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Environmental: E Takes Centre Stage in Europe
Environmental: E Takes Centre Stage in Europe
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Environmental: E Takes Centre Stage in Europe

03/12/2019


Trevor Allen

Trevor Allen

Sustainability Research Analyst

BNP Paribas

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With a new European Commission in place since 1 November 2019, all eyes are on Brussels to see where the environment will land in its order of priorities.

Europe has not only put environmental stewardship front and centre in policy, the European Union (EU) is adding arrows to its quiver to support the movement to help align Europe to a 2 degrees Celsius scenario. There are three initiatives in particular to watch:

  1. A new taxonomy

    The EU Taxonomy is a systematic look at analysing what should qualify as a green investment. It acts as a Rosetta Stone, translating specific business activities and their associated carbon limits into actionable investing objectives, specifically looking at climate mitigation, climate adaptation, and the circular economy.  The taxonomy identifies specific sectors and the carbon limits that are permissible to qualify as an eligible green investment. For example, it identifies that investments in the energy sector should have emissions limits that are less than 100 CO2 g/kw to qualify as a green eligible investment. For cars to qualify, emissions limits will need to be below 50 CO2 g/km.
  2. Curbing pollution

    The EU is cutting down on pollution from fossil fuel vehicles (table 1). The following group of cities have all agreed to ban petrol and diesel vehicles in their city centres, while simultaneously promoting electric buses to fully replace their fossil fuel counterparts ahead of the bans. This initiative will have obvious impacts on business – i.e. car manufacturing, mobility, local, small scale shipping and couriers services,  but setting goals in advance allows business to assess these goals and consider how they will scale up their fleets to comply with the bans. Table 1: In addition, the EU has a limit on emissions for car manufacturers. For example, the average emissions of all cars built by an individual EU car manufacturer must be less than 135 CO2 g/km. This number will be reduced to 95 CO2 g/km by 2021. This means that car manufacturers are currently re-investing, and will continue to re-invest, their profits to create lower emission vehicles. Currently, the average passenger car manufactured in the EU produces 120.4 CO2 g/km, so manufacturers have significant work to do to reach this goal. This regulation will apply only to new vehicles and not vehicles sold prior to 2021.

    EU cities aiming to ban petrol and diesel vehicles over next 11 years
    img_bp2s_environmental_stage_img1_2019-12-03.jpg
    Sources: C40 Cities, BNP Paribas
  3. Reaching carbon neutrality

    Ursula Von Der Leyen, President of the European Commission, is calling for an acceleration of decarbonisation, reducing carbon levels to 50% of 1990 levels by 2030, on the way to reaching carbon neutrality in the EU by 2050. Simply stating the ambition to reach carbon neutrality by 2050 would be meaningless without interim steps to ensure success. In order to prevent irreversible environmental degradation, she has proposed converting parts of the European Investment Bank (EIB) into a climate bank, where she has plans to unlock over EUR 1 trillion to fund business transition to carbon neutrality in the transport, real estate, energy sectors.

It is early days and the EU Taxonomy still needs to be passed by the EU Parliament, but with the EU Commission supporting the legislation, and with recent seats gained by the Green and Socialist parties in the EU Parliament, it is likely we will see the support necessary to align policy to a 2 degrees Celsius scenario. 

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