EU confirms first green finance taxonomy rules, key decisions on energy still to come

The European Union has passed the first set of rules under its new green finance taxonomy, which determines which activities can be classed as "green" and which cannot. Decisions on gas and nuclear energy are yet to come, though.

EU confirms first green finance taxonomy rules, key decisions on energy still to come

The EU’s €750bn Covid-19 recovery fund must dedicate at least 37% of spending to 'green' investment

Published late on Thursday (9 December) after a long scrutiny period, the first section of the bloc’s sustainable finance taxonomy will come into effect from 1 January 2022.

Decisions have been taken on sectors including shipping, renewable energy and car manufacturing, while some of the most politically contentious sectors including gas-fired electricity generation, hydrogen and nuclear power, remain outstanding.

In car manufacturing, only zero-emission vehicles will be classed as ‘green’. There will be a four-year transition period, designed to spur progress towards pure electric technologies.

Shipping is badged as a “transitional economic activity”, with the EU stating that it is a less carbon-intensive mode of transport than many alternatives including aviation. Tighter emissions rules will come into effect from 2026. There could, from this point, be a ‘green’ classification for certain shipping technologies.

It has been widely reported that around a dozen nations, including Hungary, Poland, Finland and France had objected to this first set of rules, but ultimately were unable to block them.

The most politically sensitive decisions will be whether gas and nuclear are badged as transitional activities, and whether some parts of these sectors could be labelled green. Twelve nations, including France, are pushing hard for the inclusion of nuclear, while five others, including Austria, are staunchly against this move.

A similar split can be seen around gas, with central and eastern European nations including Poland pushing for a “transitional” label as they phase down coal. Other nations, and green groups such as WWF and Transport and Environment, have argued that including gas in the taxonomy would undermine its credibility.

The European Commission’s vice president Frans Timmermans, the bloc’s most senior climate representative, told an event in Brussels this week: “I think we need to find a way of recognising that these two energy sources play a role in the energy transition. That does not make them green.”

EU heads of government are due to meet next week to further the next section of the taxonomy and to continue discussions around the energy price crisis. A resulting proposal may come before Christmas or, if not, is likely to come early in the new year 2022.

edie content partner Euractiv is reporting that the European Commission’s president Ursula con der Leyen has taken charge of the next phase of the taxonomy.

UK Chancellor Rishi Sunak confirmed this summer that the UK will create its own green finance taxonomy. There is not yet a timeline for publication.

Sarah George

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