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28th Jan 2023

Auditors slam EU Commission on green investments

  • The European Court of Auditors call on the European Commission to double down on sustainable finance. (Photo: European Court of Auditors)
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The EU is not doing enough to direct finance towards green investments, according to a report on Monday (20 September) from the European Court of Auditors.

The European Commission, by its own estimation, will need to invest €1 trillion a year to transition to a zero-carbon economy by 2050. EU financial support could help provide over €200bn per year in the 2021-2027 period, which falls far short of that.

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Currently, the commission set the minimum climate investment at 30 percent for the EU budget (€1,074bn) and 37 percent for the EU recovery fund (€850bn).

But according to the report, this is not enough. "None of the funds the EU invests should go to projects that harm the environment," said Eva Lindström, a member of the audit team, in a press conference on Monday.

"Some of these funds are still used for fossil-fuel infrastructure." She advised the commission to apply the 'do no significant harm'-principle to all EU funding.

This principle means no investment should hinder the goal of transitioning to a sustainable, non-polluting, zero-emissions economy by 2050 - which should be well underway by 2030.

"I acknowledge this is a political challenge, but I believe that is the direction the EU should take," she said.

The EU taxonomy, a green classification system will help companies adjust to the new reality. And it is meant to assist private investors and public authorities direct money in the right direction.

The 414-page regulatory effort was started in 2018 and forms the heart of the EU action plan for sustainable finance.

It aims to compile a total overview of all economic activities - from pig farming, the manufacture of chemicals, cement and steel to transport - with benchmarks describing - in grammes of CO2-per-production unit - how much producers are allowed to emit to be sustainable.

For example, a passenger car can only be called sustainable if it emits less than 50 grammes of CO₂ per kilometre. After January 1 2026, it is grammes.

Sustainable cement producers may emit no more than 0.498 tonnes of CO2. And drinking water and sewage are only sustainable if no more than 0.5-kilowatt hours of energy is used per 1,000 litres.

Although the taxonomy has not yet been finished, Lindstrom points out the European Investment Bank (EIB) is already using it, and the principle of 'do no significant harm,' as the starting point for all investments.

According to Lindstrom, the commission should do the same: "[The] EU budget still funds gas infrastructure in some cases. And 40 percent of the EU budget goes towards subsidising agriculture, which is a sector where emissions are rising."

No time to waste

Lindstrom conceded the commission has proposed many measures in recent years that will help speed up the transition. But she pointed out many of the green finance plans currently on the table are delayed or incomplete.

The damage of greenhouse-gas emissions is not adequately reflected in the price per tonne of CO2. Companies still do not report adequate on sustainability.

According to Lindstrom, it is still not clear enough which investment is sustainable and which is not. The taxonomy, planned to be completed in 2019, has become mired in disputes between member states, who disagree on whether natural gas and bioenergy deserve a green label.

But according to Lindstrom, there is no time to waste on disagreements, and the "taxonomy should be completed in accordance with the scientific advice that has already been given."

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