The TEG statement makes it clear that the Sustainable taxonomy has a role to play in guiding both private and public sector recovery plans post COVID-19, including the European Council’s recently announced Roadmap to Recovery. Hence, the importance of the taxonomy is not to be understated. Diverging definitions of Sustainable Economic Activities leads to fragmentation across markets and borders, is a potential feeding ground for Greenwashing.
In the early hours of Monday 27th of April, the Technical Expert Group (TEG) on Sustainable Finance issued its latest recommendation: for the planned Sustainable Finance Taxonomy to guide and inform coming stimulus packages and recovery plans post COVID-19.
It’s timely, released on the closing date of the ongoing Inception Impact Assessment of the Delegated Acts setting out the Taxonomy Regulation’s Technical Screening Criteria (TSC) for climate change mitigation and adaptation. Although originally planned for full rollout from 2021, the TEG statement makes it clear that the Sustainable taxonomy has a role to play in guiding both private and public sector recovery plans post COVID-19, including the European Council’s recently announced Roadmap to Recovery.
Capacity and resilience building are the best forms of protection both in moments of crisis and in efforts to prevent future ones. Due to the last update, Bellona Europa has amended its consultation reply to reflect the last minute TEG recommendations, issuing a few of its own in the process.
Bellona Recommendations: Technical Screening Criteria
It is Bellona Europa’s strong recommendation that the Commission sticks to the single technology-neutral threshold covering all technologies of 100gCO2e/kWh as outlined by the TEG recommendations. This will ensure that unabated natural-gas fired power generation are not seen as sustainable under the taxonomy, and importantly prevent lock-in of assets through investments in accompanying infrastructure.
As a long-time advocate for a just transition for all, closely working with the scientific community to ensure achievable outcomes for industrial decarbonisation for decades, Bellona Europa supports the inclusion of CCS as an enabler for reaching the set threshold. This includes the installation of CCS technology being seen as taxonomy eligible once the screening criteria has been met. The science remains clear: deep decarbonisation is not attainable without access to CO2 transport and storage at a large scale.
On the issue of the inclusion of CCU technologies in the taxonomy, we recommend that strict sustainability criteria accompany any such inclusion. A full cradle-to-grave LCA of CCU products, including origin of their carbon content, indirect emissions from electricity use and all processing and end-of-life emissions must be considered during their preliminary impact assessment. These recommendations are in line with the “LCA4CCU” report commissioned by DG ENER1.
Bellona Recommendation: Caution when addressing introduction of “Brown Taxonomy”
With the stated aim of redirecting much needed investment to sustainable projects and economic activity, Bellona Europa recommends that the European Commission shows caution when it comes to an early inclusion of a “Brown Taxonomy”.
Although there might be a role to play for such a “Brown Taxonomy” in the future, it should be accompanied by a strong legal framework to reflect the climate related costs of “Brown Taxonomy” economic activities, and to introducing clear economic consequences for such activities. If introduced at the early stages of the taxonomy’s life-span, the creation of a “mid-category” of seemingly “less-harmful” economic activities neither included in the “Brown” or Sustainable Taxonomy could have detrimental effects.
Enjoying a European Commission stamp-of-approval as “non-harmful” or “less-harmful” to the current ambition of a climate-neutral Europe by 2050 – a notion not in line with the needs for emissions reduction or aim of the taxonomy – in effect disincentive redirection of investments from the mid-category to sustainable investments. Potentially also redirecting investments to the “mid-category” which would otherwise have been directed to sustainable investments.
Avoiding greenwashing now more than ever
Taking the current situation of COVID-19 and the Commission’s stated dedication to a sustainable recovery into consideration, it is all-the-more important to facilitate a sustainable just transition and recovery for all. Now more than ever we need to encourage investment and cannot afford investment laying idle in less-than sustainable projects and activities.
The importance of the taxonomy is not to be understated. Diverging definitions of Sustainable Economic Activities leads to fragmentation across markets and borders, and is a potential feeding ground for Greenwashing. The final TSCs will define the future role and uptake of the taxonomy, and above all its ability to direct capital to sustainable investment projects.
We believe that an inclusion of a “Brown Taxonomy” at this stage, where a large-scale uptake and usage of the taxonomy is vital for its intended effect, would reduce the legitimacy of the taxonomy and in its extreme consequence be seen as a tool for greenwashing in providing “less-than-sustainable” economic activities with a stamp of “doing no harm”. To ensure the credibility and future uptake of the taxonomy, there can be no room for greenwashing or creative accounting practices, especially when considering technologies which haven’t gone through rigorous scientific scrutiny to prove their contribution to climate change mitigation.
Keeping in mind the TEG’s outlined recommendation for future considerations by the platform on sustainable finance, it is Bellona Europa’s clear intent to apply for membership to the platform, to offer expertise and important insight on how to ensure real emission reduction and keep the taxonomy credible and free from loopholes or greenwashing potential.