The Taxonomy has been the EU’s flagship sustainable finance legislation. It has been establishing the EU as an international leader on green finance. However, it appears that there is a risk that the EU will take a step back in ambition on the taxonomy in response to political and industry vested interests. The alleged changes would substantially weaken the EU’s credibility. This is only days after John Kerry’s visit to Brussels and at a time when the UK is preparing its own green taxonomy.
Following 10 Central and Eastern European Member States’ opposition to the Taxonomy Draft Delegated Act (DA) due to the exclusion of unabated power generation from fossil gas from the EU green finance criteria, the European Commission has delayed the publication of the DA.
It appears that the Commission is now considering including fossil gas-fired power generation in the taxonomy. This is in order to secure political support, using the argument that it can maintain the reliability of electricity supply and contribute to electricity grid stability.
A decision to make space for unabated power generation from fossil fuels would ignore climate science. Additionally, this would send negative signals both to investors and the EU’s international peers. The Commission must ensure that the EU ‘green’ finance activities, together with their respective thresholds, continue to be governed independently on the basis of scientific evidence and are not influenced by political considerations.
Tsvetelina Kuzmanova, Policy Advisor, Sustainable Finance of E3G said:
“Allowing polluting activities to be classified as green as a result of political and industry pressure would be a serious mis-step for the Commission. This would damage not only the credibility of the taxonomy as a finance tool, but also the reputation of the EU as a leader in climate ambition and action. Failing to create a best–in–class, scientific tool would set a dangerous precedent for other jurisdictions to follow and could justify investments in harmful activities.”
Kate Levick, Sustainable Finance Program Leader of E3G said:
“The reputation of the Green Deal is at stake. If the EU were to move away from using science to define what investments are green, then the world would need to look to other international leaders – including the US and UK – to lead the way on the economic transition to meeting the goals of the Paris Agreement by mid-century.”
Lisa Fischer, Programme Leader, Energy Infrastructure of E3G said:
“The reported changes would defeat the purpose of the taxonomy which is to avoid greenwashing and establish a simple guide for investors to navigate climate-related financial risks. Blurring labels would undermine the taxonomy’s effectiveness as a compass for investors and risks locking in valuable private finance into high-risk solutions that are bad for the climate.”