EU’s sustainable finance taxonomy to brand gas and nuclear plants as ‘green’

EU’s sustainable finance taxonomy to brand gas and nuclear plants as ‘green’

Subject: Environment

Section: Climate Change

Context:

EU has recently agreed to label investments in some gas and nuclear power plants as environment-friendly.

What is EU taxonomy?

• It is a classification system, establishing a list of environmentally sustainable economic activities.
• It could play an important role helping the EU scale up sustainable investment and implement the European green deal
• The EU taxonomy would provide companies, investors and policymakers with appropriate definitions for which economic activities can be considered environmentally sustainable.
• In this way, it should create security for investors, protect private investors from green washing, help companies to become more climate-friendly, mitigate market fragmentation and help shift investments where they are most needed.

The Taxonomy Regulation establishes six environmental objectives:

1. Climate change mitigation
2. Climate change adaptation
3. The sustainable use and protection of water and marine resources
4. The transition to a circular economy
5. Pollution prevention and control
6. The protection and restoration of biodiversity and ecosystems

What makes a “green” investment?

The rules classify three types of green investments

1. Those that substantially contribute to green goals, for example, wind power farms.
2. Those that enable other green activities, for example, facilities that can store renewable electricity or hydrogen
3. Transitional activities that cannot be made fully sustainable, but which have emissions below industry average and do not lock in polluting assets or crowd out greener alternatives

Green washing

• It is his practice of making unwarranted or overblown claims of sustainability or environmental friendliness in an attempt to gain market share.

Background:

EU Greed Deal:

• To raise the EU’s ambition on reducing greenhouse gas emissions to at least 55% below 1990 levels by 2030.
• To achieve climate neutrality in the EU by 2050.

India’s Climate target:

• India will get its non-fossil energy capacity to 500 gigawatt (GW) by 2030
• India will meet 50 per cent of its energy requirements from renewable energy by 2030
• India will reduce the total projected carbon emissions by one billion tonnes from now onwards till 2030
• By 2030, India will reduce the carbon intensity of its economy by less than 45 per cent
• So, by the year 2070, India will achieve the target of Net Zero