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Ursula von der Leyen must take on Europe’s biggest #Climate rebel: Germany

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Ursula von der Leyen won’t assume the European Commission presidency for another four months, but the battle that will define her tenure is already underway. After years of sluggish European progress on climate change, Von der Leyen has committed herself to a bold new ‘Green Deal’, with the goal of securing carbon neutrality by 2050. She only secured her wafer-thin Parliamentary majority after convincing skeptical left-wing MEPS of her carbon credentials.

But now, after all the promises, she needs to deliver. That means going out and securing support from all the EU’s members, including one particularly rebellious central European state. And for once, we’re not talking about one of the poorer members which have been pilloried for their regressive environmental policies.

This time, it’s her own home country.

Climate hypocrisy

Germany has talked a good game on climate change. Angela Merkel has even been dubbed the climate chancellor, both for her bullish rhetoric on carbon emissions and the key role she played in brokering the UN’s inaugural climate deals while serving as German environment minister in the 1990s. But faced with the lobbying might of German carmakers, Merkel and her ministers have consistently failed to match words with actions.

Despite spending an estimated €500 billion to revamp its energy matrix by getting out of nuclear energy and supposedly coal, it is ironic that Germany remains the biggest coal burner in Europe. Merkel even admits that coal “will remain a pillar of German energy supply for a prolonged time span.” Her government is committed to achieving a 40% reduction in carbon emissions by 2020 (compared to 1990 levels), yet at present that target is a long way off. When it should be plummeting, Germany’s output of polluting gases has plateaued.

Worse than that, though, Germany has actively tried to thwart some of the EU’s flagship environmental policies. In 2006, just a year into her chancellorship, Merkel decided to dole out pollution permits to her industrial powerhouses, flooring the price of the EU’s emissions trading system. She’s has since ignored warnings about the pollution emanating from the automakers’ diesel engines, and tried to block a new fuel economy standard for European cars. When the EU proposed increasing the share of renewables in its energy mix to 35%, Germany argued furiously that it should go no higher than 30%.

Condemning greenhouse gases, but preaching Nord Stream 2

Perhaps the most dangerous example of German intransigence is Nord Stream 2, the new pipeline which will convey natural gas directly from Russia to Germany via the Baltic Sea, bypassing transit states such as Poland, Belarus and Ukraine. The plans have been met with vehement protest from these countries, not only because they stand to be cut out of the loop. Many believe that, once Nord Stream 2 is built, Russia will turn off the taps on its former satellites and ramp up its campaign of military provocation.

Still Germany stands firm, prioritizing its own energy needs over the rest of Europe, even though using natural gas – a fossil fuel, for all its claims of cleanliness – won’t help its climate track record and the emissions reductions deadlines Berlin is already set to miss by a wide margin. Nor is the carbon dioxide the only greenhouse gas European environmentalists are worried about; the production system managed by Russia’s Gazprom, which is behind the Nord Stream 2 project, has a notoriously high “fugitive emissions” rate for methane that makes its natural gas no cleaner than coal. As a 2017 Atlantic Council/Free Russia report points out, Gazprom itself has been dismissive of both renewable energy technologies and European energy transitions.

German officials, for their part, flatly deny that the pipeline will undermine gas diversification in Europe or pose a threat to Ukraine. They have even tried to prevent the EU from extending its gas liberalization rules to Nord Stream 2, which would give Brussels a measure of control over Russian energy giant Gazprom. The decision has caused a split between Germany and France, a gap at the heart of Europe which Vladimir Putin is happy to exploit.

Building a closer, cleaner Europe

Von der Leyen has set herself firmly against such division, pledging to promote a stronger, closer Europe. In fact, she was nominated for her ability to repair relations between Paris and Berlin. She’s also known for her uncompromising attitude towards the Kremlin’s divisive tactics. But will she be able to stand up to Germany – and her former boss?

