London | A minute-to-midnight deal between Brussels and the European Parliament has given the EU a confirmed 2030 emissions reduction target to take to US President Joe Biden’s climate summit, but the Continent is still grappling with how to turn ambitious rhetoric into practical reality.
Some European Parliament members (MEPs) pushed the European Union to go beyond the agreement struck by the bloc’s national leaders in December, which was for a 55 per cent cut in carbon emissions from 1990 levels by 2030.
But after talks that stretched into the early hours of Wednesday – barely more than 24 hours before Mr Biden starts demanding fresh ambition from 40 world leaders at his online Earth Day summit – the parliamentary faction gave way.
The 55 per cent target will still require Europe to raise its game, as projections from the Climate Policy Tracker website suggest existing policies will only get the Continent to 48 per cent.
But there were signs on Wednesday of just how difficult a process it will be to keep all 27 EU countries on the same page as the demands of the energy transition accumulate.https://5a35d0e37f9e12dbc5360bf02fafc8f4.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.htmlAdvertisement
The European Commission on the same day released the first tranche of its “green taxonomy”, which aims to provide an objective and standardised measure of the environmental sustainability of a given investment such as a company’s stock or bonds.
From next year almost 50,000 EU-based companies will have to provide sustainability reports using the taxonomy’s criteria and templates. The first set of rules under the taxonomy covered combating climate change and adapting to its impacts.
Two years in the making, the taxonomy is meant to supplant a confusing and potentially unreliable marketplace of different, often inconsistent, ratings and standards for environmental, social and governance factors.
It would give companies and investors what Brussels called “a one-stop shop” for compliance with the EU’s increasingly extensive ESG rule book.
But the supposedly technical, science-based exercise of developing the taxonomy became mired in politics, as national governments mounted rearguard actions to make the new regime less onerous for their economies.
Coal-dependent countries in eastern Europe have pushed for natural gas to be recognised as green energy, or at least as a “transition fuel”, while France wanted nuclear energy excluded. Both have been left out of the taxonomy for now. Finland, meanwhile, successfully lobbied for logging to get a green tick.
“The taxonomy was supposed to be the cornerstone of the EU’s sustainable finance policy and the foundation for shifting capital to match European Green Deal and climate neutrality objectives,” said Sandrine Dixson-Decleve, co-president of the Club of Rome, in a statement.
“Unfortunately, this process got out of control due to intense pressure from national interests, including member-state governments and MEPs.”
And that is before the taxonomy even makes its way through the formal approval process, involving national governments signing it off and then a green light from the European Parliament.
Still, Brussels has vowed to reconsider natural gas’s place in the taxonomy when it releases a second tranche of green criteria later in the year; and it is conducting a separate review of nuclear energy.
A similar bun fight could await the European Commission’s imminent proposal for a carbon border adjustment mechanism, which is due mid-year for potential introduction in 2023.
This would tax imports from outside the bloc to stop them undercutting domestic producers, who have to pay a carbon price through the EU Emissions Trading System.
The pinch-point will come because introducing a CBAM that complies with global trade rules will potentially mean ending some sectors’ entitlement to free carbon permits and could also bring new sectors into the ETS.
“There are resistances to recognising it [the CBAM] within parts of European industry, [because] this structural mechanism entails the disappearance of the free permit allocation which has been practised within the European Union,” a former EU trade commissioner told a Jacques Delors Institute briefing last week.