The European Commission’s draft delegated act to include fossil gas and nuclear energy in the EU taxonomy as ‘transitional’ activities is not in line with the EU regulation (2020/852) establishing the taxonomy, says the Platform on Sustainable Finance, in an opinion published on Monday 24 January.
This stakeholder group advising the Commission on sustainable finance considers that the institution has used a different approach to that followed when drafting the first delegated act (on the climate part of the taxonomy - see EUROPE 12850/13) by using the idea of “transitional criteria” to accelerate the transition away from coal.
“The Technical Screening Criteria (TSCs) differ in fundamental ways to the TSCs in the already in-force Climate Delegated Act and are not consistent with the provisions of the Taxonomy Regulation” and in particular the article on transitional” activities, the Platform members point out in their assessment.
In their view, the Commission’s new approach is “counterfactual” in determining potential environmental performance.
And they added: “Transitional activities, as defined in the Taxonomy Regulation are activities that must still make a substantial contribution (to climate change mitigation or adaptation, editor’s note) in their own right, while ensuring no significant-harm (any of the other four environmental/climate objectives of the taxonomy), and not merely be part of a bigger system in transition”.
In addition, Platform members have doubts about how the Commission’s proposed criteria would work in practice and many are “deeply concerned” about the environmental impacts that could result, the assessment says.
Most of them are therefore worried that the draft delegated act will be “undermining the sustainable Taxonomy framework”.
Gas
On fossil gas, the Platform on Sustainable Finance criticises the new thresholds in the draft supplementary delegated act for gas-fired power plants for which planning permission is granted before 31 December 2030.
According to the Commission’s draft text, these may be taxonomy-compatible provided they have direct greenhouse gas (GHG) emissions of less than 270 g CO2e/kWh or annual emissions not exceeding an average of 550 kg CO2e/kW of the installation’s capacity over 20 years (see EUROPE 12860/1).
Platform members believe that the “scientific threshold” for defining whether an economic activity in the energy production sector makes “a substantial contribution to climate change mitigation” should remain 100 g CO2e/kWh on a life cycle basis (direct and indirect emissions), as defined in the first delegated act on taxonomy.
On the criterion of 270 g CO2e/kWh, the assessment shows: “In addition to the higher direct emissions threshold, the technical criterion does not take into account the life cycle and therefore excludes other important emissions, such as methane leakage during the extraction, transport and storage of the fossil gas, and especially excludes emissions from the manufacture of the ‘low carbon’ fuels proposed for ‘blending’ (of fossil gas with hydrogen)”.
The assessment is even harsher for the second criterion set by the Commission.
The Platform notes that due to the capacity threshold of 550 kg CO2e/kW averaged over 20 years proposed by the institution, “there is no effective emissions cap in the early years of operation”.
A new gas plant starting operation with emissions above 270 g CO2e/kWh would therefore not be excluded from the taxonomy.
Based on an analysis of the year-on-year emissions performance of a gas-fired power plant, the Platform further believes that a new gas plant would not be required to meet the 100 g CO2e/kWh threshold (the criterion for a substantial contribution to climate change mitigation) at any stage over 20 years.
These two criticisms lead the Platform on Sustainable Finance to formulate a third.
It is concerned that a new gas plant with emissions above 270 g CO2e/kWh could be recognised as taxonomy compliant and thus have easier access to private funding, with no guarantee that its operator will subsequently be able to make the improvements to meet the criterion of 550 kg CO2e/kW on average over 20 years.
However, “it would not be possible to reclassify the already invested funds as not taxonomy aligned retrospectively”, the assessment points out.
Nuclear
With regard to nuclear energy, the Platform considers that the criteria provided by the Commission “do not ensure no significant harm” to the other four objectives of the taxonomy: - sustainable use and protection of aquatic and marine resources; - the transition to a circular economy; - pollution prevention and control; - the protection and restoration of biodiversity and ecosystems.
Although greenhouse gas emissions from nuclear power are low, this “does not make the activity green and sustainable for Taxonomy purposes”, the assessment points out.
The Platform further argues that the criteria proposed by the Commission will allow new nuclear power plants (those that have received a construction permit by 2045) to be aligned with the Taxonomy, even if they become operational too late to contribute to climate change mitigation in order to limit warming to below (or even close to) 1.5 degrees.
The assessment also criticises the criteria for waste treatment as insufficient.
A new ‘Amber zone’ category
As a result of its assessment, the Platform wants to establish an intermediate performance category called ‘Amber zone’ which would include activities with emissions above 100 g CO2e/kWh but below 270 g CO2e/kWh.
It will publish its final proposal in the coming weeks.
See the opinion of the Platform on Sustainable Finance: https://bit.ly/3FWi4mw
Germany and Austria publish their respective positions
In addition to the Platform on Sustainable Finance, Germany and Austria have also published their opinions on the draft supplementary delegated act.
Not surprisingly, Vienna opposes its adoption as it stands. The Austrian authorities consider that the Commission’s text “is fundamentally flawed, both on the substance and with respect of the procedure by which it is being adopted”, and “runs directly counter to the Taxonomy Regulation’s ambitious approach and its objective to prevent ‘greenwashing’”.
See Austria’s opinion: https://bit.ly/3KzVmEB
Berlin, on the other hand, opposes the inclusion of nuclear energy in the Taxonomy. The German government considers that it is not a sustainable energy and that its inclusion is therefore not compatible with the requirements of the Taxonomy Regulation.
For fossil gas, the German government wants to revise the proposed criteria to allow for more flexibility, including the obligation to provide a plan whereby the gas plant will use at least 30% renewable or low-carbon gas starting from 1 January 2026, at least 55% from 1 January 2030 and 100% by 31 December 2035.
The German government considers these intermediate steps to be unrealistic and therefore proposes to allow a ‘switch’ to renewable or flexible low-carbon gases from 2036.
And it added: “In any case, we believe that the fuel switching requirements should be considered as indicative values”.
The contributions of Germany and Austria, as well as those of the Platform on Sustainable Finance and each of the other 25 Member States are currently being analysed by the Commission.
See the opinion from Germany (in German): https://bit.ly/3FQvAIs (Original version in French by Damien Genicot)