Sven Giegold
Member of the European Parliament – Greens/EFA Group

Speaker of the German Green Delegation

Credible Sustainable Finance rules: The worst has been avoided for now, but green hazards remain

Today, on 21 April 2021, the EU Commission presented the long-awaited first Delegated Act on the Taxonomy Regulation. The Delegated Act defines the criteria that economic activities must fulfil in order to be considered sustainable in the Taxonomy with regard to climate change mitigation or adaptation. In the last weeks, the Commission had considered softening many of the hard science-based criteria under pressure from the member states. The draft presented today does not go as far as recently feared. The consideration of fossil gas as a transitional technology as well as the entire field of agriculture are excluded for the time being. Instead, the Commission wants to present an extension of the Delegated Act still this year, which would set the standards in the areas of agriculture, fossil gas and nuclear power. For the latter, the Commission has announced that it will follow the recently completed recommendation of the Joint Research Centre (JRC). Its report came to the questionable conclusion that nuclear power would not significantly affect the environmental goals of the Taxonomy, despite the nuclear waste problem. The JRC was established as a nuclear research institution in the 1950s through the EURATOM Treaty and was originally to be called the “Plutonium Institute”.

Especially in the areas of bioenergy and forestry, the Commission has bowed to the demands of the Scandinavians and has significantly weakened the criteria. In particular, they are now largely based on the criteria of the second Renewable Energy Directive. These criteria are broadly considered unsustainable by experts with regard to bioenergy and are to be revised in the summer as part of the European Green Deal. The Commission has announced that it will subsequently transpose any adjustments to the Taxonomy.

MEP Sven Giegold, financial and economic policy spokesperson of the Greens/EFA group commented:

“The major catastrophe has been postponed. A sustainability label for fossil gas would have plunged the European Sustainable Finance project into a dramatic credibility crisis. There is a serious threat of greenwashing of financial products. This would mean a further undermining of the European Green Deal.

For us Greens as well as the Sustainable Finance community and science, it is a great success that this has been prevented for the time being. But the disaster is only postponed. The Commission has announced that it will propose new rules for fossil gas and nuclear power still this year. A sustainability label for nuclear power would irreversibly damage the credibility of the Taxonomy. The Technical Expert Group on Sustainable Finance made it clear last year that nuclear power has no place in the Taxonomy. Yet the Commission wants to follow the contrary recommendation of the Joint Research Centre, which was supposed to be called the “Plutonium Institute” when it was founded under the EURATOM Treaty in the 1950s. This is a bad joke.

But damage is already done. According to the legal provisions, the Taxonomy rules should be strictly based on science in order to put an end to greenwashing in the Sustainable Finance sector. The leadership of the EU Commission should have invoked this and simply implemented the recommendations of the Technical Expert Group. Instead, it opened the door to the vested interests of the member states and their industrial lobbies. In doing so, the Commission signalled: the Taxonomy is open to political special interests. This approach has permanently damaged the credibility of the Taxonomy. The financial industry must ask itself whether private-sector initiatives might be the better alternative.

In many points, the EU Commission has softened the scientific recommendations considerably. With lax provisions on bioenergy and forestry, the Commission wants to buy the approval of Finland and Sweden. The burning of practically any form of biomass and the unsustainable management of forests may thus be considered sustainable. A revision is needed here quickly. As soon as more ambitious standards are agreed in the third Renewable Energy Directive or the forthcoming Forest Strategy, these must also be transposed to the Taxonomy.

Today does not bode well for the European Green Deal. The Commission has not even managed to credibly align the rather innocuous transparency rules of the Taxonomy with the Paris climate goals. It is unclear how such a weak Commission intends to push through the really drastic measures for the sustainable transformation of the automotive industry, the construction industry or the chemical sector. After the revision of the Common Agricultural Policy, the Taxonomy is already the second piece of legislation in which the EU Commission is failing miserably to achieve the goals it has set for itself in its Green Deal.”

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My urgent petition “Save the European Green Deal!”:

https://www.change.org/p/eu-comission-urgent-petition-save-the-european-green-deal

Open letter by 250+ Sustainable Finance professionals for credible Taxonomy rules:

https://sven-giegold.de/wp-content/uploads/2021/04/08.04.2021-Open-Letter-to-EU-Commission-on-credible-Sustainable-Finance-rules-MEP-GIEGOLD-and-951-signatories.pdf

My letter to the EU Commission on the planned weakening of the Taxonomy rules:

https://groenlinks.nl/sites/groenlinks/files/2021-03/letter-gas-taxonomy.pdf

Legislative proposals by the EU Commission on the Taxonomy and the Corporate Sustainability Reporting Directive:

https://ec.europa.eu/commission/presscorner/detail/en/ip_21_1804

Documentation of the structural pro-nuclear position of the Joint Research Centre by Greenpeace:

https://www.greenpeace.org/static/planet4-eu-unit-stateless/2021/03/5a375b88-jrc-industrie-nucleaire-briefing-final-29032021.pdf

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Background: Taxonomy

Initially, the Commission was set to present the Delegated Act already at the end of 2020, but then postponed the publication in view of massive lobbying efforts by the European member states. While some Eastern European states demanded a stronger role for fossil gas as a transitional technology, the Scandinavian states lobbied for softer rules for forestry, agriculture and bioenergy. France furthermore insisted that nuclear power should be taken into account.

As leaked drafts of the EU Commission showed in March, the Commission was considering taking up several of these demands and thus deviating from the scientific recommendations made by the Technical Expert Group on Sustainable Finance (TEG). This provoked massive resistance from civil society and academia. Several members of the Platform on Sustainable Finance, the successor to the TEG, threatened to leave if the planned softening were to take place. Most recently, the Platform’s leadership team also supported this position and urged the Commission to base its taxonomy criteria on science, as required by law.

The Delegated Act presented by the Commission today cannot be amended by the Parliament or the member states. However, both can stop it with a qualified majority.