Judgments and misconceptions about the EU taxonomy

The European Union has committed to reducing CO2 emissions by 55% by 2030 (compared with 1990).

Consequently, the objective has been identified of doubling the share of renewable sources in all energy consumption between 2020 and 2030 (from 20% to 40%) and the simultaneous reduction of energy consumption in all sectors between 36% and 41%. In addition, from 2035 new cars and commercial vehicles will be zero-emission.

On December 15, 2021, the European Commission presented its proposal for a legislative package to decarbonize the gas market, which includes measures for the deployment of renewable gases and "green" hydrogen that will require at least 40 GW of renewable-fueled electrolysers by 2030. The proposal also introduces a freeze to 2049 on long-term contracts for "non-decarbonized fossil" natural gas.

The combination of these measures inevitably entails a progressive extension of electrification of energy end-uses, i.e. the increase in demand for electricity to replace fossil fuels in mobility, heating, industrial production and for the production of hydrogen. Renewable sources today cover 38% of electricity production (nuclear 25%, gas 22% and coal 13%) and are expected to reach 70% by 2030.

The context of European commitments is confronted with at least three indicators that represent challenges towards decarbonisation:

• Europe today imports 61% of its energy sources (oil, gas and coal)

• Fossil fuels and nuclear are still necessary given the intermittence of renewable power production

• the EU's multi-year budget and the budgets of individual member states do not have the financial resources available to support the necessary investments.
  

The progressive reduction of dependence is primarily linked to the growth of renewable sources, which however in 2030 will cover only 40% of primary energy demand.

It is therefore necessary to consider first and foremost the potential for further "indigenous" production of zero- or low-carbon energy sources, and in this regard the role of nuclear power must be assessed rigorously and without bias following the criteria of the Joint Research Center of the European Commission (Technical assessment of nuclear energy with respect to the 'do no significant harm' criteria of Regulation (EU) 2020/852 'Taxonomy Regulation').

It should also assess the exploitation of the potential of natural gas extraction in Europe, as a support to the transition and energy independence, while the phase out of coal mining should be accompanied by the elimination of coal for the production of electricity and heat.

Nuclear and natural gas should also be considered as a back up to renewable sources, to ensure the continuity of electricity supply.

The private investment needed to complement public resources to support the transformation to decarbonization requires a framework of targets and rules for the transition, with the two milestones being 2030 and 2050.

This is the goal of the European taxonomy, which is not the "Bible" of sustainability, but a tool aimed at guiding investments towards decarbonization.

On April 21, 2021 was issued the first "package" (delegated act) containing the criteria by which it is possible to define "sustainable" activities consistent with the first two objectives of the European taxonomy: adaptation to climate change for the prevention and reduction of the effects of extreme climate events, and climate change mitigation for the reduction of emissions.

In mid-January, in his letter to the CEOs of companies invested in by BlackRock, the world's largest investment fund, Larry Fink said that "the decarbonization of the global economy is creating the greatest investment opportunity of our lifetime," and the transition will not materialize overnight. We will have to go through varying shades of brown and green before we get to a 'green' world." "We need governments to provide clear pathways and a consistent taxonomy for sustainability policy."

The delegated "climate" act in early February , which introduced nuclear and natural gas into the taxonomy addresses the need to provide a realistic reference for investments in the energy transition, to support the path to zero emissions without the backlash of energy crises that could block or delay Europe's goal of climate neutrality by 2050.

For gas, which is primarily intended to replace coal, emission targets, technological specifications, implementation times and subsequent transformation are indicated, orienting investments towards a very low carbon intensity plant. Many companies have objected that the objectives are difficult to reach and, in any case, with doubtful returns on investment. Looking at the last 30 years in the automotive, energy and industrial sectors, it can be said that similar objections have been overcome by facts.

For nuclear power, binding criteria are indicated for

• new plants to be approved by 2045 with technologies capable of ensuring additional levels of safety and minimisation of radioactive waste

• the use from 2025 of accident-tolerant nuclear fuel to increase safety levels in existing plants

Again, companies (Framatome) have objected that the criteria require the use of technologies not yet available. But the acceleration in research and testing in recent years suggests that the stated goals are realistic.

The taxonomy is now being considered by the European Parliament and the Member States. We hope that the examination will be well grounded in reality, without bias and with the goal of achieving the climate neutrality targets already approved. Also to avoid that international investors can be "distracted" by European uncertainty.

This article also appeared in Italian on La Formiche. Energy Voices is a democratic space presenting the thoughts and opinions of leading Energy & Sustainability writers, their opinions do not necessarily represent those of illuminem.