The taxonomy as proposed may negatively impact our ability to reach our climate goals. It also risks undermining our competitiveness and ultimately leading to an overall increase in global CO2 emissions.
Work is currently underway at EU level on developing a new regulatory framework to classify what is – and what is not - environmentally sustainable; the so-called ‘taxonomy’. This is a highly detailed framework aimed at promoting sustainable development and reducing the impact on climate impact via investment decisions made in the financial market. As a result, this new regulatory framework will also be of particular significance for companies” capital costs.
In addition, the resulting taxonomy may also be used within the framework of other EU regulations, such as the capital adequacy regulations governing the lending of banks and credit institutions. It may also be relevant for those funds whose purpose is to support financial recovery following the COVID-19 pandemic. Furthermore, it is highly probable that increasing numbers of future regulations will be based on this taxonomy.
Clearly, the significance of this pending taxonomy cannot be overestimated. With regard to its potential influence, it is essential that the assessment criteria are fair and genuinely delvers climate benefits.
The increased electrification of communities will be vital in delivering effective efforts in climate change. To offer an example, the Confederation of Swedish Enterprise has calculated that electricity use in Sweden will need to rise by 60 percent by 2045. Such a sharp increase in use is the key to allowing Sweden to continue to grow at the same time as the country is phasing out its use of fossil fuels. The analyses that we published recently have demonstrated that creating a cost-effective and delivery-secure system for electrical power to meet 2045 requirements will envisage extensive reinvestment in all existing hydropower and nuclear power facilities.
However, under the regulations currently being developed by the EU, both of these fossil-free sources of power - which together make up almost 80 percent of Swedish electricity production - could be classified as unsustainable. This sends a signal to electricity producers not to further invest in hydropower and nuclear power generation. In the event that they do continue to invest, capital costs will be driven up, which is a cost that will ultimately fall on everyone and everything that consumes electricity, such as the highly electricity-dependent export industry.
Above all, companies that rely on this fossil-free electric mix in their production will be generally perceived as less sustainable. In other words, there is a risk that investors’ views will clearly be affected negatively. Rather than reducing global emissions, the EU”s taxonomy - contrary to its intended purpose – may ultimately lead to increased, not decreased, global CO2 emissions. Equating CO2-free hydropower and nuclear power with electricity produced from coal risks seriously undermining climate change efforts.
The Confederation of Swedish Enterprise is thus deeply concerned that the proposed taxonomy may negatively impact our ability to achieve our climate goals. It also risks hitting the competitiveness of Swedish companies hard and thus, as a consequence, our prosperity. This would lead to an overall increase in global CO2 emissions. Governments with strong ambitions for climate change must act swiftly and decisively in order not to undermine the existing competitiveness of business and industry and avoid weakening the capacity to address the challenges of climate change.TaxonomiEUKlimatlag