EU warned over green finance taxonomy ‘loopholes’ on transport and plastics

This week, it was revealed that a group of Green MEPs has written to the Commission imploring it to update criteria in the taxonomy relating to high-emission, hard-to-abate parts of the transport sector.

At present, aircraft manufacturers can claim that their aircraft is a ‘green’ investment if its tailpipe CO2 emissions are lower than the international limits set by the International Civil Aviation Authority (ICAO).

The seven MEPs argue in their letter that this is greenwashing and set out the case for only aircraft capable of operating on 100% alternative, sustainable fuels being awarded a ‘green’ investment label.

“Given the long lifespan of aircrafts, the current draft criteria would allow aircrafts to operate with fossil fuels for decades to come, thereby infringing on the requirement to prevent a lock-in of carbon-intensive assets,” the letter states. It does concede that, when an ultra-efficient aircraft was replacing an old, inefficient model, the investment could be classed as a ‘transition’ investment.

The letter also expresses concerns that what the bar for what would classify as a ‘green’ maritime investment is far too low.

It points to evidence that, if implemented, the label could lead to investment in ships and other technologies that would increase the shipping sector’s emissions, at a time when they should be falling.

Similarly to the clauses relating to aviation, more efficient ships are currently given preference in the taxonomy as it stands. There is also contention over the fact that shipbuilders and operators will not have to prove real-world energy and emissions performance; they can rely on forecasts to obtain a label.

The letter states that the EU “cannot afford any further compromising of the environmental integrity of the taxonomy”, after lawmakers voted for the inclusion of some nuclear and natural gas activities last year. These decisions are now subject to legal challenges.

Signing the letter are Bas Eickhout (Netherlands), Ciarán Cuffe (Ireland), Ernest Urtasun (Spain), Ville Niinistö (Finland), Martin Häusling (Germany), Marie Toussaint (France), and Michael Bloss (Germany).

Circular economy

As well as deciding on taxonomies for industries stemming from energy, the EU is also debating what investments relating to materials and packaging should be considered ‘green’.

The MEPs are concerned that, at present, emissions resulting from bio-based materials risk being double-counted, and their climate benefit compared to raw fossil materials underestimated.

There is also concern that buildings could be considered “green” even if developers did not consider refurbishment or retrofit ahead of demolition and replacement – and even if buildings include no reused or recycled materials. The MEPs are calling for new circular economy minimum requirements for buildings. Globally, construction and demolition account for at least 40% of solid waste generation.

A group of civil society organisation has separately written to the European Commission this month regarding the taxonomy.  This letter expresses many of the same concerns over the circular economy, and implores lawmakers to also ensure that single-use plastic packaging cannot be classed as ‘green’, regardless of whether it contains recycled content.

Another commonality between the two letters is criticism of the role of offsetting. Neither the MEPs nor the civil society groups want any form of biodiversity offsetting investments classed as green. Such investments allow organisations to compensate for the damage they do to nature in one place by restoring or conserving it in another.

At present, nature investments can be considered taxonomy-aligned when “it does not only serve the purpose of offsetting the impact of another economic activity”. Offsetters could technically claim additional benefits and claim a ‘green’ label.

The civil society groups singing the letter include Transport and Environment, Reclaim Finance and Birdlife.

Related feature: Transition finance but no taxonomy: What’s in the UK’s new Green Finance Strategy?