Letter: The EU’s green taxonomy is a missed opportunity

A sustainable finance taxonomy is a classification aimed at helping financial markets define what is green and what is not green, so as to avoid greenwashing and accelerate green investments. On the last day of 2021, the European Commission proposed to insert nuclear power and natural gas into the nascent EU taxonomy (“EU ignores critics over green label for nuclear and gas power”, Report, February 3). This proposal is highly controversial and was taken to make both European pro-nuclear and pro-natural gas countries happy.

To be sure, the commission is not envisaging to give a “free pass” to these technologies, but it rather proposes to subject them to stringent parameters to be labelled as sustainable. However, the proposal has faced massive pushback from environmental NGOs and institutional investors, as well as from various European governments and lawmakers in the parliament.

This disarray seems to be generated by a fundamental misunderstanding in the way the EU debate in the field has evolved during the last few months. That is, the EU has erroneously mixed-up the taxonomy debate with a very different conversation on the structure of Europe’s future energy mix.

And these really are two different things. Taxonomy is there to put a green badge on certain investments, with the hope that markets will favour and appreciate their green premium. It is not there to define a country’s energy mix or a company’s investment decision. In short, nothing prevents companies and governments from investing in a gas or nuclear project even if they are not part of the taxonomy.

Notwithstanding the pushback, the proposal might still be approved. But this is unlikely to become the international “gold standard” in the field, which is a missed opportunity.

Simone Tagliapietra
Senior Fellow, Bruegel, Brussels, Belgium
Adjunct Professor, Catholic University Milan, Italy