On Saturday 20 March, the European Commission sent Member States a new draft of its delegated act to complete the EU Taxonomy Regulation (2020/852) in order to gauge the reaction of national delegations before the final text is presented in mid-April.
This long-awaited delegated act aims to establish technical selection criteria to determine the conditions under which an economic activity can be considered to contribute substantially to climate change mitigation or adaptation, while not significantly harming any of the EU’s other environmental objectives, such as those relating to biodiversity, air pollution or the circular economy (‘do no significant harm’ principle).
Initially, the criteria defined in the taxonomy were thus ‘simply’ intended to help investors orient themselves towards activities that could be described as “sustainable”. But taxonomy is now seen as the tool to ensure that the post-Covid-19 recovery is “green” by directing EU recovery spending towards sustainable activities.
It is therefore easier to understand what is at stake with this regulation, in particular the delegated act scheduled for April.
The controversial treatment of gas
Compared to the previous draft (whose adoption by the Commission had been delayed – see EUROPE 12606/15, 12643/23), the new version of the delegated act, obtained by EUROPE, contains a number of changes, including the inclusion of two new categories of gas-related activities.
The first is the direct replacement of heating/cooling systems using solid or liquid fossil fuels (e.g., coal) with systems using gaseous fuels of fossil, renewable or bio-based origin.
The second concerns the direct replacement of cogeneration installations, separate thermal installations or separate electrical installations using solid or liquid fossil fuels by cogeneration and electricity production installations running on gas (of fossil, renewable or bio-based origin).
Among the criteria proposed for an activity in one of these two categories to be in line with the climate change mitigation objective is that the replacement results in a reduction of at least 50% of greenhouse gas (GHG) emissions per kWh of energy produced. The direct GHG emissions of the new installation must also be less than 270 g CO2 equivalent per kWh of energy produced.
Other criteria: – the new installation must be compatible with the co-firing of low-carbon gaseous or liquid fuels; – there must be no low-carbon technological and economic alternatives; – the replaced installation must be located in one of the transition regions.
However, the criteria for gas-fired power plants (a category that already existed in the previous version) do not change. The emissions cap that these installations must not exceed in order to comply with the climate change mitigation objective thus remains at 100 g CO2e/kWh.
In fact, the Commission considers that by meeting these criteria, gas-related activities can be considered to be “transitional activities”.
“Technical screening criteria should be established for those economic activities for which near-zero carbon solutions are not yet viable or for which near-zero carbon activities exist but are not yet feasible at scale, and which have the greatest potential for significant greenhouse gas reductions”, the new text says.
For transitional activities, the Commission plans to review the criteria at least every 3 years and, if necessary, to amend the delegated act “in light of scientific and technological developments”.
In response to this new focus on gas, 226 civil society organisations, scientists and financial institutions have sent a letter to the Commission (https://bit.ly/3f65CHh ) calling on it to “defend climate science” by following the recommendations of the Technical Expert Group on Sustainable Finance (see EUROPE 12442/14).
“Counting gas as green ignores the significant environmental effects of methane, which has up to 84 times the impact on climate change than CO2 over a 20-year period”, the signatories say.
Hydrogen
Another important change concerns hydrogen. The Commission is therefore proposing a new emissions threshold, from 2.256 to 3 kg CO2e per kg of hydrogen.
According to NGOs, this amounts to making “low-carbon” hydrogen (hydrogen produced from fossil gas in combination with carbon capture and storage technologies) eligible for the taxonomy.
In addition, the delegated act now includes activities to convert underground gas storage facilities into hydrogen storage facilities.
Other changes
It should also be noted that the criteria for agriculture and livestock activities have been deleted and those for forestry have been amended.
For the NGO ECOS, the new criteria for forest management practices are thus less ambitious, as all types of logging would be covered by the taxonomy, provided that they comply with national legislation.
Nuclear
As far as nuclear power is concerned, however, there is no change. This sector remains excluded from the taxonomy for the time being, pending a report from the Joint Research Centre (the Commission’s in-house scientific service), which should be published in the coming weeks.
See the new provisional version of the delegated act and its annexes: http://bit.ly/3sf4AMF; http://bit.ly/2PiH0A8; http://bit.ly/3shCBvQ (Original version in French by Damien Genicot)