THE GREEN DEAL AT A CROSSROADS

Recently, and particularly since the publication of the Commission Delegated Regulation 2022/1214 in March 9, 2022, (establishing new criteria in the field of the so-called "Taxonomy" (a list of technical screening requirements for certain economic activities in order to comply with the EU objectives related to climate change)), there has been great consternation in the media due to the fact that the Regulation is intended to support the use of two sources of energy considered until then as harmful to the environment: natural gas, a fossil hydrocarbon with significant  carbon dioxide emissions; and nuclear energy, whose main drawbacks lie in the dangerous nature of its facilities and in the storage of the waste generated.

Apparently, the "new" labelling as "sustainable" of such activities contradicts the essential lines established in the "European Green Pact" (Commission Communication 2019/640) and in the “EU RePower Plan” (Commission Communication 2022/230), which are committed to the rapid substitution of fossil fuels by renewable energies in the framework of the "Fit for 55" program (a reduction of greenhouse gases emissions in a percentage of 55% regarding those existing in 1990).

 

This important change, displayed in a Regulation and not in a mere statement of intents, is usually attributed to the crisis due to the Ukraine-Russian war and to the shortage of fuel supplies caused by it. But to be precise, the "revision" of the situation was already planned, and in this sense, we cannot forget article 194 of the Treaty on the Functioning of the EU refers to three targets of the Union's energy policy, by providing that, to preserve and improve the environment, it is necessary to “promote energy efficiency” together with energy saving and development of new and renewable energies”.

As a matter of fact, Regulation 2021/2139 (“EU Taxonomy”), modified in March 2022 to include as "green" activities, the production of energy through natural gas and nuclear plants, stated, in its original text, and in relation to certain “transition activities” that these “must make a substantial contribution to climate change mitigation when no low-carbon alternative is technologically or economically viable…”, significantly adding that "Natural gas activities that meet these requirements will be included in a future delegated act."

Furthermore, in 2021, a proposal to modify Directive 2003/96 on the taxation of energy products and electricity (COM 2021/563) justified fiscal privileges for several fossil fuels on the basis that they are “less harmful, and still have some potential to contribute to decarbonisation in the short and medium term”, applying reduced rates to “natural gas, LPG and hydrogen of fossil origin for a transitional period of 10 years”.

In short, the EU is carrying out two kind of actions to clear the way ahead: one of them reflects the objectives, linked to climate neutrality (zero emissions in 2050) to be achieved in the long term (Commission Communications “Green Pact” or “UE RePower Plan”); the other (Taxonomy Regulation, Commission proposal restructuring the Union framework for the taxation of energy products and electricity), maintains the use of natural gas as a less polluting hydrocarbon (and also of nuclear plants) during a "transitional period" that would last until 2030, when the “Fit for 55” target should be met.

Both actions face significant difficulties: the long-term one due, firstly, to an energy crisis that could last for years; and, secondly, to the lesser involvement of the most polluting countries in the fight against climate change (it is significant that at the recent COP27 China, India and Russia were absent).

 

The European Union is well aware that its efforts will be useless if a collaboration on a global scale is not reached, and this is made clear in the 2019 "Green Pact", which states: "As long as many international partners do not share the same ambition as the EU, there is a risk of carbon leakage, either because production is transferred from the EU to other countries with lower ambition for emission reduction, or because EU products are replaced by more carbon-intensive imports. If this risk materialises, there will be no reduction in global emissions, and this will frustrate the efforts of the EU and its industries to meet the global climate objectives of the Paris Agreement. Should differences in levels of ambition worldwide persist, as the EU increases its climate ambition, the Commission will propose a carbon border adjustment mechanism, for selected sectors, to reduce the risk of carbon leakage”.

 

This proposal, the CBAM, launched in July 2021 and pending approval, may entail retaliations by certain less advanced countries in environmental matters that consider it does not comply with WTO rules and raises obstacles to their exports.

As for the "transitional" objectives to be reached in a shorter term, the use of natural gas to produce energy, admitted by the EU taxonomy rules, may mean a slowdown, in certain Member States, when it comes to replacing it with renewable energies such as hydrogen or biomethane, the production of which is very significant in France, Germany and Denmark, whilst it is reduced or non-existent in other EU Member States.

The future of the EU environment policy is, at present, not as clear as would be desirable, and even if all the mentioned goals were achieved, this would not mean a reduction of greenhouse gas emissions in a worldwide context, which is what really counts, given the stagnation of some large economies such as China in the fight against climate change or even the probable increase, in future years, of the use of polluting energy sources.