EU sustainable finance taxonomy

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The EU Taxonomy is a tool to help investors understand whether an economic activity is environmentally sustainable, and to navigate the transition to a low-carbon economy. Setting a common language between investors, issuers, project promoters and policy makers, it helps investors to assess whether investments are meeting robust environmental standards and are consistent with high-level policy commitments such as the Paris Agreement on Climate Change[1].

In order to meet the EU’s climate and energy targets for 2030 and reach the objectives of the European Green Deal, it is fundamental to direct investments towards sustainable projects and activities. ... To achieve this, a common language and a clear definition of what is ‘sustainable’ is needed. This is why the action plan on financing sustainable growth called for the creation of a common classification system for sustainable economic activities, or an “EU taxonomy”.

The EU taxonomy is a classification system, establishing a list of environmentally sustainable economic activities. The EU taxonomy is an important enabler to scale up sustainable investment and to implement the European Green Deal. Notably, by providing appropriate definitions to companies, investors and policymakers on which economic activities can be considered environmentally sustainable, it is expected to create security for investors, protect private investors from greenwashing, help companies to plan the transition, mitigate market fragmentation and eventually help shift investments where they are most needed[2].

Natural gas

Inclusion of natural gas in the sustainable finance taxonomy threatens the credibility of EU energy policy Viite; 25 Mar 2021

The European Commission’s proposal for the sustainable finance taxonomy has been leaked. According to the proposal, natural gas plants would be classified as sustainable investments under certain conditions. The sustainable finance taxonomy is an important tool to avoid greenwashing, so that private and institutional investors can be confident of the environmental friendliness of the investments which have received the sustainability label.

Nuclear energy

EU experts to say nuclear power qualifies for green investment label: document Kate Abnett; Reuters; 27 Mar 2021

BRUSSELS (Reuters) - Experts tasked with assessing whether the European Union should label nuclear power as a green investment will say that the fuel qualifies as sustainable, according to a document reviewed by Reuters.

The European Commission is attempting to finish its sustainable finance taxonomy, which will decide which economic activities can be labelled as a sustainable investment in the EU, based on whether they meet strict environmental criteria.

Brussels’ expert advisors last year split over whether nuclear power deserved a green label, recognising that while it produces very low planet-warming CO2 emissions, more analysis was needed on the environmental impact of radioactive waste disposal.

The Commission asked the Joint Research Centre (JRC), its scientific expert arm, to report on the issue.

A draft of the JRC report, seen by Reuters and due to be published next week, said nuclear deserves a green label.

“The analyses did not reveal any science-based evidence that nuclear energy does more harm to human health or to the environment than other electricity production technologies,” it said.

Storage of nuclear waste in deep geologic formations is deemed “appropriate and safe”, it said, citing countries including France and Finland in the advanced stages of developing such sites.

Two expert committees will scrutinise the JRC’s findings for three months, before the Commission takes a final decision.

The Commission declined to comment on the draft document.

EU countries are split over nuclear. France, Hungary and five other countries this month urged the Commission to support nuclear in policies including the taxonomy.

Other states including Austria, and some environmental groups, oppose the fuel, pointing to its hazardous waste and the delays and spiralling costs of recent projects.

“The nuclear industry is desperate for funds as nuclear power is too expensive and new projects are evaporating,” said Greenpeace EU policy adviser Silvia Pastorelli.

EU countries are also split over how the taxonomy should treat investments in natural gas.

After a plan to exclude gas faced pushback from pro-gas countries, the Commission this month drafted plans to label some gas as sustainable - splintering countries between those who support the fuel as an alternative to more-polluting coal, and those who say new gas plants risk locking in emissions for decades, thwarting climate goals.

Commentary

David Hess Twitter; 5 Apr 2021

With the JRC report confirming nuclear sustainability and suitability for inclusion in #EUtaxonomy I think it’s time for a bit of a self-audit thread. IMHO I got a lot right and a little wrong a year and a half ago

Footnotes and references

  1. EU Sustainable Finance Taxonomy Principles for Responsible Investment
  2. EU taxonomy for sustainable activities European Commission