EU Taxonomy DA2 on Gaz & Nuclear is not green, it's not even amber, it's red!

Following the end of media embargo at 10am CET this morning, here is my selection of direct quotes on the most critical aspects of the Platform for Sustainable Finance report:

1) "Incompatibility of the draft CDA with 1.5 degrees temperature goal, European targets for decarbonisation and climate neutrality (Applicable only to Activity 4.29)

The relaxed Substantial Contribution criteria for fossil gaseous fuels (270gCO2e/kWh and 550 kgCO2e/kW average over 20 years) within the draft CDA are assessed to be largely incompatible with existing decarbonisation projections for 1.5 degree scenarios or EU decarbonisation targets (-55% by 2030) according to IEA and PRIMES modelling. Against available scientific evidence, the draft CDA foresees the facilitation of finance for assets that not only fail to deliver a Substantial Contribution towards these goals, but actually have emission levels well above mean emissions level needed in the EU energy system throughout the transition curve. This is particularly true in the decade until 2030, which although the graphics above show a straight line as they are conservatively modelled to the 2030 goals, actually as is well reported by IPCC, UNFCCC IEA and others must fall faster in the first years. In comparative terms, performance above the mean emissions levels needed to meet 2030 climate targets do not constitute a substantial contribute to climate change mitigation goals, they actually make it harder to meet them. Article 10(2) on Transitional Activities prescribes that activities must make a substantial contribution in the context of compatibility with climate neutrality. Platform responses were strong on that point:

- Keeping in line with 1.5° degree pathway

- Keeping in line with 2050 carbon/climate neutrality target

As a result, many members are asking for an Impact Assessment of the projected EU emissions pathway with potential introduction of the draft CDA that facilitates not only the financing of carbon-intensive assets, but their labelling as Green encouraging finance and subsidies away from activities needed for the urgent transformation of the energy sector, such energy storage, innovation in renewables and energy efficiency

Detailed emissions Modelling/calculations presented in feedback submissions at EU level and country specific:

At the EU level, the 20-year 550kgCO2e/kW average for facilities permitted before 2031 decouples from production and is equal to an 11tCO2e/kW budget – without a yearly cap. If all the EU's 166 coal plants and their 112GW capacity were replaced, this could result in over 1.4bnCO2e (including allowed 15% capacity increase: 112000000kW*1.15*11t CO2e; this ‘worst case’ estimate would be larger if indirect emissions from methane leakage or replacement of oil/other solid/liquid fossil fuels was considered too). The long timeframe for the average makes it hard to miss it for quite a while, eg for the next 10 years the plant releases higher emissions if it states emissions will be reduced to nearly zero afterwards – trusting in not yet developed technologies. The 55% low-carbon gas criterion in 2030 is not actually a 55% reduction: Low-carbon gases defined as 70% less LCA emissions make only 0.7*0.55=38.5% reductions. allowing for above 550kg average yearly emissions in worst case scenarios, even when using 100% low-carbon gases.

In terms of country specific modelling, the examples of Greece, Slovakia and Spain were provided. Greece already announced in September 2019 that it would phase out coal power generation by 2028 and then further enhanced this commitment in April 2021. Assuming further that the coal phase out incentive foreseen in the draft proposal worked perfectly and Greece would decide to literally phase out coal tomorrow, it would save 10MtCO2e. However, replacing this coal capacity with new gas plants with average annual emissions of 550kg/kW capacity as the Commission proposes would result in 24MtCO2e of "greened" CO2e emissions, an increase of 140% which does not even consider methane leakage or emissions from subsequent possible blending with hydrogen. Considering these emissions in a full lifecycle emission approach would show that the move to gas may actually increase emissions much further still. Similarly, in Spain, 29MtCO2e would be saved by closing coal tomorrow, while the replacing gas infrastructure would emit twice as much (62MtCO2e). In Slovakia, retiring coal would save 7.7MtCO2e and replacing it with gas would add 9MtCO2e. In each case these are direct emissions figures which would be very significantly worsened when considering all emissions in the lifecycle."

2) Notes on Diagram 1 (see cover image)

- "Emissions CCGT: calculation of direct CO2 emissions for a CCGT with extremely high, best-known efficiency rates of 64% resulting into estimated emissions performance of 316 gC02e/kWh, even though it is likely incompatible with the operating mode proposed (backup plants) and remains theoretical (GE, 2017). Depending on condition of operation and load factor/operating hours, the emission performance can be even higher, in particular for purposes of peak dispatch.

- Default assumption on emission savings of low-carbon gases is that 70% reduction of life-cycle emissions AS PER the revised EU gas directive 2021 COM (2021)803 is equivalent to 70% reduction of output emissions. To be noted that blended gases might have a higher % reduction although there would be little incentive to produce such “even lower carbon fuels” as there would be no better label available for them to justify additional production costs. Alternatively since no definition is given of these fuels and lifecycle emissions of the manufacture and supply of the low carbon or renewable fuels might not be captured at all or only partly, the 70% reduction is deemed a conservative and robust modelling assumption.

- Assumption DNSH: reduction of DNSH according to 70% reduction of emissions in power sector by 2030 (base year 2015) and decarbonisation of EU power sector by 2040 (capped at 10g) in line with EU 2030 Climate Targets and EC Impact Assessment. Alternative calculations based on IEA WEO21 Assumed Pledges Scenario (ASP) or IEA Net-Zero Scenario (NZS) would have led to an even steeper reduction of the DNSH curve as well as a steeper drop in the period to 2025 than to 2030. Again this leaves the DNSH line as shown as a conservative model.

- Assumption SC: Reduction of SC criteria in line with TEG analysis for EU Commission on required climate action emissions factors in EU power sector with gC02e/kWh of 42g 2023 until 2026, 26g until 2031, 15g until 2036, 7g until 2041 and 2g from 2042. Provided by the Commission to the Platform as part of the Commission data for their own Taxonomy work. The first step-wise reduction of SC threshold is shown in 2025, rather than 2023, which is the earliest estimated date that such revision could come into force after TWG periodic review. It is important to highlight that development of the SC criteria shown here do not pre-empt the future evolution of the technical screening criteria of the Taxonomy Regulation as may be recommended by the Platform."

3) The full report with equivalently disapproving assessments on nuclear can be found here:

https://ec.europa.eu/info/files/220121-sustainable-finance-platform-response-taxonomy-complementary-delegated-act_en

https://ec.europa.eu/info/business-economy-euro/banking-and-finance/sustainable-finance/overview-sustainable-finance/platform-sustainable-finance_en#activities