It won’t be easy. Von der Leyen has long been a Merkel ally, and the German chancellor is a key figure in her own European People’s Party. The EPP, the biggest voting bloc in the European Parliament, is already suspicious of Von der Leyen because she reportedly failed to consult them over her climate plans. Yet Von der Leyen is pitched herself as a candidate capable of bold, disruptive action, and she does have a clear mandate to take on Europe’s biggest powerbrokers.

While she might jeopardise the support of conservative Parliamentarians by taking on Germany, Von der Leyen owes her election victory as much to progressive blocs such as the Socialists and Renew Europe as to the EPP. These blocs will expect her to repay their faith. A bold stand in relation to Berlin might also win the support of the powerful Green bloc, which voted against Von der Leyen because they believe her environmental strategy doesn’t go far enough.

One can’t expect Von der Leyen to block Nord Stream 2 overnight or stop Germany from burning coal any time soon, but by pushing Germany to prioritize the EU’s collective interests over its own, and by embracing a more progressive environmental agenda in line with its neighbors, Von der Leyen can deliver on her mandate to build a cleaner, greener, and more united Europe.

European Green Deal

Greenwashing of EU finance law sparks walk-out by experts

Catherine Feore

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Five environmental and consumer organizations are pulling out of an EU expert group in protest at the European Commission’s decision on 21 April to classify certain forestry practices and highly emitting types of biomass as sustainable investments. 

The Platform on Sustainable Finance advises the European Commission on the development of science-based technical screening criteria for sustainable investments. The Commission has selected 50 members and nine special observers based on their environmental, sustainable finance, or social/human rights expertise. The members include key EU institutions such as EIOPA, ESMA, EBA, EIB, in addition to NGOs, trade and business associations, academia and research institutes there are also a number of observers including: OECD, ESM and ECB.

The organizations claim that the new rules are not based on climate and environmental science and ignore the recommendations of the EU expert group on sustainable finance. 

Luca Bonaccorsi, director of sustainable finance at Transport & Environment, said: “The taxonomy law was supposed to be the gold standard of sustainable finance. But the result has been the greenwashing of dirty cargo ships, gas buses, and logging and burning trees. Environmentalists will not come back to the process until the Commission comes back to science.”

NGOs Transport & Environment, WWF European Policy Office, BirdLife Europe and Central Asia, consumer group BEUC, and eco-standards advocates ECOS are demanding discussions with the Commission to establish rules that stop the scientific basis of the EU taxonomy law being, to their minds, compromised further. 

director general - BEUC, eu consumer organisation

The groups say decisions to endorse harmful forestry and biomass projects completely discredits the green taxonomy.

The Commission also decided to classify as ‘sustainable’ cargo ships burning highly polluting ‘bunker’ fuel and buses running on fossil gas. It delayed a decision on fossil gas as an energy source until a later stage of the process.

The five organizations have suspended their participation in the expert group to avoid a “cover-up” of further greenwashing. They called on the expert group’s members and leading MEPs to join their protest. 

The Taxonomy Regulation determines which financial investments can be labelled environmentally sustainable. The actual list of environmentally sustainable activities is being drawn up by the Commission and is supposed to be based on recommendations by the expert group of NGOs, financial market companies and EU agencies.

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Sustainable Finance and EU Taxonomy: Commission takes further steps to channel money towards sustainable activities

EU Reporter Correspondent

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The European Commission has adopted an ambitious and comprehensive package of measures to help improve the flow of money towards sustainable activities across the European Union. By enabling investors to re-orient investments towards more sustainable technologies and businesses, today's measures will be instrumental in making Europe climate neutral by 2050. They will make the EU a global leader in setting standards for sustainable finance.

