GREENWASHING CONCERNS OVER PROPOSED EU TAXONOMY AMENDMENTS - Oikantik Sinha

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The European Commission has been facing severe backlash over its latest draft proposal of including investments in gas and nuclear energy, under the bracket of "transitional economic activities" in the EU Taxonomy. Several experts and climate activists believe this decision will adversely affect the European Union's climate goals due to greenwashing and a divided financial market

To better grasp this situation we must first understand what the EU Taxonomy is. The EU Taxonomy is a classification system that provides a list of environmentally sustainable economic activities. It thus makes it easy for environment-conscious investors and policymakers to make better decisions and provides a roadmap for companies to align their operations in a more sustainable direction. The environmental objectives that the taxonomy lists are climate change mitigation, climate change adaptation, sustainable use and protection of water and marine resources, transition to a circular economy, pollution prevention & control, and protection and restoration of biodiversity and ecosystems.

Estimates show that if gas power plants are granted construction permits till 2030, emissions of the scale of 1.4 billion tonnes of carbon dioxide could be witnessed. While nuclear energy on the other hand does not contribute to CO2 emissions, its production leads to another environmental concern in the form of disposal of radioactive waste. Operations of gas and nuclear power plants will hence significantly hinder the European Union's climate goals and Paris Agreement commitments.

While countries such as Austria and Germany are strongly opposed to this draft proposal, others such as France, Poland, and Hungary are strongly in favour. Proponents of this proposal highlight the fact that gas and nuclear energy could act as a stopgap, while the EU takes steps for the transition to renewable sources of energy. Others however believe that the proposed changes in the EU Taxonomy would undermine the very purpose for which it was created.

This decision is also very likely to split the financial markets. While investors supporting environmental sustainability would continue to align their investments in that direction, many others would view this as an opportunity to continue as usual and neglect their climate commitments.

It remains to be seen whether the changes are implemented in the EU taxonomy and what long-term impact they will have on the European climate objectives as well as its energy landscape.


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