But taxonomy also affects how tax money is used. And already today. The state development bank KfW has introduced financing products that are based on taxonomy. A spokeswoman said that it promotes climate-friendly activities by medium-sized companies based on the EU taxonomy. KfW wants to set incentives for sustainable and climate-friendly mobility with another program. The federal government is liable for KfW.
The taxonomy regulation is already in place. However, it provides for precise definitions to be submitted later by the EU Commission. Last year, for example, the Commission defined the circumstances under which investments in renewable energies are classified as sustainable. The next step is to define the conditions for investing in gas and nuclear power.
That is the most controversial part, which is also due to the fact that very different economic interests are involved in the EU countries. For example, for the transition to renewable energies, Germany probably also needs new gas-fired power plants in order to be able to compensate for the fluctuations in wind and solar power. In France, on the other hand, companies have an interest in building new nuclear power plants.
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A large part of the investments in German gas-fired power plants are also financed with public money. Many public utilities that are in municipal hands are also responsible for the power supply. “If the EU classifies certain gas-fired power plants as sustainable, then it is also more likely that the municipalities will build these power plants,” says Timm Fuchs from the German Association of Towns and Municipalities. Networks for electricity and gas are also planned by the municipalities.
Billions have to flow in to achieve the climate goals
In order for Germany to achieve its climate target of no longer emitting greenhouse gases by 2045, huge sums of money have to be invested. A study by McKinsey comes to the sum of 240 billion euros annually. A large part of this will be private money, but a lot will also be supported through subsidies. These subsidies could also be based on taxonomy in the future – if not in Germany, then in other EU countries.
The investments can pay off because electricity becomes cheaper for industry and jobs are created. First of all, however, debts must also be incurred.
In Brussels there is therefore the idea of joint debt for an energy transition fund based on the model of the Corona reconstruction fund. The EU awards the money from this fund to the member states, making sure that it is spent in the interests of the economic recovery. In the case of an energy transition fund, it would have to determine the criteria by which it classifies an investment as sustainable. This is exactly what taxonomy does. So it could be of great importance.
This could also be the case if the euro countries agree on a reform of their debt rules, which were often ignored even before the corona pandemic and have now been stretched extremely far. Monetary Commissioner Paolo Gentiloni will probably present a proposal on this in the summer.
One idea is to exclude investments in the energy transition when borrowing. That would prevent the Stability Pact from stalling the transformation. In this case, too, clear criteria would be needed as to what is assessed as an investment in the energy transition – and the taxonomy would be at hand.
The position of the federal government is still open
These scenarios explain why the taxonomy debate is now so adamant and why Germany and France have not been able to find a compromise. To cover this up, Chancellor Olaf Scholz downplayed the importance of the topic in December. “The question is completely overrated,” he said after his first EU summit as Chancellor. “It’s about assessing the activities of companies.” But that’s only half the story.
How the federal government will behave is still open. It seems likely that she does not lodge an official protest. Only the Greens have a serious problem with the classification of gas and nuclear power. Scholz will rather not let it come down to an argument, which is also due to the fact that he would have little chance of winning it. In order to stop the EU Commission’s delegated act on taxonomy, the EU states would have to organize a clear majority against it. That is not foreseeable.
The Greens could try another way, namely through an initiative in the European Parliament. There, too, a majority could stop the legal act. MPs are already calling for petitions to be signed against the classification of nuclear power as a transition technology.
If this is also unsuccessful, the only thing left is a lawsuit aimed at the EU Commission violating the meaning of the taxonomy regulation with its legal act.
More: EU Commissioner Breton: Saving the climate without nuclear power? “That is impossible, everyone understands that”