The package is comprised of:

  • The EU Taxonomy Climate Delegated Act aims to support sustainable investment by making it clearer which economic activities most contribute to meeting the EU's environmental objectives. The College of Commissioners today reached a political agreement on the text. The Delegated Act will be formally adopted at the end of May once translations are available in all EU languages. A Communication, also adopted by the College today, sets out the Commission's approach in more detail.
  • A proposal for a Corporate Sustainability Reporting Directive (CSRD). This proposal aims to improve the flow of sustainability information in the corporate world. It will make sustainability reporting by companies more consistent, so that financial firms, investors and the broader public can use comparable and reliable sustainability information.
  • Finally, six amending Delegated Acts on fiduciary duties, investment and insurance advice will ensure that financial firms, e.g. advisers, asset managers or insurers, include sustainability in their procedures and their investment advice to clients.

The European Green Deal is Europe's growth strategy that aims to improve the well-being and health of citizens, make Europe climate-neutral by 2050 and protect, conserve and enhance the EU's natural capital and biodiversity.

As part of that effort, companies need a comprehensive sustainability framework to change their business models accordingly. To ensure the transition in finance and prevent greenwashing, all elements of today's package will enhance the reliability and comparability of sustainability information. It will put the European financial sector at the heart of a sustainable and inclusive economic recovery from the COVID-19 pandemic and the longer-term sustainable economic development of Europe.

EU Taxonomy Climate Delegated Act

The EU Taxonomy is a robust, science-based transparency tool for companies and investors. It creates a common language that investors can use when investing in projects and economic activities that have a substantial positive impact on the climate and the environment. It will also introduce disclosure obligations on companies and financial market participants.

Today's Delegated Act, politically agreed today by the College of Commissioners, introduces the first set of technical screening criteria to define which activities contribute substantially to two of the environmental objectives under the Taxonomy Regulation: climate change adaptation[1] and climate change mitigation[2]. These criteria are based on scientific advice from the Technical Expert Group (TEG) on sustainable finance. It follows extensive feedback from stakeholders, as well as discussions with the European Parliament and Council. This Delegated Act would cover the economic activities of roughly 40% of listed companies, in sectors which are responsible for almost 80% of direct greenhouse gas emissions in Europe. It includes sectors such as energy, forestry, manufacturing, transport and buildings.

The EU Taxonomy Delegated Act is a living document, and will continue to evolve over time, in light of developments and technological progress. The criteria will be subject to regular review. This will ensure that new sectors and activities, including transitional and other enabling activities, can be added to the scope over time.

A new Corporate Sustainability Reporting Directive

Today's proposal revises and strengthens the existing rules introduced by the Non-Financial Reporting Directive (NFRD). It aims to create a set of rules that will – over time – bring sustainability reporting on a par with financial reporting. It will extend the EU's sustainability reporting requirements to all large companies and all listed companies. This means that nearly 50,000 companies in the EU will now need to follow detailed EU sustainability reporting standards, an increase from the 11,000 companies that are subject to the existing requirements. The Commission proposes the development of standards for large companies and separate, proportionate standards for SMEs, which non-listed SMEs can use voluntarily.

Overall, the proposal aims to ensure that companies report reliable and comparable sustainability information needed by investors and other stakeholders. It will ensure a consistent flow of sustainability information through the financial system. Companies will have to report on how sustainability issues, such as climate change, affects their business and the impact of their activities on people and the environment.

The proposal will also simplify the reporting process for companies. Many companies are currently under pressure to use an array of different sustainability reporting standards and frameworks. The proposed EU sustainability reporting standards should be a “one-stop-shop”, providing companies with a single solution that meets the information needs of investors and other stakeholders.  

Amendments to Delegated Acts on investment and insurance advice, fiduciary duties, and product oversight and governance

Today's six amendments encourage the financial system to support businesses on the path towards sustainability, as well as supporting existing sustainable businesses. They will also strengthen the EU's fight against greenwashing.

  • On investment and insurance advice: when an adviser assesses a client's suitability for an investment, they now need to discuss the client's sustainability preferences.
  • On fiduciary duties: today's amendments clarify the obligations of a financial firm when assessing its sustainability risks, such as the impact of floods on the value of investments.
  • On investment and insurance product oversight and governance: manufacturers of financial products and financial advisers will need to consider sustainability factors when designing their financial products.

