Latest Taxonomy Draft – A Greenwashing Tool?

    Stockholm (NordSIP) – Following the leak of the latest draft of the European Commission’s Delegated Act (DA) for EU’s Taxonomy of sustainable economic activities, 9 of the 67 experts that make up the Platform on Sustainable Finance, an expert advisory body, threatened to quit the platform in protest against the changes.

    “The new draft puts us in an extremely difficult position: this politicised process, and the overriding of the experts’ work, questions the very purpose of the Platform and the value of our work in it, creating reputational risks for us and the organisations we represent,” the 9 experts warn. “Should politics and lobbying prevail over science, it is our responsibility to inform you that we would be forced to reconsider our contribution to the Platform.”

    The Changes

    In a recent article on the latest draft, Ann Kristin Kästner, Sustainability Specialist at SEB, summarises the changes that have been introduced since the previous draft at the end of 2020.

    She noted that the latest draft addressed criticisms on the topics of biomass, steel manufacturing, buildings, hydropower, forestry, gas and liquid fuels. In forestry, the new draft notes that only forest holdings with a surface superior to 25 ha are required to conduct a climate benefit analysis, a change that should relieve pressure on small forest owners.

    Regarding existing buildings, although the rule remains that Taxonomy alignment is contingent on a EPC class A rating, EPC class B buildings can also be Taxonomy aligned if its energy performance is within the top 15% of the national or regional building stock.

    On the sticky issue of gas and liquid fuels, Kästner highlights the introduction of “two new activities regarding the replacement of fossil fuel combined heat/cool and power as well as the replacement of fossil fuel heating/cooling facilities.” She notes also that “gaseous fuels can only be Taxonomy aligned when they are used to directly replace solid or liquid fossil fuels and if direct GHG emissions of the new facility are lower than 270g CO2e/kWh output energy.” Finally, “the threshold of 100g CO2e/kWh for the activity Electricity generation from gaseous and liquid fuels,” she explains.

    A Greenwahsing Tool?

    The open letter focused on changes made to the criteria regarding forestry, bioenergy, and fossil gas, which the experts described as being “in clear contradiction to climate science”. They warn that the “criteria are not simply weak: they are counter-productive and label as ‘sustainable’ activities that may cause significant harm to the climate and the environment.”

    “If the leaked text for these sectors were adopted, the Taxonomy would become a greenwashing tool instead of being the gold standard in the fight against greenwashing that it was promised to be. Its rollout would be even more harmful to investors than the current situation, as they would reasonably expect the taxonomy to have set high standards of sustainability.”

    “It would also penalise sectors which are making real efforts to align with the Paris Agreement. At a broader level it would openly discredit the European Green Deal, leading to significant reputational damage for the EU.”

    Greenpeace added its voice to the dissenting experts. “The leak shows that the EU Commission is abandoning all pretence of advancing the European green deal through its sustainable finance rules,” Greenpeace EU green recovery spokesperson Ariadna Rodrigo said. “Instead of focussing on proven solutions like home insulation and renewables, it would allow taxpayers’ money and private investments to fund destructive industries – a green recovery in name only. The EU taxonomy was supposed to be the gold standard of green investments, but it looks set to become a greenwashing exercise.”

    Image by Steve Buissinne from Pixabay

    Filipe Albuquerque
    Filipe is an economist with 8 years of experience in macroeconomic and financial analysis for the Economist Intelligence Unit, the UN World Institute for Development Economic Research, the Stockholm School of Economics and the School of Oriental and African Studies. Filipe holds a MSc in European Political Economy from the LSE and a MSc in Economics from the University of London, where he currently is a PhD candidate.

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