November 24, 2020
At a time when the European Union is wasting its energy on taxonomy – a kind of bureaucratic statism defining “sustainable” economic activities – China is announcing the launch of an immense market with its 14 neighbours! The shortcut is striking…but leaving aside its totalitarian logic, taxonomy bears all the hallmarks of failed governance: opacity, imprecision, subjectivity, with a punitive approach albeit not assumed. In short, an Orwellian mechanism.
The word “taxonomy” has the whiff of authority and makes one think of a kind of economic statism. Regulation 2020/852 of 18 June 2020, adopted via co-decision, sets a “framework for sustainable investment”, i.e. investment that contributes to protecting the environment. It is inspired by the 2015 UN Sustainable Development Agenda, the 2016 Paris Accord and the 2018 Commission Action Plan for financing sustainable growth. The Taxonomy Regulation falls under the Green Deal agenda but, in reality, predates it.
Regulation 2020/852 can be summarised in a few words: abandoning all legislative ambition, it entrusts the Commission with adopting delegated acts to determine whether or not an economic activity is sustainable or does significant harm to the environment. Thus, the Commission becomes the power that will regulate issues of vital importance. The same goes for the draft Climate Law which proposes giving the Commission the power via delegated acts to fix the trajectory for reducing Europe’s carbon footprint.
Delegated acts: fine, but not without counter-powers.
Article 290 TFEU states: “A legislative act may delegate to the Commission the power to adopt non-legislative acts of general application to supplement or amend certain non-essential elements of the legislative act.” The measures subject to delegated acts under Regulation 2020/852 are obviously essential, but the European Parliament and Council decided otherwise.
However, Member States’ supervisory power over delegated acts is very weak. Comitology committees, previously responsible for these kinds of “quasi-legislative” measures, no longer exist, replaced by mere Expert groups with the same composition (representatives from each Member State and chaired by the Commission), but having a purely advisory role, WITH NO RIGHT TO VOTE. On taxonomy it is worse, the Commission refusing at this stage to communicate its draft delegated act to the Expert group, contrary to its written commitments. The draft, supposed to be adopted by the end of December after undergoing a 4-week public consultation, still has not been seen by the Member States.
Thanks to Politico, the draft delegated act is now available after being leaked. Who allowed this text to be leaked? Is it the latest version, or a preliminary draft? We find ourselves deep in the territory of bad governance, at a level never seen before.
Counter-powers organised by the Commission itself.
If one asks the Commission whose opinions it relied on in drafting this delegated act and its annexes, it would surely respond by saying “we never consulted so much!” And that is not untrue. But who was consulted? In 2018, the Commission created a Technical Expert Group (TEG) on Sustainable Finance which produced a Technical Report on Taxonomy addressing all the issues linked to climate: agriculture, forestry, manufacturing, energy, transport, construction, water management, etc. But who are these experts? Do they represent the “real economy”? No: they are mainly bankers, insurers, re-insurers, representatives of the European Investment Bank, EBRD, ECB, etc. A second committee of “stakeholders” was set up in October 2020 to replace the TEG, called the Platform on Sustainable Finance. It is composed of industry, NGOs and financial organisations, but these are chosen via a call for applications based on criteria considered subjective and therefore questionable by unsuccessful candidates.
From all this, an incredible mountain of documents has resulted. The Taxonomy Technical Report comes to 420 pages, the two annexes of the delegated act to 500 pages! Above all, it’s the lack of precision in everything which surprises. The 150-page FAQs (Frequently Asked Questions) raise more questions than they answer. Despite an attentive reading of all these documents, one understands nothing. Certain sectors celebrate the fact that they are not mentioned in the delegated act, others despair! If you wish to be heard, who by? DG FISMA which leads the file, DG CLIMA or DG GROW… one looks for the right interlocutor but can never find them, as everything seems to be deliberately frozen.
A complete absence of scientific rigour.
For an issue of such importance, one would have expected some scientific rigour. Even if the lobbyists who express their views do so in diplomatic language, their messages are clear. Business Europe recommends harmonising existing standards rather than creating new ones. They deplore the failure to take account of technological developments, the administrative burden and the “punitive” character of the proposed mechanism. For CEFIC (the chemicals industry), the errors and technical guesswork are countless. As for COPA-COGECA, they emphasise that the taxonomy draft adds constraints going beyond the commitments recently agreed in the CAP reform. The energy sector is worried about gas, not mentioned at this stage despite being an obvious transition energy to any good-faith observer. Nuclear energy is absent despite emitting no CO2. The car industry, household equipment and more generally the manufacturing industry are concerned to know whether or not their advertisements will have to include mention of “X % sustainable vehicle” or “X % sustainable washing machine”, the sustainability percentage varying from one vehicle and machine to another.
Take the problem back to basics.
For the Commission, taxonomy is “a European tool for greening the economy.” Therefore it is a kind of compass, barometer or indicator that will reveal the degree of carbon neutrality for each sector, each business, each product. In every case, it will be necessary to publish the percentage of what is sustainable and what is not. Financial penalties are currently not envisaged, but a possible labelling system is in the works (green, brown, etc.). All indications are that taxonomy is like a bureaucratic superpower overseeing the European economy, industrial processes and existing technical regulations. Aside from being intrusive, statist and Orwellian, such a system cannot be based on guesstimates, half-answers and untruths.
November 2020Author : Daniel Gueguen