The European Commission will have to defend itself in court after a coalition of NGOs filed a legal complaint against the EU executive’s much-derided sustainable taxonomy rulebook. It has been a difficult upbringing for the policy.
The European Union’s taxonomy for sustainable activities had a very simple and admirable goal when it was first launched in 2020: guide billions of euros in investments towards sustainable projects, technologies and ventures.
Much of the Green Deal and the climate targets it sets are reliant on huge amounts of private capital being diverted from polluting activities towards green alternatives. The taxonomy was intended to be a playbook for investors to consult and follow.
EU laws and regulations are a tricky prospect even for the initiated and the Green Deal added even more complexity to the policy mix. The taxonomy was meant to simplify all that and make it easy for investors to identify the safe bets.
But it has not turned out that way. Right from the off, there was controversy about what should and should not be included in the rulebook. The main scandal revolved around what energy technologies should get the green label.
Germany wanted fossil gas included, arguing that it is a much cleaner option than coal. France, meanwhile, wanted nuclear included, which Berlin was not happy about. But eventually a bargain of sorts was brokered between the two European capitals.
In 2022, the European Parliament rejected a motion to keep nuclear and gas out of the taxonomy and they are now included, albeit subject to rather strict provisions.
New fossil gas projects must meet certain emission limits, while existing gas plants must be converted to run on low carbon fuels by 2035. Nuclear developers must obtain construction permits by 2045 and stick to very stringent radioactive material disposal regulations.
It has all muddied the waters somewhat of what is sustainable. For many, the inclusion of gas is a complete oxymoron, while for others, the initial exclusion of zero-carbon nuclear was also incomprehensible.
Austria – which has banned the use of nuclear power – has launched legal action against the Commission over the taxonomy. The case is still ongoing at the European Court of Justice.
More days in court
It is not just power generation that is proving to be controversial. What kind of manufactured goods that can be labelled as green is also rubbing people up the wrong way.
According to the current taxonomy rules, aircraft manufacturers and shipbuilders can qualify for a sustainable label if the vehicles they produce meet certain criteria as well.
Clean mobility advocates were aghast at this prospect when it was first announced in 2023 and urged the Commission to rethink its position.
Before the summer break, the EU executive refused to do that and so earlier this week a group of NGOs launched another legal case against this particular aspect of Brussels policymaking.
The plaintiffs claim that the Commission lacks the right scientific basis to include planes and ships in the taxonomy, citing in particular the methane emissions of LNG-powered vessels and the non-CO2 impact of aircraft.
They also believe that the standards set by the Commission are far too lax and manufacturers can qualify for inclusion far too easily. There is also the fact that these vehicles are built to last decades so could become quickly outdated from a sustainability point of view.
Again, the Commission’s initial correct decision to try and streamline the green financing process has come rather undone because it has been undermined by vested interests that have little stake in making sure climate objectives are met.
The ECJ now has to decide whether the case is worthy of a full hearing. The Commission will be given an opportunity to defend itself but regardless of what the outcome is, time will be lost and investor-certainty is already diluted.
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