View from Brussels - June 2022

20 June 2022 

Brussels is at a crossroads in its ambitions to be a global leader on climate change. 

Earlier this month, the European Parliament ratified a European Commission proposal for a ban on the sale of new petrol and diesel cars from 2035. MEPs voted to require carmakers to cut their average fleet emissions by 15% in 2025, compared to 2021, by 55% in 2030, and by 100% in 2035. It accelerates the EU’s previous plan, which targeted a 37.5% reduction by the end of the decade. Passenger cars account for about 12% of total EU CO2 emissions, so curbing that output is key to achieving the bloc’s overall climate goals of reaching “net zero” by 2050. In contrast, the UK will prohibit internal combustion engine vehicles from 2030. 

The EU position mirrors the UK however on a ban on hybrid vehicles from 2035. MEPs came under pressure to make exceptions, including for synthetic fuels. The same arguments are likely to be made when EU Member States consider their position over the next few months. Final agreement is likely to occur in the Autumn. 

EU negotiations on a green taxonomy are altogether more delicate. Two parliamentary committees voted last week against European Commission plans to include natural gas and nuclear in its “taxonomy for sustainable finance”, in essence a labelling system intended to give investors clear direction on what constitutes an environmentally friendly activity – or at least an acceptable transitional activity until full net zero activities are achievable. The plenary of the European Parliament is expected to endorse this position next month. In taking a binary approach to its taxonomy, the EU has placed itself in a challenging position vis-à-vis sourcing alternative energy sources against the backdrop of the Russia/Ukraine conflict. 

As I wrote in my January blog tensions exist with the Council. Whilst France relies heavily on nuclear energy, Austria and Luxembourg have threatened legal action if nuclear is included in the EU’s green taxonomy. In the end, the market may decide as born out by a letter from the Institutional Investors Group on Climate Change to the Commission President, Ursula van der Leyen. This group of investors takes the view (based on the science) that gas (on which some southern and eastern Member States rely ) should not be included within the green taxonomy. 

Published 20 Jun 2022