An Economy that Works for People Executive Vice President Valdis Dombrovskis said: “Europe was an early leader in reforming the financial system to support investments for climate change. Today, we are taking a leap forward with the first-ever climate taxonomy which will help companies and investors to know whether their investments and activities are really green. This will be essential if we are to mobilize private investment in sustainable activities and make Europe climate-neutral by 2050. This is a ground-breaking step for which we have consulted far and wide. We left no stone unturned in seeking a balanced, science-based outcome. We are also proposing improved rules on sustainability reporting by companies. By developing European standards, we will build on and contribute to international initiatives.”

Mairead McGuinness, commissioner responsible for financial services, financial stability and the Capital Markets Union, said: ““The financial system plays a crucial role in the delivery of the EU Green Deal, and significant investments are required to green our economy. We need all companies to play their part, both those already advanced in greening their activities and those who need to do more to achieve sustainability. Today's new rules are a game changer in finance. We are stepping up our sustainable finance ambition to help make Europe the first climate-neutral continent by 2050. Now is the time to put words into action and invest in a sustainable way.”

Background and next steps

The EU has taken major steps over the past number of years to build a sustainable financial system that contributes to the transition towards a climate-neutral Europe. The EU Taxonomy Regulation, the Sustainable Finance Disclosure Regulation and the Benchmark Regulation form the foundation of the EU's work to increase transparency and provide tools for investors to identify sustainable investment opportunities.

Once formally adopted, the EU Taxonomy Climate Delegated Act will be scrutinised by the European Parliament and the Council (four months and extendable once by two additional months).

Regarding the CSRD Proposal, the Commission will engage in discussions with the European Parliament and Council.

The six amendments to Delegated Acts on investment and insurance advice, fiduciary duties, and product oversight and governance will be scrutinised by the European Parliament and the Council (three month periods and extendable once by three additional months) and are expected to apply as of October 2022.

More information

Commission Communication: EU Taxonomy – Corporate Sustainability Reporting, Sustainability Preferences and Fiduciary Duties    

EU Taxonomy delegated act 

Q&A - Taxonomy Climate Delegated Act and Amendments to Delegated Acts on fiduciary duties, investment and insurance advice

Q&A - Corporate Sustainability Reporting Directive proposal

Factsheet – the April 2021 sustainable finance package  

DG FISMA's website on sustainable finance

[1] An economic activity pursuing this objective should contribute substantially to reducing or preventing the adverse impact of the current or expected future climate, or the risks of such adverse impact, whether on that activity itself or on people, nature or assets.

[2] An economic activity pursuing this objective should contribute substantially to the stabilization of greenhouse gas emissions by avoiding or reducing them or by enhancing greenhouse gas removals. The economic activity should be consistent with the long-term temperature goal of the Paris Agreement.

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Climate change

LIFE programme: More EU support for climate action

EU Reporter Correspondent

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The EU agreed to fund the LIFE programme with a budget of €5.4 billion. LIFE is the only programme at EU-level solely dedicated to the environment and climate and the programme for 2021-27 is the most ambitious yet. There will be €3.5bn for environmental activities and €1.9bn for climate action. The programme is part of the Green Deal package proposed by the European Commission.

Find out about EU responses to climate change.

Creating a cleaner and more circular economy that re-uses and recycles products is a main priority for the EU and the LIFE programme will have an important role to play. The programme will support the transition to clean energy and will work together with other programmes towards the EU goal of achieving carbon neutrality by 2050. It also aims to protect and improve the quality of the environment and to halt and reverse biodiversity loss.

The LIFE programme is part of the EU long-term budget and recovery plans, which committed to spending 30% on climate action. The other programmes include the Just Transition Fund to help EU regions to adapt to the green economy, InvestEU which will finance climate projects, and Horizon Europe which will fund EU research and innovation in the climate sector

Read more on EU funding for initiatives to fight climate change:

Find out more 

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