Revising the EU taxonomy to fuel the journey towards industrial decarbonization

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

Stakeholder Opinion

In June 2020, after complicated and tedious inter-institutional negotiations, the European Parliament adopted at second reading the compromise regulation for the establishment of an EU framework (the so-called ‘taxonomy’) to facilitate sustainable investment.

Years of intensive work and engagement with strategic stakeholders, since the publication of the Action Plan on Financing for Sustainable Growth in March 2018, led to an ‘ambitious’ sustainable finance strategy with one key priority in line with EU solidarity: leave no industry nor Member State behind.

The next step is the development of delegated acts establishing realistic and fair technical screening criteria and thresholds for sustainable economic activities eligible for financial support.

The Commission’s proposed delegated act for the EU Taxonomy for Sustainable Finance, released in December 2020, fell short of the promised solidarity priority.

Despite official public consultations carried out by the European Commission, the delegated act ignored the priorities of numerous stakeholders, from the aluminium and raw materials industries to the refining and energy sectors, and left some member states frustrated by the Commission’s disregard for their right to decide on their energy mix and appropriate technologies to achieve the 2030 climate target.

A leaked revised proposal, available since the second half of March, still fails to meet the industry’s needs – although a number of activities are, thankfully, now fully taxonomy eligible. Nevertheless, the Commission’s revised draft delegated act is, as it stands, an ineffective plan for supporting businesses and member states across the Union in their attempt to transition towards sustainability.

The benchmarks it sets narrow down the basket of technological climate solutions rather than broadening it. The revised delegated act still does not explicitly include liquid and gaseous transport fuels of non-biological origin and Recycled Carbon Fuels – even though they play a critical role in meeting our climate goals.

This clearly limits the solutions available to reduce CO2 emissions in, for instance, the transport sector where electrification is not always technologically possible. In practice, this means that we are jeopardising the sector’s ability to remain competitive by limiting its access to diversified, affordable, and sustainable energy.

All low carbon liquid fuels (LCLF), alongside electrification and hydrogen technologies, are crucial in achieving carbon neutrality for all transport modes.

The European Commission should look to facilitate, rather than hinder, investments for the decarbonisation of European industry. By leveraging on the technological expertise of the EU refining industry we could step up the ongoing green transformation and foster investments in promising technologies, such as sustainable liquid biofuels and all hydrogen-derived synthetic fuels.

Predictably, extensive feedback from member states and stakeholders to the December draft taxonomy criteria and thresholds highlight these concerns, which are still present in the Commission’s leaked revision.

With less than a month before the final proposal, the task at hand is to ensure that the taxonomy criteria and thresholds are established with foresight and broaden the scope of technological climate solutions.

The EU taxonomy has the potential to be a game-changer, but it must adopt a holistic approach, examining all possible solutions to meet our climate objectives, moving away from a “brown list” that dictates “good” and “bad” technologies.

We need to ensure that there is a level playing field when comparing various technologies, especially low-carbon technologies for fuels, petrochemical feedstock, and other refinery products. Life-cycle analysis and impact assessments are promising methods to achieve fairness and accuracy, and they need to apply horizontally.

Launching a “Renewable and Low-Carbon Fuel Value Chain Alliance”, mentioned by the Commission in its December 2020 Sustainable and Smart Mobility Strategy, would be a pragmatic starting point for a broad reflection on these issues with stakeholders involved in aviation, marine, and road transport.

With the right mix of enabling sustainable finance conditions, the EU will send clear, long-term signals to guide businesses and investors towards sustainable growth.  But for this to be efficient, we need the full engagement of all actors, from EU institutions and civil society to industry.

Only then will we build a realistic and fair EU Taxonomy that drives the EU towards an affordable and pragmatic transition – and leaves no one behind.

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