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The taxonomy could be a game changer for the financial industry and the whole European economy as it requires investment funds to disclose to what extent they are ‘green’ according to the new EU criteria. T&E welcomed last week’s recommendation on auto industry investments as only zero-emissions production will count as green from 2026.
But T&E cautioned that the EU should not include trucks and ships that claim to use bioenergy, as the report calls for. In practice, it will be impossible for investors to control what type of fuels end up in their tanks.
T&E’s sustainable finance director, Luca Bonaccorsi, said: ‘The taxonomy is visionary when it comes to cars, acknowledging that the only green car is one that has zero emissions. It sends a strong message to the car industry: there is no future for combustion engines. But the list leaves the door open to fossil fuel trucks and ships if they claim to use biofuel or biogas.’
The taxonomy’s biofuels, forestry and animal farming chapters also need to be revised, T&E and five other leading environmental NGOs said.
The report assumes that bioenergy is carbon neutral and hence good for the climate – despite scientific evidence to the contrary, said NABU in Germany. Steffi Ober, head of economics and research policy, said: ‘The safeguards it includes are very partial and only try to avoid the most egregiously damaging forms of bioenergy such as biofuels produced from crops on freshly deforested land. The reality is that almost all bioenergy is not carbon neutral and the vast majority is worse than fossil fuels once you properly account for its impact on carbon stores and sinks.’
The taxonomy law must not treat biofuels as a solution to the climate crisis but as a threat to both climate and biodiversity, said Deutsche Umwelthilfe (DUH) in Germany. Peer Cyriacks, deputy head of nature conservation, commented: ‘We must stop investments in the biofuel industry and invest in new mobility concepts, without combustion engines, instead.’
In classifying which forestry investments are ‘green’, the taxonomy report relies on ‘sustainable forest management’, essentially the notion that cutting less than the annual growth is OK. Ariel Brunner, senior head of policy at BirdLife Europe, said: ‘Pretty much any increase in logging intensity means reducing the carbon sink function of a forest, which is not good for the climate. Then there is the issue of biodiversity and other environmental impacts which require robust safeguards under the ‘do no harm’ principle.’
The experts also declare livestock farming as sustainable without proper regard for its risks to the environment, said Ecologistas en Acción in Spain. Samuel Martín-Sosa, head of international affairs, commented: ‘It tries to declare livestock farming as sustainable on the basis of a number of technological fixes which, while mostly meaningful individually, are unlikely to guarantee any positive climate impact or even prevent harm. This type of animal farming contributes greatly to greenhouse gas emissions locally and worldwide, pollutes water resources, and is based on a business model which lowers workers’ wages.’
It’s now up to the European Commission to propose a final list of what counts as ‘green’ investments. Its proposal must secure the agreement of the EU Parliament and governments by the end of the year to become law.
Legambiente in Italy called on the Commission to hold a public consultation so that voices outside the financial sector could be included in the process. Executive director, Giorgio Zampetti, said: ‘As finance is mired in massive greenwashing and fraud, environmental NGOs, consumer groups and citizens are increasingly engaged with the financial industry and the taxonomy law. Hopefully the Commission will let civil society experts, largely absent from the process so far, have a say through a public consultation.’