The European Commission has been told by a key expert group that planned adjustments to its green rulebook risk raising greenhouse gas emissions and undermining the bloc’s reputation as a bastion for environmentally friendly finance.
The Platform on Sustainable Finance, which is one of just two groups assigned the role of providing official feedback to the EU Commission, said that even the best performing gas-fired facilities couldn’t qualify as green or transition assets, according to a report published on Monday.
The findings mark the latest body blow to the credibility of Europe’s green rulebook, once touted as an international gold standard in steering capital toward sustainable projects. But the Platform’s findings are unlikely to derail the planned adjustments. At least 20 of the EU’s 27 member states -- representing no less than 65% of the bloc’s population -- would need to unite against the plan for it to fail.
Under the EU Commission’s proposal, which is due to be adopted as soon as this week, “new gas plants could be called green and sustainable, even though they never reach below the average greenhouse gas emissions level for the European grid,” said Nathan Fabian, the Platform’s chair. “These would be polluting plants with no guarantee they will ever be green.”
Gas and Nuclear as green? Here’s what the Commission proposes:
Gas projects that replace coal and emit no more than 270 grams of carbon dioxide equivalent per kilowatt-hour can be given a temporary green label; or annual emissions of the activity do not exceed an average of 550 kilograms per kilowatt-hour over 20 years
Such plants would have to obtain construction permits before the end of 2030, and have plans to switch to renewable or low-carbon gases by the end of 2035
Similarly, nuclear plants are eligible as long as new plants that are granted construction permits by 2045 meet a set of criteria to avoid significant harm to the environment and water resources
Funds will be required to enhance disclosures to investors on nuclear and gas holdings under the taxonomy
The Platform pointed out that some of the planned gas facilities may replace coal plants that are already being phased out across much of the region. Bloomberg News first reported the group’s objections on Friday, based on a draft feedback document.
The focus “on replacing coal fired energy generation is clear, but the net greenhouse gas emissions benefit arising from such a switch is not certain,” it said. “This is because 59 gigawatts of coal-fired capacity in Europe is already due to be phased out by 2035.”
In a letter sent to Brussels late Friday, Germany said that it opposed the inclusion of gas as a sustainable source of energy, but supported a temporary green label for gas to transition from coal. France meanwhile, has thrown its support behind nuclear, on the basis that the energy form doesn’t produce carbon dioxide and is seen as a reliable power source as infrastructure for renewables is built. Critics argue that the EU’s proposal doesn’t adequately deal with risks relating to nuclear waste.
The EU’s proposal has drawn sharp rebukes from members of civil society, climate activists, lawmakers and major investor groups. They warn that the perceived dilution of the green rulebook means Europe may not meet its legal obligation to achieve climate neutrality by mid-century. Think tank E3G last week called on the EU Commission to withdraw or drastically amend the complementary delegated act that paves the way for the taxonomy to add gas and nuclear.
The Platform also warned that plans to switch to renewable or low-carbon gases by the end of 2035 could result in an increase in emissions at the plants if so-called gray or blue hydrogen is used for blending. Proposed disclosure requirements for investors would also need to be “materially enhanced,” it added.
The body, made up of key civil society groups, banks and companies like Airbus SE, will recommend to the Commission that adjustments to grant the green label to gas and nuclear during the transition should be abandoned. Bloomberg LP, the parent company of Bloomberg News, is a member of the Platform.