A border tax on high carbon imports, and a list of which economic activities to bankroll, are some of the tasks in hand by the European Union’s Platform on Sustainable Finance.
Shared language on sustainability
The world needs rapidly to develop a shared language and uniform ways of taking action on and measuring its effect on climate change.
Climate scientists say that by 2030 – nine years away – global net human-caused emissions of carbon dioxide must fall about 45 per cent from 2010 levels if the world is to reach the target of “net zero” emissions by 2050. This gives us a chance of stopping world temperature rises from exceeding 2oC.
The screening criteria to be developed by thePlatform on Sustainable Finance are intended to help this process.
They will be based on the EU taxonomy for environmentally sustainable economic activities and potentially extend it to other dimensions of sustainability.
The taxonomy – a list of activities deemed sustainable – was created by the European Commission’s “Technical Expert Group”; we have reported on it previously.
Due to the fast-changing nature of both science and technology, the criteria will be adapted regularly and based on scientific evidence and input from experts as well as relevant stakeholders.
To be judged “environmentally sustainable”, economic activities should make “substantial contribution” to environmental improvements and do no “significant harm”.
The screening criteria will identify the minimum requirements necessary in order to support the European Union’s aim to transition to a carbon-neutral economy.
Where activities presently have a negative impact on the environment, criteria will concern themselves with the extent to which they reduce this negative impact. They will particularly look at whether activities “lock in” carbon intensive actions.
The platform will also regularly review and update the EU taxonomy, monitor capital flows towards sustainable finance, and monitor EU policy development.
It will check out the potential costs and benefits of applying the criteria and help the commission process stakeholders’ requests to develop or revise them.
Members of the platform
The 50 members of the platform (whittled down from a total of 709 applicants) include representatives from the European Environment Agency, European Investment Bank and the EU Agency for Fundamental Rights; experts from relevant private stakeholders from the financial and business sectors; from civil society and academia.
Representatives from industries with high environmental impact are included because it was felt necessary to engage their experience and expertise so they can make a valuable contribution to the transition net zero.
Nuclear hydrogen and natural gas
Separately, the European Commission has just clarified that it will consider hydrogen produced from nuclear power as “low-carbon”.
It’s also been criticised by a watchdog for granting priority status to natural gas projects without properly assessing their impact on climate change.
The EU Ombudsman launched an inquiry in February into the commission’s process for approving fossil fuel projects as “Projects of Common Interest”– a label that means they can receive funding from the bloc and fast-tracked permits.
It is presumed that such mistakes would not now happen in the future. The list of Projects of Common Interest is not connected to the EU Taxonomy, since it predates it.
The taxonomy is likely to specify that to qualify as a “sustainable” investment, gas power plants must not emit more than 100 grams of CO2 equivalent per kilowatt hour. This would prevent gas plants from being labelled as a “transition” technology to net-zero, something the gas industry has long lobbied for.
Poland, which wants to replace its ageing fleet of dirty coal power stations with cleaner gas ones is protesting. It is backed by the trade association Eurogas. The taxonomy’s position on gas is not yet ratified and the argument is continuing.
Tax to stop carbon leakage
Meanwhile, EU climate officials are considering how to set tariffs on imported goods to encourage their manufacturers to take climate action, as part of the European flagship Green Deal initiative.
“Risk of carbon leakage means either that production is transferred from the EU to other countries with lower ambition for emission reduction, or that EU products are replaced by more carbon-intensive imports,” the commission has said in its public consultation.
The level of the tariff would fluctuate according to the price of CO2 allowances on the emissions trading scheme, the EU’s carbon market.
At the annual European Business Summit Mauro Petriccione, the head of the commission’s climate directorate, said the task would be made easier since a “climate-neutrality club” of nations is now forming, citing China, Japan and a likely pending announcement by Canada to go net zero.
It is highly complex and controversial; many countries such as Russia oppose such a tax.
Ultimately, all tax and spending must be aligned with net-zero goals, or the goals become meaningless.
David Thorpe is the author of ‘One Planet’ Cities and Director of the One Planet Centre Community Interest Company in the UK.