The Commission got it right on the Green Taxonomy

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When it comes to the adoption of delegated acts, usually little controversy sparks among the Member States of the EU. Their non-legislative nature naturally leads media to focus their attention elsewhere, ignoring measures that sometimes are even more incisive than the actual legislative act containing the delegation to the Commission. Delegation of powers to the European Commission has been expanded significantly with the Lisbon Treaty and, under article 290 TFEU, the Commission may be delegated legislative powers over non-essential aspects of a legislative proposals. To balance these enhanced powers of the Commission, a system of check and balances has been put in place. For “delegated” acts, the Council and the Parliament outline precise criteria and temporal limits for the adoption and may revoke the delegation or reject the act.

The so-called “Green Taxonomy” is the list of economic activities classified as sustainable that the Commission has to identify through the adoption of a delegated act, as established by Regulation (EU) 2020/852 on the establishment of a framework to facilitate sustainable investment. This list is meant to provide guidance for investors, acting for them as incentive to direct funds on projects needed to reach EU’s climate and energy targets.[1] The Commission originally promised to send the draft proposal for the act to the Member States before the end of 2021, among speculations on the inclusion (or not) of nuclear energy and gas in the list of sustainable investments. It is no surprise, therefore, that when the draft was sent on the 31st of December and governments quickly discovered that nuclear energy and gas were indeed present, reactions of varying degrees and intensity arose throughout the EU. On one hand, an alliance of countries guided by France manifested appreciation for the inclusion of nuclear energy, probably an achievement of the strong lobbying activity they conducted in Brussels. On the other hand, a group of countries spearheaded by Germany and Austria heavily criticized the fact. Germany however kept her voice way lower than expected, probably due to the partial satisfaction derived from the inclusion of natural gas.[2]

This cleavage on nuclear energy is explained easily by two factors: the presence of nuclear in the national energy supply of a certain country and the ideological attitude of the governments. Germany and Austria, for instance, oppose tout-court its use, especially the former due to a strong anti-nuclear turn made by Chancellor Angela Merkel in the aftermath of the 2011 Fukushima’s incident, strongly supported by the public opinion. On the other hand, France relies on nuclear energy for a great share of its national supply, an asset which also gives Paris the capability of exporting energy, namely for an amount around 4 billion euros in 2018. This excess capacity is also enabling the French government to “stock” virtually a share of the total energy production to sell it at production prices to industries, which pay a decisively lower price for a Mwh compared to other European countries, such as Italy.[3] While environmentalist groups and many political parties across the Union vowed to continue their fight against nuclear, the Commission seems set to continue on its current path. For gas, while predictable opposition from environmentalists arose, less controversy is present: it constitutes a huge share on the energy supply of many Member States like Italy and Germany, being also less polluting than coal or petrol. Critics of natural gas quote more often the dangerous dependence on Russian supplies, especially in the light of Ukraine’s crisis, while claiming that the inclusion of gas in the Taxonomy undermines its credibility.

There is little doubt the delegated act will be approved by the Parliament and the Member States almost in its current form. The number of these kinds of acts in recent years has increased more than significantly leading to two possible conclusions, in conjunction with the extremely small number of rejections or delegations revoked[4]: either the Commission’s proposals are always judged as adequate in their form by the three actors (EP, Council and Member States) delegating those powers and supposed to control their use, or, on the other hand, the checks and balances created by the Treaties are substantially ineffective. At first sight the post-Lisbon situation seems to have enhanced the role of the European Parliament and the Council may appear to have lost power, the Commission retained its powers of initiative. Furthermore, the discretion, recognized by the ECJ in a 2014 judgment, of the co-legislators to decide whether a delegated or an implementing act is more adequate in cases where the attribution of a certain provision is not clear-cut may lead to think to a slight loss of control from the Commission over the instruments to use, giving the Council and the EP a useful bargaining tool in trialogues to obtain concessions over other substantive points of the original legislative proposal.[5]

The real balance of power steered quite significantly from Treaty provisions: the new powers of the EP revealed to be less relevant than expected, since the objection (or revoke of the delegation) to a delegated act proved to be quite unfeasible, as any other option is excluded explicitly by the Treaty. This forces the lawmakers (since this problem affects also the Council) to choose between approving the act or outright rejecting it, possibly prompting a conflict with the Commission, which on the other hand gained the ability to avoid amendments to its text from the Parliament and the Council. Further penalization for the EP is constituted by the role of experts, especially national ones, during the drafting and approval process of delegated acts: the scarcity of resources at its disposal and the lack of expertise vis-à-vis the Commission and national experts mean that the EP often gets marginalized, and its point of view ignored or downgraded.

So, delegated acts see the Commission in a favourable position. As said, the debate on the “Green Taxonomy” evidenced high levels of controversy over the Commission’s proposal to include gas and nuclear energy in the list of “sustainable” sources. Austria, one of the fiercest opposers of the inclusion of nuclear energy in the taxonomy, voiced its opposition and threatened to take the Commission to the Court.[6] The notable absence of a menace to actually reject the act, a power in theory the Council possesses, highlights how little it is capable of opposing the Commission’s proposals, even when a relevant portion of its members is against, including in this case a political and economic heavyweight such as Germany. This may be due to the decision-making rule, in this case qualified-majority voting, adopted by the Council, which combined with the particular rules on delegated acts prevents every option other than the tacit approval or the outright rejection of the proposal and forces the Member States to reach an acceptable compromise rather than forcing a vote, in the typical consensual decision-making characteristic of EU Institutions. Since the Commission almost always has a majority of Member States in favour of its proposals, it becomes extremely difficult to vote them down and the usually cooperative relation between the Commission and the Council of Ministers reinforces the incentives to reach a compromise acceptable to both actors, with “defeated” Member States obtaining other concessions on different dossiers.

