Brussels There is a heavy moral pressure on the members of the European Parliament. On Wednesday they have to decide whether investments in certain gas and nuclear power plants should be considered sustainable in the EU taxonomy.
The day before, Ukrainian MP Inna Sovsun had drawn a connection between taxonomy and the Russian invasion. “Russian missiles are hitting our cities every single day,” she said, speaking at a press conference in the European Parliament in Strasbourg. The money that Europe transfers to Russia for gas would finance these missiles. “This taxonomy is part of Putin’s efforts to transform European politics.”
The opponents of the new regulations also include numerous EU parliamentarians, including the German Green MP Michael Bloss. “Putin would be the big winner,” he warned.
The EU taxonomy establishes criteria for when an investment contributes to a climate-neutral future. A supplementary legal act is now intended to make it clear that this also applies to particularly efficient gas and nuclear power plants.
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Many companies welcome the addition and are hoping for cheaper credit to fund new equipment. Since taxonomy-compliant power plants have to be particularly efficient, gas could be saved compared to older power plants. In the future, these plants could also be operated with hydrogen.
Climate protectors, on the other hand, want to switch to renewable energies as quickly as possible and reject additional ones gas power plants in general. In the debate about expanding the taxonomy, they joined forces with opponents of nuclear power and those politicians who want to stop gas imports from Russia as quickly as possible.
Opponents fight for every deputy
The already heated discussion has become even more heated as a result of Russia’s attack on Ukraine. Taxonomy opponents from all relevant groups in the European Parliament are fighting for every single member of parliament. In order for the legal act to be overturned, 353 votes are needed on Wednesday at 12 p.m. “We keep counting,” said Green politician Bloss.
The votes are not enough. However, the Greens are counting on some of the previously undecided parliamentarians taking their side in the face of the pressure. MPs must ask themselves how their behavior will affect the geopolitical situation, Ukrainian MP Zovsun said in order to increase pressure. And the answer is simple: “The taxonomy relies too much on Russian gas.”
The taxonomy does not differentiate according to the origin of the gas. Requirements are only placed on the power plants that produce electricity from gas. However, as long as there is a shortage of LNG and hydrogen is not yet available, Russian gas in particular will be used in European gas-fired power plants.
>> Read here: Russia’s revenge – Europe is not prepared for a possible gas supply freeze
If the taxonomy opponents manage to overthrow the set of rules, it would be an embarrassment for the EU Commission. In months of talks, the people of Commission President Ursula von der Leyen sounded out the interests and finally presented guidelines with which the two largest EU countries should be brought on board.
The classification of gas power plants as sustainable was intended as a concession to Germany, whose electricity supply is heavily dependent on supplies from Russia. The specifications for nuclear power plants should reassure the French that the energy transition will no longer mean major changes for them, because the country is already mainly supplied with nuclear power.
For a long time, the topic was considered too specific to trigger broad resistance in the European Parliament. Now, however, the question of future energy supply is an issue every day. And voting for new investments in gas-fired power plants is highly unpopular.
Daniel Caspary will do it anyway. The CDU MP heads the group of Germans in the European People’s Party (EPP). “We need that investment, but many don’t want to get their hands dirty on the vote,” he said.
>> Read here: Ten European energy ministers are sounding the alarm – Europe should go back to nuclear power
It is now about building an infrastructure of LNG terminals, pipelines and power plants that can be operated with hydrogen in the future. “The companies that have to shape the energy transition locally need this legal act and ask us not to block it.” And he added: “We want to become a climate-neutral industrial country, not an industrial museum.”
Colleagues in Caspary’s parliamentary group, such as CDU environmental politician Peter Liese and CSU financial politician Markus Ferber, will vote against the taxonomy.
Economy warns of rejection
Although majorities are tight and a lot of money is at stake, business associations have been reluctant to make statements and have tended to operate in the background. As recently as February there was a wealth of position papers and statements with which the associations explained why gas should be included in the taxonomy. There are hardly any such reports at the moment.
When asked, however, the Association of Municipal Enterprises (VKU) explains that “transformation power plants” are needed that are operated today on gas basis and later with hydrogen “to flank the expansion of renewables and the ramp-up of hydrogen”.
One wants to stick to that, even if it is difficult to communicate due to the geopolitical situation, says a spokesman. “Should the delegated legal act be rejected, the federal government must ensure economic operation and expansion.”
The Federation of German Industries (BDI) also warns that the taxonomy supplement will fail: “Nothing has changed in the BDI’s position,” said the association’s energy expert, Carsten Rolle. “We need investments in the gas infrastructure more than ever.” Without the decision, necessary investments would be more expensive.
Financial experts like Volker Brühl from the Center for Financial Studies in Frankfurt, on the other hand, consider the lobby warnings to be exaggerated. “Some institutional investors would then say goodbye, and credit financing would also become more expensive,” he says.
>> Read here: Conversion to hydrogen – economy sees itself slowed down by the EU
However, large companies like EDF would have no problems raising capital on the markets even without a taxonomy seal. “Only the conditions will deteriorate, but not so much that investments are no longer worthwhile,” says Brühl.
In the financial sector, the concern is that the taxonomy will be diluted. “If the taxonomy is to become the gold standard for sustainable investing, you cannot undermine its credibility by including nuclear and gas,” Brühl said. “Many fund managers see it that way too.”
And the need for capital is great: According to a study by New Financial, the financial markets are crucial for the green transformation of the economy. To illustrate the importance, the think tank identified a group of around 500 “good” and around 1000 “bad” companies in Europe in the study.
The former manufacture green products such as solar cells or wind turbines that slow down climate change. In the second group are oil companies, mine operators, energy suppliers and other industrial companies that are accelerating climate change.
The “bad” companies collect an average of around 350 billion euros per year on the capital markets. The “good” companies, on the other hand, received just 37 billion euros last year. So the ratio is around ten to one.
It could be argued that big polluters like BP or RWE are also investing in renewable energies. On average, however, the “bad” companies only use around twelve percent of their collected capital on green activities. The imbalance between climate-friendly and climate-damaging investments on the capital market is huge.
According to the study, the figures cast an “uncomfortable spotlight” on the sheer extent of financing for climate-damaging companies. The companies that can be considered green make up only two percent of all capital market activities, while the “bad” companies have a constant share of around 30 percent.
More: Not just private capital – How the EU taxonomy also diverts tax money