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EU greenwash laxity could see it build back worse

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European Union flags flutter outside the EU Commission headquarters in Brussels, Belgium, May 5, 2021. REUTERS/Yves Herman

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LONDON, Jan 13 (Reuters Breakingviews) - Ursula von der Leyen is damaging her climate change credibility. The European Commission’s so-called taxonomy is supposed to ensure investors and governments channel funds to projects that are meaningfully green. The fine print of the president’s latest draft could do the opposite.

Given its kitemark status, the taxonomy’s inclusion of nuclear and carbon-emitting gas projects is a setback. European politicians pressed to include them because publicly financed projects deemed taxonomy-compliant stand to benefit from European Union recovery funds and possibly an easier ride on state aid and budgetary rules. Instead of cleaning their energy systems, they’ve therefore dirtied the taxonomy.

The new draft, sneaked out on Dec. 31, is especially egregious. It allows new gas plants to be taxonomy-compliant if they emit 550 kilogrammes of carbon dioxide each year for every kilowatt of capacity. That’s equivalent to 11 tonnes of carbon emissions over the proposed 20-year lifespan. This itself is bad enough: if these stations replaced all EU coal capacity it might still create over 1 billion tonnes of CO2, 4% of global energy-related emissions in 2019.

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University College Dublin professor Andreas Hoepner, a member of the taxonomy’s original technical expert group, reckons this tweak also creates a problematic loophole. Because the allowable emissions are averaged over a 20-year timeframe, a project that spewed out way more than 550 kilogrammes of carbon a year in a shorter period can still be taxonomy-compliant. Its developers would just need to show emissions will decline over time due to carbon capture, utilisation and storage technology, despite “CCUS” not currently being commercially viable.

One wheeze would see a gas plant developer issuing a green bond with, say, a 7-year maturity, then belching out the full 20-year CO2 budget in that period. Investors, who last year snapped up $500 billion of green bonds, would get to claim they were investing sustainably. But they wouldn’t need to care if the CCUS technology actually materialised or not, as their bonds would mature before it is supposed to kick in. Developers would get cheaper capital. And finance ministers would get new gas plants to avoid supply crunches like the current one that has sent gas prices soaring.

The loser is the planet. Unless the draft is overhauled, more CO2 could be emitted than Europe can afford to hit its decarbonisation targets. And the taxonomy, supposed to help stamp out greenwashing, will instead enable it.

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CONTEXT NEWS

- The European Commission said on Jan. 10 it had delayed to later this month the deadline for experts to give feedback on divisive plans to allow some natural gas and nuclear energy projects to be labelled as sustainable investments.

- The Commission drafted a plan late last year to add some gas and nuclear investments to the European Union's "taxonomy", its rulebook to define which investments can be labelled as climate-friendly in the European Union.

- Brussels said on Jan. 10 its expert advisers will have until Jan. 21 to provide feedback on the draft proposal, rather than until Jan. 12 as initially planned.

- The draft - which was leaked to some media organisations - has reignited disputes between EU countries, which disagree on whether gas and nuclear are green. Spain, Germany and Austria's governments are among those to publicly criticise the latest proposal.

- Once the EU's advisers give their feedback, Brussels will publish its final proposal. A super-majority of EU countries or the European Parliament could block it in the four months that follow. If they do not, the rules would enter into force.

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Editing by Neil Unmack and Karen Kwok

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