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What is the European green taxonomy and why is it so important? The keys to the Brussels proposal

The European Commission chose New Year's Day to put its green taxonomy proposal into circulation, a technicality behind a laudable attempt to order the economy and energy based on their environmental footprint. The draft, however, has raised significant dust, with a good number of countries – Spain among them – and MEPs raising their voices against it. What follows is a synthesis of what the Community Executive wants and the keys to the negotiation that will take place in the coming months between Brussels, the Governments and the European Parliament:

What is it?

Green taxonomy is a classification system for economic activities and, in this case, for electric power generation technologies. With it, the European Union seeks to offer companies and investors a clear definition of what is and is not sustainable, as well as redirect investments and avoid the so-called greenwashing or green face wash, in its Spanish translation. The initiative does not affect public investments nor does it imply a veto on them, which are already regulated by other regulations, such as, for example, Competition policy.

What does the European Commission propose?

Basically, giving nuclear power plants (as France wanted) and natural gas (as the previous German government wanted) the vitola of green energy. In the first case, it would be achieved by the atomic power plants whose construction permit is issued before a distant today 2045. In the second, it would be obtained by all the plants in operation that emit less than 100 grams of carbon dioxide (CO₂) per kilowatt hour (KWh) and those of new construction that emit less than 270 grams of CO₂ per kWh as long as that energy need cannot be covered with renewable sources and the installation replaces another that emits more.

Why How controversial is the Brussels proposal?

Know in depth all the sides of the coin.


Because it places both nuclear energy and energy from combined cycles (fueled with natural gas) at the same level as renewable energy. Although the former does not emit greenhouse gases, it does generate waste that is difficult to manage in the environment. The second does pollute and emit CO₂ although in significantly lower amounts than thermal power plants that work by burning coal or fuel oil, which, in many cases, they replace in the mix electric. Several countries, including Spain, and the senior staff of environmental organizations have shouted to the sky. One of the great paradoxes of the Brussels proposal is that, despite being considered green, the generation of electricity with natural gas would continue to be subject to the payment of CO₂ emission rights orchestrated by the Commission itself. These securities, which are intended to discourage polluting activities, are trading at all-time highs.

Is there an international precedent for something similar?

No, there is not. The current European Commission proposal completes the first step taken in July and should be ready before next summer.

Which countries are in favor? And against?

Austria has so far been the one that has shown the most forceful rejection, even warning that it is willing to go to court to avoid its entry into force. Spain has also rejected this initiative, although it is open to intermediate solutions. Nor has it been totally liked in Germany. In Berlin the label assigned to gas sounds good, but not that of not nuclear, an energy that they are eliminating from their energy matrix. The green faction of the Olaf Scholz government opposes both. The position expressed by the Netherlands before the Brussels proposal was known is similar to that of Germany. Portugal, Luxembourg and Denmark have also recently shown their rejection of atomic energy.

The opposite position of Austria was to be expected, due to its historical rejection of nuclear energy. Also the favorable view of France, whose commitment to this energy is ancient: more than two thirds of its electricity comes from this source. Other countries such as Poland or Bulgaria are also aligned with Paris.

What does the Spanish Government think?

Before the draft that the European Commission was known, the Executive of Pedro Sánchez had already shown his resounding refusal to consider green energy to nuclear and natural gas. On Sunday, just 24 hours after the content of the Brussels proposal was known, the Ministry of Ecological Transition issued a harsh statement in which it flatly rejected the motion, which it described as a “step back”.

Why is Spain opposed?

First, because it does not consider nuclear and gas to be “green or sustainable” energy. Second, because “it would send the wrong signals for the ecological transition in the European Union as a whole (…) and for the financial markets.” Third, because, according to the Ministry of Ecological Transition, it is not aligned with the “scientific evidence” by not respecting “the principle of not causing significant environmental damage.” And fourth, because it does not provide “the necessary clarity to focus capital flows towards the decarbonized, resilient and sustainable economy envisaged in the European Green Pact.”

If it finally succeeds, how would it be classified the Spanish electrical system?

Paradoxically, its composition would be virtually 100% green. Except for a tiny fraction – 3% of the total, with the data for 2021 in hand – that comes from the burning of coal or diesel, the rest of the generation sources would receive that band.

¿ What steps are left for approval?

The draft has been presented to member states and experts from the sustainable finance platform, who now have 12 days to present submissions. Afterwards, the Commission will present a final text that can only be rejected by a qualified majority in the European Council (55% of countries with at least 65% of the population) and the European Parliament. For this, they would have a period of four months extendable for another two.

How would investment patterns in green energy change?

The recategorization of nuclear and solar generates additional risk, by creating one more competitor for investment in renewables. “Major investors are very sophisticated and know how to distinguish”, confides Peter Sweatman, CEO of the specialized consultancy Climate Stretegy & Partners. The problem is that whoever wants to could sell as green investments in nuclear or gas, even if they are not, and “there would be no way to differentiate between a wind and a gas plant that meets the requirements, which are approximately half of those that meet the requirements. They are in use ”, he underlines by phone.

“Renewables are very competitive in and of themselves, so both investment and financing will continue to come, even more so when the price of CO₂ continues to rise,” closes Sweatman. The problem is that the pace of investments is not enough to meet the objectives, and that nuclear and gas have the label does not help: it can be a distraction and divert funds that are very necessary for wind and solar. ”

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