Building a sustainable future by eliminating the Carbon dioxide emissions by 2050 is the ambitious goal of the European Green Deal. But the green transition it is above all an economic issue, which has a number of important societal implications, as the violent revolts against energy and fuel price hikes in the past have already shown: one notably that of the yellow vests in France. In short, carbon neutrality cannot be achieved on the skin of the most sensitive categories. That’s why green investment, a huge cash flow that could be worth as much as $1.3 trillion in 2022, needs to be channeled into projects that can really make a difference. In this context, in 2020 the European institutions developed a criterion for classifying environmentally sound economic activities. The “green taxonomy” is a way to protect investors from the risks “green washing’, Avoid market fragmentation and direct investment where it is ‘needed most’. Not only. By aligning with the taxonomy, companies have better chances of financing from banks and ad hoc funds. The regulation sets out six goals to be pursued: climate change mitigation and adaptation, sustainable use of water and marine resources, transition to a circular economy, pollution prevention and control, and protection of ecosystems and biodiversity. On the other hand, the “technical screening criteria” of the economic activities that contribute to the achievement of these purposes are laid down in the delegated acts drawn up by European Commission.
The last and most discussed was launched on February 2nd. The political and media debate has focused on inclusion nuclear and gas are among the energy sources useful for the ecological transition. However, since the devil is in the details, that’s exactly where you need to be on the lookout for what appears to be a real rip-off for most member states. Even at first glance, it is clear that the document essentially accepts the demands of France and Germany: from “customs clearance” of the atom as clean energy, one of President Macron’s workhorses, to strict requirements for gas plants to be classified as green apply… only if they emit less than 100 grams of Co2 per kWh, except for a transitional period until 2030, when the threshold will be raised to 270. Environment, Health and Food Safety, commented on the result of the compromise reached: “These solutions are consistent with both the position of France and with the coalition agreement of the new federal government”. But these are not the only conditions from which Berlin and Paris actually benefit. We talked about the details and in particular the technical requirements that investors should pay attention to. Let’s start with nuclear power. The document states that among the obligations are member states operating new nuclear power plants to submit a plan for the construction of an operational storage facility for high-level radioactive waste by 2050. A constraint currently only achievable by France, Germany, Finland, Sweden and Estonia. All other states, including Italy, would not succeed as they would be effectively barred from funding such projects.
The same applies to power plants powered by gas. Here the Commission has defined eight criteria, two of which are particularly problematic and relate to the replacement of coal-fired power plants. The first states that the production capacity of the new gas plants must not exceed that of the closed plants by more than 15 percent. The second, on the other hand, concerns the question of determining the date for parting with it fossil fuel.
two more parameter which cannot be met by most Member States, which would be barred from being able to fund projects on their own territory. For example, Croatia plans to build three new gas-fired power plants with a total capacity of 750 Mw. The total capacity of the coal-fired power plants is 335 Mw, so at least 49 percent of the new gas capacity would be excluded from the taxonomy and not considered “transition”. The same applies to Hungary, where investments in 43 percent of the new gas capacity would be excluded.
The number is also significant for Italy and would be around 38 percent. In practice, this fee cannot be the recipient green investments because it does not “replace” coal-fired power plants. Lithuania, Estonia, Cyprus, Austria and Belgium will also not comply with the 15% rule. The new German gas plants will be 100 percent financeable.
Another paradox is the Polish one: the Warsaw government has not yet defined a roadmap for phasing out this polluting source of energy, and therefore, paradoxically, will not be able to count on investments in gas plants, although they are among the EU countries dependent on coal.
Based on this information, some analysts have also developed a chart to understand where green investments will end up Europe. The result is worrying. Paris would secure the largest share with 53 percent of the funds. Translated into figures, this amounts to around 100 billion euros, most of which will be used to refurbish the old plants that are in the process of being dismantled and to build others to the new green standards. Germany follows with 23 percent, while the rest has only crumbs left. According to the same estimate, 5 percent goes to the Czech Republic and only 3 percent to countries like Italy, Romania, Bulgaria and Sweden. The rest have to be content with 2, 1 or 0 percent. In short, despite the Commission’s expert group’s insistence on the need for a compromise that meets the needs of all states, the final document seems tailored to the needs of Paris and Berlin. And that also applies to Europe, even on an issue as important as that protection of the planetrun at two speeds.
