The EU Taxonomy complementary Delegated Act tabled by the European Commission is incompatible with limiting global warming to 1.5°C and with the EU’s 2030 climate targets
The EU taxonomy – a classification system aiming to determine which activities genuinely contribute to the green transition – was meant to create a gold standard for private investors to determine the proportion of their portfolios truly to ambitious climate targets. It was also meant to drastically reduce greenwashing in the EU’s financial sector. By adopting a science-based approach, the Technical Expert Group (TEG) on Sustainable Finance notably issued recommendations on the carbon emission thresholds above which an activity cannot be considered to substantially contribute to climate mitigation targets – thresholds which would practically exclude any fossil fuel investments from being labelled “sustainable”.1 Similarly, the TEG recommendations provisionally excluded nuclear due to concerns that it would significantly harm other environmental objectives.
Instead of endorsing the TEG’s recommendations, the leaked complementary Delegated Act tabled by the European Commission2 includes fossil gas and nuclear in the EU taxonomy: it sacrifices the scientific integrity of the taxonomy on the altar of fossil gas and nuclear lobbies, without giving the European public the possibility to comment on the content of the DA through a proper consultation process.3 Indeed, only the Platform on Sustainable Finance and the Member States Expert Group on Sustainable Finance will be consulted and the document hasn’t been formally made public.4 Fossil gas and nuclear can by no means be deemed “sustainable”.
First, labelling fossil gas as a “sustainable” activity is completely incompatible with limiting global warming to 1.5°C and with the EU’s 2030 climate targets. According to the International Energy Agency (IEA) any new investment in fossil gas is incompatible with limiting global warming to 1.5°C.5 Similarly, hitting the EU’s 2030 targets implies reducing fossil gas consumption across the EU by 32-37%, which is incompatible with more gas investments.6 By including fossil gas in the taxonomy, the EU fails to give a clear signal to private investors that they need to stop investing in fossil gas assets and reorient financial flows towards genuinely climate-positive investments.
Second, labelling nuclear as a “sustainable” activity contravenes the Taxonomy regulation’s principle according to which activities and investments can only be labelled “sustainable” if they both contribute to climate objectives and do no significant harm to other environmental objectives – including circular economy, biodiversity, and pollution reduction objectives. Even if ignoring the risks of catastrophic nuclear accidents, it is evident that nuclear does not abide to these key principles as it poses significant environmental and social hazards at all stages of its supply chain – from mining to the disposal of nuclear waste.7
The integrity of the taxonomy and the EU’s global leadership in sustainable finance is already under threat. Earlier this year 225 scientists, NGOs and financial institutions called the European Commission to reject any inclusion of fossil gas in the EU taxonomy.8 Similarly, the Net Zero Asset Owner Alliance, a group of investors representing €9 trillion of assets, has rejected any prospect of labelling fossil gas and nuclear as “green”9, while the UN’s Principles for Responsible Investment initiative, comprising more than 4000 signatories (pension funds, insurers, investment managers and service providers), stated in a position paper that including gas and nuclear in the taxonomy would “thwart the scientific integrity of the EU Sustainable Taxonomy […] tarnish investors’ interest to use it as an instrument for driving sustainable investments, and lead to market fragmentation and risk of greenwashing”.10
Genuine green investments don’t include fossil gas and nuclear, and what the Commission has done by proposing to classify them as green puts a big stain on the label. If the European Commission insists in adopting the leaked complementary Delegated Act, the Parliament and Council should reject it if they are serious about preventing the taxonomy from becoming a greenwashing tool that openly threatens the credibility of both the EU Green Deal and the global leadership of the EU in climate finance.
1 EU Technical Expert Group on Sustainable Finance (2020). Taxonomy Report Technical Annex. https://ec.europa.eu/info/publications/sustainable-finance-technical-expert-group_en
2 European Commission (2021). Delegated regulation amending Delegated Regulation (EU) 2021/2139 as regards economic activities in certain energy sectors and Delegated Regulation (EU) 2021/2178 as regards specific public disclosures for those economic activities https://www.euractiv.com/wp-content/uploads/sites/2/2022/01/draft-CDA-31-12-2021.pdf
3 Letter to Commissioner Timmermans requesting a public consultation for the taxonomy complementary Delegated Act https://caneurope.org/letter-to-vice-president-frans-timmermans-ngos-on-public-consultation-complementary-delegated-act-eu-taxonomy/
4 European Commission press statement on the complementary delegated act. https://ec.europa.eu/commission/presscorner/detail/en/ip_22_2
5 IEA (2021), Net Zero by 2050, IEA, Paris https://www.iea.org/reports/net-zero-by-2050
6 European Commission (2020). Impact Assessment: Stepping up Europe’s 2030 climate ambition Investing in a climate-neutral future for the benefit of our people.
7 Republic of Austria (2021). Nuclear energy is not a “green” investment. Report of the Federal Ministry on climate action, environment, Energy, Mobility, Innovation and Technology. https://www.bmk.gv.at/en/topics/climate-environment/nuclear-coordination/nuclear-not-green.html
8 Open letter of 225 scientists, NGOs and financial institutions: Gas attack in the taxonomy. https://wwfeu.awsassets.panda.org/downloads/225__scientists__financials__cso_open_letter___gas_attack_in_eu_taxonomy___march21_cl_1_1_1.pdf
9 Bloomberg. “Net zero alliance plans to reject gas and nuclear as green asset”. 11/08/2021. https://www.bloomberg.com/news/articles/2021-11-08/net-zero-alliance-plans-to-reject-gas-nuclear-as-green-assets
10 UNPRI (2021). Alternative solutions to including gas-fired power and nuclear energy in
the EU sustainable taxonomy. Principles for Responsible Investment position paper. https://www.unpri.org/download?ac=15189