Reaction to EU draft Taxonomy Complementary Delegated Act

05 January 2022 – On 31 December 2021, the European Commission sent a request for feedback to the Member States Expert Group on Sustainable Finance and the Platform on Sustainable Finance on a draft text of a Taxonomy Complementary Delegated Act covering certain gas and nuclear activities. The Platform has been instructed to provide their contributions by 12 January. A leak of the consultation document was published by Euractiv.

In response to the proposed complementary Delegated Act, Sandrine Dixson-Declève, co-president of the Club of Rome and member of the European Commission’s Platform on Sustainable Finance has the following comments:

1.      “The new proposal from the European Commission fundamentally alters the future use and impact of the EU’s taxonomy framework. It disregards four years of rigorous scientific, financial analysis and stakeholder dialogue, which had aimed to support the mobilisation of capital away from stranded assets into truly sustainable and low carbon economic alternatives.  As proposed, the Delegated Act could change the taxonomy from a useful tool for financing long-term sustainable economic activities, such as wind and solar, to one which constrains the transformation of the economy. Including activities related to natural gas in the Act could result in substantial unintended consequences- first, diverting capital away from future renewable investments and, second, leading to the cannibalisation of vast amounts of renewable electricity, which could be better used directly, for the conversion into low-carbon gases.”

“The EU taxonomy is important for financing change yet the inclusion of natural gas and nuclear energy on the same terms as other activities in the taxonomy framework will impede the change required. China has developed a taxonomy that excludes fossil gas while the South Korean taxonomy excludes nuclear power. Slippage at the EU level would both put Europe’s system in disrepute but also lower the bar globally allowing for more ambition to be squandered in other country schemes. Even Russia is proposing a taxonomy that could forgo gas.”

2.      “The moves to label natural gas and nuclear as “green”, in as far as being “transitional activities”, is completely misleading. The Platform was clear back in March 2021 that the term “transition” and the term “transitional activities” are not the same[1]. Nuclear energy and natural gas both have roles to play in the energy transition but for very clear technical reasons they are not transitional activities per the objectives laid out by the European Commission and therefore are not green. The Regulation itself is clear on this: activities are considered transitional in the Regulation when there are no technologically and economically feasible low-carbon alternatives, when emissions level is the best performance in the sector, when they do not hamper development of low-carbon alternatives, and do not lead to stranded assets. Neither fossil gas, nor nuclear energy fulfil these requirements.”

“Energy generation from fossil gas or nuclear power cannot be defined as green in the taxonomy framework, it is deceit to classify as such and it will completely undermine the impact of the taxonomy framework. They could however be potentially classified as “amber” once a full assessment has been carried out and proper criteria developed.”

3.      “It seems all the efforts of the Platform on Sustainable Finance have been futile – our advice has been completely ignored and both the platform and public interest is being side-lined in the process. The request for a thorough assessment in less than two weeks over the holiday period is completely unreasonable. A science-based taxonomy is dead if this new Delegated Act is adopted as proposed, and the technical development and screening role of the Platform thrown into question.”

4.      “The European Commission should re assess this proposal and enable more time for proper scrutiny by governments and Platform experts. Moving forward with this Delegated Act as proposed will set a precedent both in terms of content and process. The demands made by those governments that are concerned about their transition, and their particular national energy interests, should not be met by impairing the EU’s taxonomy. There are valid alternatives available including an “amber” category within the taxonomy framework or the consideration of alternative tools, such as state aid rules, just transition funds and a “bad bank” concept[2]. Labelling these activities as amber in the taxonomy framework has already been discussed by the Platform and proposed by the Spanish government.”

[1] Platform on Sustainable Finance Transition Finance Report 2021, page 14: “Transitional activities may be part of an economy in transition, but not all activities that are part of an economy in transition are transitional activities. “Transitional activities” are defined in Article 10(2) and refer to a specific sub-set of activities making a substantial contribution to climate change mitigation. The term relates to how an activity is performed, not the nature of the activity or the sector within which it sits.”
[2] A real alternative to the problems trying to be addressed with this framework is bailing out stranded assets through a “bad bank” concept that could take on assets that would become financially destructive in the transition to a zero-carbon economy – as proposed in the UNEP FI supported paper “Financial Stability in a Planetary Emergency”. It would clean up our society from harmful activities and create space for a new economy to emerge with sustainable energy sources.

 

The EU Taxonomy: Natural gas and nuclear power are not sustainable investments

For more information contact:

Tom Jess
Program Manager
E: Tjess@clubofrome.org
Philippa Baumgartner
Head of Communications
T: +43 664 414 4456
E: pbaumgartner@clubofrome.org

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