Welcome to Better Europe’s weekly update on EU Affairs.
COMMISSION PLAN FOR 90% CARBON REDUCTION RELIES HEAVILY ON NET ZERO TECH
The Commission’s 2040 climate target announced this week in Strasbourg, unlike the 2030 and 2050 goals, will not be enshrined in legislation. It heavily relies on two optimistic assumptions: full and effective implementation of the existing legislation, and speedy and successful roll out of “net zero” carbon technology, including carbon capture and storage. As expected, the Commission recommends 90% net greenhouse gas emissions reduction compared to 1990. Yet, it does not propose new policy measures, and it does not set any new sector-specific targets either, arguing that an extension of the current policies would already lead to an 88% reduction. As Climate Action Commissioner Wopke Hoekstra put it: “Tacking the climate crisis is a marathon, not a sprint” – a job for pacemaker Esther de Lange who is joining his team on 15 February as Head of Cabinet. De Lange, currently an MEP, has in the past publicly expressed her doubts about the Commission’s proposed Nature Restoration Law.
FIRST TRILOGUE NEGOTIATION DEADLINE EXPIRES AHEAD OF JUNE PARLIAMENT ELECTIONS
As the elections for the new European Parliament are now four months away, the first deadline for the wrap-up of interinstitutional negotiations expired this week. It was a productive week (see below), and all agreements found this week can still be adopted using the normal first reading procedure with sufficient time left for a legal-linguistic verification in the coming 8 weeks. There will be another trilogue sprint ahead of the next deadline, on 15 March, as anything agreed before then can still be endorsed by the Parliament in its final plenary in April, although any legal-linguistic changes will have to be formalised by the next Parliament. Legislative initiatives on which an agreement is found after 15 March, will go into (early) second reading. This is politically risky as the composition of the Parliament will change significantly in June, and a compromise position that attracts a majority today might not be supported in September.
EUROPE AGREES ON LEGISLATION TO ADDRESS SUSTAINABILITY RATINGS GREENWASHING
Companies that publish Economic, Social and Governance (ESG) ratings will have to explicitly disclose the weight of the individual E, S and G factors underlying their ratings, to avoid rated companies covering up unsustainable behaviour in one field with sustainable scores in another. They will also have to disclose the weight of both risk and impact evaluations in the final rating. These major improvements of the initial text were agreed in a final political deal reached on 5 February, and follow a push by civil society organisations concerned about the current practice of excessive focus on one of the sustainability components, such as greenhouse gas reductions. Civil society organisations themselves will be covered by the legislation and its central supervision requirements, but only if they charge users or the rated companies for the ratings. In other words, free rankings of companies in terms of sustainability, such as sustainability performance on retail electricity comparison websites, will remain out of scope. Application is foreseen to start in 2026, with a review due in 2028. The review might also revisit the idea to impose minimum quality requirements in ESG rating methodologies.