EU sustainable finance rules to defy greenwashing accusations

Good morning and welcome to Europe Express.

The EU’s long-awaited final text on the so-called taxonomy for what is considered a green investment (nuclear and gas included) is set to be published today. We’ll look at why all the opposition to the text hasn’t made much of a difference, and what are the next steps.

Meanwhile, on the eastern front, Russia’s president Vladimir Putin dug his heels in yesterday, accusing western powers of ignoring his demands and dragging his country into war with Ukraine. Next door in Kyiv, the procession of western officials continued, with the prime ministers of the Netherlands, Poland and the UK all meeting with Ukraine’s president yesterday to show support.

Switching gears, remember the idea — floated last year — of having an EU-wide digital wallet for personal, medical or official records? We’ll explore why it’s off to a rather bad start.

The gas is greener

It’s D-Day for the EU’s fraught publication of its green finance rules, writes Mehreen Khan in Brussels.

The European Commission will this afternoon publish the final version of its taxonomy on sustainable finance, which has been heavily criticised for classifying nuclear power and some forms of natural gas as green energy sources.

Ramming home the dissent, environmental campaigners will be greeting today’s text with a protest featuring commission president Ursula von der Leyen’s head on a mock tombstone reading “RIP EU Green Deal” outside the executive’s headquarters in Brussels.

Today’s publication is the penultimate step in a taxonomy process that has been littered with complaints from environmental groups, some EU governments and even the European Investment Bank. Green experts, MEPs and governments, including those of Austria, the Netherlands, Spain, Luxembourg and Denmark, as well as Germany’s Greens, have all called for the commission to exclude natural gas from the green label.

Their calls are likely to fall on deaf ears. Mairead McGuinness, EU commissioner for financial services, has said there will be no major changes from an initial draft that the Financial Times first reported on New Year’s Eve.

The classification of fossil gas and nuclear power will be largely unchanged, but officials have told Europe Express there will still be some tweaks to watch out for. One of them includes removing targets for the blending of gas with renewables for 2026 and 2030 to qualify for the green label. In theory, that will make it easier for gas to be considered a sustainable investment.

One key demands from anti-gas campaigners will not make it into the final text. This is a call for the inclusion of gas only if it emits less than 100g of CO2 per kilowatt hour of power and is used to replace more polluting sources such as coal. An initial designation of 270g will remain.

Amid the outcry, expect the commission to put up a staunch defence of the rules at a press conference this afternoon. Brussels is also well aware that despite the complaints and even threats of legal action, there is no super majority of member states to reject the taxonomy outright.

That leaves the European parliament as the only institution that can still stop the taxonomy in its tracks. MEPs would need to find a majority — 353 votes — to veto the rules and force the commission to go back to the drawing board. Anti-taxonomy MEPs are already rallying their troops.

A rejection would be an embarrassing blow for the commission that has flaunted the taxonomy as a trailblazing green financial regulation that will create a “green gold standard” for the rest of the world to follow.

Even if MEPs can’t veto the rules, investors may still shun the standard if they think it offers the greenwashing it was designed to eliminate. Should markets choose to comply with more rigorous alternatives — such as those being devised in the UK or the US — the EU’s green taxonomy will have failed on its own terms.

Chart du jour: Low unemployment

Unemployment in the eurozone fell to a record low of 7 per cent at the end of last year, underlining how the region’s labour market has bounced back much faster than expected from the impact of the pandemic. (More here)

EU’s digital wallet: dead on arrival?

Last summer, the EU unveiled plans for a digital wallet so that citizens could have access to services online, but some member states are starting to think it might not be a good idea after all, writes Javier Espinoza in Brussels.

The project was supposed to allow EU citizens to securely store payment details and passwords and log into local government sites to pay bills with a single sign-on, recognised across the bloc. The proposals are non-binding and allow member states to implement them as they see fit.

But some countries, including Ireland and Denmark, are starting to have reservations about the plans.

A letter signed by 14 member states outlines their fears. These are twofold:

• On the one hand, countries warn of “silos”, with each government developing their own technical solutions, making it very hard to achieve compatibility among the various systems.

• More fundamentally, these countries are concerned that the whole project may become obsolete the moment it gets implemented. “We have concerns regarding the sustainability of making potentially redundant systems within the near future,” the non-paper says.

What to watch today

1. European Commission publishes taxonomy on sustainable investments, including nuclear and gas

2. European parliament’s economics committee holds a hearing with eurogroup chief and Irish finance minister Paschal Donohoe

Notable, Quotable

When you work from a standard that is your benchmark and if that standard is set in a vibrant, democratic market economy, you get one [global] standard that will work

• Taking on China: The European Commission today is set to adopt a more aggressive approach in setting global standards for cutting-edge and green technologies, in a concerted effort with the US to counter the influence of China. Margrethe Vestager, the bloc’s competition chief, told the FT the new strategy was designed to ensure Europe continued to set international benchmarks that guided the development of everything from facial recognition systems, advances in battery power and the next generation of environmental innovations.

• Russian might: Russia’s recent overhaul of military equipment, strategy and personnel has transformed its combat units as troops mass on the Ukraine border. For its part, Kyiv has also improved its military capabilities since 2014, when Russia annexed Crimea and started the war in the Donbas region. But Russian forces remain superior both in numbers and equipment.

• Irish spring: Ireland’s prime minister Micheál Martin may have declared last month that “spring is coming”, as he eased Covid-19 restrictions and announced that the country had weathered the Omicron storm, but he is entering his political autumn, having agreed to step down this December amid dwindling popularity.

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