If the approval of the act is more or less predictable, it could be argued that the substance of the Green Taxonomy represents a misstep by the Commission. But the second head of the EU’s executive, the other being the European Council, may instead have made the correct decision. Data on energy production in the EU shows clearly that nuclear energy and gas account for more than 40% of the total energy production in the Union. Of course, different countries may be affected differently: for instance, France relies on nuclear energy for 42,3% of its internal energy consumption, the highest rate in the EU together with Sweden, which uses nuclear energy for more than 30% of its internal needs. On the other hand, natural gas is the pillar of Germany’s and Italy’s energy supply, two countries that placed their bets heavily also on the construction of pipelines to ensure the supply of the precious fuel.[7] A complete exclusion of these two sources of energy would be devastating for the three major economies of the continent, while also endangering the green transition, which needs a medium-term low-carbon solution, such as gas and nuclear, to substitute more polluting sources like coal and petrol.

Another argument in favour of the Commission’s proposal is the current energy crisis affecting the Union. The EU depends on foreign supplies for coal, oil, natural gas and so on. The huge increase in demand created by the end of Covid-related restrictions, together with a decline in exports towards the EU from Russia, the main supplier of gas of the Union, led to a rise in energy prices to unexpected levels. European governments ran to provide support for their economies, adopting structural measures (like in France or Germany) or temporary ones (Italy). If the green transition is to be pursued, with renewable sources constituting an ever more relevant share of the total supply, costs will rise further. Including in the mix cheaper supplies becomes therefore fundamental to avoid repercussions not only on European industries and enterprises, but also on common citizen, especially disadvantaged ones, who will face unsustainable costs and may decide to forgo other expenditures, like healthcare, with unpredictable consequences.

When it comes to delegated acts, compromises need to be made, and the Green Taxonomy makes no exception. But if the premises on the increase in energy prices and the Green Transition are taken into account, together with the current share of those two sources in domestic production of energy in the EU, the Commission’s proposal seems to be the best possible. Flagging nuclear and gas as transitory, effectively incentivizing investments on them while keeping at bay the harshest critics, will lead in the end to a tacit consensus by the Member States, fundamentally unwilling to go into open conflict among themselves and with the Commission. The choice of the legal instrument and the formulation of the proposal ultimately gave it a clear opportunity of success, confirming the balance on power in its favour and maybe paving the way for a more sustainable green transition.

Sources

Christiansen, T. and Dobbels, M. (2013), Delegated Powers and Inter-Institutional Relations in the EU after Lisbon: A Normative Assessment, West European Politics, 36:6, 1159-1177.

European Commission (2021), Report from the Commission on the Working of Committees during 2020, COM(2021) 240 final.

European Commission (2022), EU Taxonomy for Sustainable Activities, available at https://www.google.it/url?sa=t&rct=j&q=&esrc=s&source=web&cd=&ved=2ahUKEwiBmevWieH1AhWm7rsIHeyjAQcQFnoECAYQAQ&url=https%3A%2F%2Fec.europa.eu%2Finfo%2Fbusiness-economy-euro%2Fbanking-and-finance%2Fsustainable-finance%2Feu-taxonomy-sustainable-activities_en&usg=AOvVaw0ulOXQjoxVBrnajcgPMD0r. (Last access 02/02/2022)

European Court of Justice (2014), Judgment of the Court (Grand Chamber) 18 March 2014 in case C-427/12, European Commission v. European Parliament and Council of the European Union.

Eurostat, Energy Statistics – An overview, available at https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Energy_statistics_-_an_overview#Primary_energy_production. (Last access 31/01/2022)

Hayes-Renshaw, F. (2017), The Council of Ministers: Conflict, consensus and continuity, in Hodson, D. and Peterson, J. (eds.), The Institutions of the European Union, 80-107, Oxford, Oxford University Press.

Hernandez, A. (2022), EU enters endgame in fight over green investing rules, Politico.eu, available at https://www.politico.eu/article/the-eus-taxonomy-tussle/. (Last access 31/01/2022)

Kurmayer, N.J. (2021), Austria ready to sue EU over nuclear’s inclusion in green finance taxonomy, EURACTIV, available at https://www.euractiv.com/section/energy-environment/news/austria-ready-to-sue-eu-over-nuclears-inclusion-in-green-finance-taxonomy/. (Last access 31/01/2022)

Mallet, B., de Clercq, G. (2022), EDF hit by cap on power prices, nuclear reactor closures, Reuters, available at https://www.reuters.com/business/energy/french-power-price-increase-will-remain-capped-4-2022-minister-2022-01-13/. (Last access 31/01/2022)

Von Der Burchard, H. (2022), Germany hits out at Brussels plan to label nuclear and gas “green”, Politico.eu, available at https://www.politico.eu/article/eu-nuclear-energy-gas-green-climate-technology/. (Last access 31/01/2022)

[1] European Commission (2022), EU Taxonomy for sustainable activities.

[2] Von Der Burchard, H. (2022), Germany hits out at Brussels plan to label nuclear and gas “green”, Politico.eu.

[3] Mallet, B., de Clercq, G. (2022), EDF hit by cap on power prices, nuclear reactor closures.

[4] European Commission (2021), Report from the Commission on the Working of Committees during 2020, COM(2021) 240 final.

[5] European Court of Justice (2014), Judgment of the Court (Grand Chamber) 18 March 2014 in case C-427/12, European Commission v. European Parliament and Council of the European Union.

[6] Kurmayer, N.J. (2021), Austria ready to sue EU over nuclear’s inclusion in green finance taxonomy, EURACTIV

[7] Eurostat, Energy Statistics – An overview.

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