The European Commission has adopted the delegated act on the technical screening criteria for the EU sustainable finance taxonomy.
A common EU taxonomy for sustainable finance could play an important role in this process if done the right way.
The delegated act as adopted now has the potential to hinder, or even prevent, the successful deployment of some of the most promising steel decarbonisation projects.
The European Commission has adopted the delegated act on the technical screening criteria for the EU sustainable finance taxonomy. The European Steel Association (EUROFER) welcomes the legislative proposal to mobilise investment in the EU to achieve sustainable growth, aligned with the Paris Agreement and EU climate goals.
“A common EU taxonomy for sustainable finance could play an important role in this process if done the right way”, said Axel Eggert, Director General of EUROFER. “The European steel industry is at the core of Europe’s transformation towards a carbon-neutral economy with carbon direct avoidance and smart carbon usage technologies ready to scale up, and with the leverage to kick-start the hydrogen economy. Access to financial investment will be key to making the change a success”.
However, EUROFER believes that if it is to work, the sustainable finance taxonomy mechanism must not lead to financial or investment leakage. It should support EU-based low-carbon projects’ financing while avoiding a further decrease in the EU steel industry’s ability to compete globally.
It is not clear the taxonomy has been entirely thought through. In particular, it relies on disconnected single reference values – so-called benchmarks – rather than considering the connections between different steel processes. The chosen benchmark set-up is the wrong approach as it does not necessarily reflect deep decarbonisation efforts by the steel industry.
“The delegated act as adopted now has the potential to hinder, or even prevent, the successful deployment of some of the most promising steel decarbonisation projects, particularly those with high potential to reduce emissions in sites that are above these unsuitable benchmarks. This includes high-potential projects deploying both hydrogen and electricity-based metallurgy”, added Mr Eggert.
“EUROFER has proposed several alternative means of determining the thresholds, as well as additional technical screening criteria to determine climate change mitigation potential – such as on-site energy efficiency measures”, said Mr Eggert. “Having the mitigation measures incorporated into an investment plan that would lead to the threshold being met should be included”.
Sustainable finance must be available to sectors striving to decarbonise, as the steel sector is doing. The EU steel industry has the ambition to reduce its emissions by 30% by 2030 and move towards carbon neutrality by 2050, under the right conditions.
“One of those conditions is access to sustainable financing over the long term”, concluded Mr Eggert. “While we welcome the EU’s Sustainable Finance Taxonomy package overall, we nevertheless remain concerned that in its current state it will not necessarily aid the EU steel industry’s decarbonisation efforts”.