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EU sustainable finance advisers say green means green

BRUSSELS (Reuters) - Economic activities should be labelled as green investments only if they truly contribute to science-based goals to fight climate change, European Union advisers said on Friday, as countries in the bloc battle over whether to weaken planned finance rules.

FILE PHOTO: European Union flags flutter outside the European Commission headquarters, where Brexit talks are taking place, in Brussels, Belgium, December 24, 2020. REUTERS/Yves Herman/File Photo

The European Commission has delayed finalising the climate section of its sustainable finance taxonomy until April. The list of economic activities will from next year define what can be labelled as a sustainable investment.

A draft proposal in November came under fire from governments upset the rules denied gas power plants a green label. Brussels then asked its advisers for recommendations on how the taxonomy treats investments in activities making efforts to become green.

Those recommendations, published on Friday, said the taxonomy already acknowledges this so-called transition finance.

“There’s actually lots of transition financing tools already in there. The point is that what was green before is still green,” said Nathan Fabian, head of the advisory group, which includes experts from finance, industry and campaign groups.

For example, the taxonomy offers a green label to “transitional” activities that cannot yet be made fully sustainable, but which have emissions below industry average and do not lock in polluting assets.

The advisers said a further option could to be to count as “green” the investments companies make to move a polluting activity towards complying with the taxonomy criteria over a 5 to 10 year period. Those investment plans would need to meet criteria developed by the advisers in future.

Ultimately, the advisers said, green activities must support the goal agreed by EU leaders in December to cut net EU greenhouse gas emissions by at least 55% from 1990 levels by 2030.

For power plants, that means emitting less than 97g of CO2 equivalent per KWh by 2030.

That is unlikely to placate the 10 EU governments, including Bulgaria and Poland, which have urged the Commission to change its plan to deem gas plants sustainable if they meet a 100g CO2e/KWh threshold. Denmark, Spain and three other countries last week urged the EU not to weaken the rules.

Reporting by Kate Abnett, Simon Jessop; Editing by Kirsten Donovan