a path of diminishing average emissions from energy facilities going towards zero. For each year in the future, the curve gives the maximum average emission level from the sector allowed in order to reach the targets.

The expert group means that energy facilities which are on average over their lifetimes emitting below the curve should be considered substantially contributing to climate mitigation. For a plant with a 40-year economic lifetime built in the coming years this corresponds to emitting less than 100 grams of carbon dioxide per kilowatt hour.

The problem though is that this would mean that all new plants would have to emit less than the 100 g-limit while also all existing plants would have to either be closed or refurbished to meet the limit. In reality this is not going to happen.

Even though facilities emitting less than 100 g are contributing, it is not correct to claim that they are contributing substantially to meeting the climate change objective. The requirement for a facility to be contributing substantially needs to be strict enough to compensate for the part of the energy sector which is emitting above the average now and in the future. Otherwise, the average emissions from the sector will not fall below the curve and the goals will be missed.

The second limit suggested by the technical expert group is that above which a facility is considered to be doing significant harm to the climate mitigation objective. This limit is suggested to be established at 262 g/kWh for both electricity and heat production. Plants emitting less than 262 g/kWh would not be considered doing significant harm. The figure is simply the average carbon dioxide emissions from the European electricity production today. This has been adapted as the proposal also for heat generation.

We find the suggestion astonishing. Recalling that the main problem that climate mitigation is trying to address is that the average emissions, in the EU and globally, are already far too high. Energy production is at heart of the problem. Even emissions well below the very harmful current average are certainly problematic and have to be addressed. In fact, by 2050, the average needs to have lowered towards the 10 g/kWh range where we find the low emitting sources of energy.

We have two suggestions for the Commission when transforming the expert group proposals into delegated acts:

First, we suggest that the limit where a facility producing heat or electricity is considered strongly contributing to climate change mitigation is set to 50 g/kWh over its whole life-cycle. This limit should be lowered every five years.

Second, we suggest that the limit for doing significant harm is lowered to 100 g/kWh (based on the expert group argument), also to be lowered every five years. Facilities emitting more than what is required to achieve the climate goals may not be considered sustainable regardless of their importance for achieving other objectives.

It is paramount that the European Union reaches its climate goals. We are deeply concerned over the limits proposed by the expert group as it is clear that they would make it virtually impossible to decarbonise the power sector. That in turn would make it impossible for the EU to reach the climate goals. The good news is that the Commission can still fix this.

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