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April 25, 2024

Editor’s note: business as usual, deregulation or climate-consistent laws?

Campaigners are furious over the European parliament’s decision to approve proposals to reduce environmental measures under the Common Agricultural Policy © Bloomberg
Campaigners are furious over the European parliament’s decision to approve proposals to reduce environmental measures under the Common Agricultural Policy © Bloomberg

The latest edition of our Sustainable Views newsletter

Dear reader,

“We can either continue with business as usual — or worse, deregulate —  and condemn people’s health, the environment and our economy to a grim future, or we can put society and the environment at the centre of EU decision-making to preserve people’s rights,” said Anaïs Berthier, head of ClientEarth’s Brussels office, after MEPs voted on a plethora of ESG-related laws on Wednesday that will have global impact.

While the decision by the European parliament to back the EU Corporate Sustainability Due Diligence Directive and an EU withdrawal from the Energy Treaty Charter were generally praised, campaigners were furious about its approval of proposals to reduce environmental measures under the Common Agricultural Policy. 

“What’s outrageous from a legal perspective is the blatant incompatibility of the revision with the CAP’s own rules, as well as other EU laws like the European Climate Law,” says ClientEarth lawyer Sarah Martin. “Any law student would be able to tell you the mere fact the European Commission failed to carry out a consistency assessment with the Climate Law is illegal.

“As lawyers, we cannot stand by and let decision-makers unpick our democracy,” Martin continues. “We intend to take action and bring a complaint to the EU ombudsman — this wrong should never be repeated.”

Timothy Foden, a partner at law firm Boies Schiller Flexner, argues the EU is wrong to leave the ECT, saying the treaty could be “a progressive tool fostering international energy investment and collaboration” around renewables, not just fossil fuels. Jean Blaylock, co-ordinator at the non-profit European Trade Justice Coalition, and Columbia Center on Sustainable Investment lead researcher Martin Dietrich Brauch both tell me they dispute this interpretation of the treaty. 

They cite the example of Spain, which, in the words of Blaylock, “faced an avalanche of ECT cases” when it changed its solar policy after the 2008 financial crisis. “The overwhelming cases came from hedge fund investors and energy giants, who primarily make their profits from fossil fuels but have small renewables divisions,” she says. “This wasn’t something community or municipal renewables projects could use, and it was not a useful way of achieving a better policy approach.” 

Brauch insists the ECT fails to “examine or address the real determinants of energy investment with a view to phasing out fossil fuels and scaling renewable energy”. 

From London, Florence reports on analysis by the Green Finance Institute, which shows nature degradation could result in a 12 per cent drop in UK GDP by 2035, outstripping the losses caused by the 2008 financial crisis, which resulted in a 5 per cent drop in GDP, and the Covid-19 pandemic, which cost the country 11 per cent of GDP in 2020. The analysis also finds nature-related risks are as, or more, detrimental to the UK economy than climate change risks. 

It is worth noting the Taskforce on Nature-related Financial Disclosures this week welcomed the International Sustainability Standards Board’s decision to research disclosure about risks and opportunities associated with biodiversity, ecosystems and ecosystem services.

Florence has also delved into the data around electric vehicles. The European Court of Auditors warns plans for all cars sold in Europe to have zero carbon dioxide emissions from 2035 will not be met unless the EU accepts significant imports of EVs, notably from China. At the same time, the Belgian ECA member Annemie Turtelboom likens the EU’s over-reliance on Chinese batteries to its dependency on Russian natural gas, “posing risks” for energy security.

It is not just cars the EU will need to import to decarbonise. A report by the Potsdam Institute for Climate Impact Research says Japan, South Korea and certain EU member states could cut the costs of the transition by importing chemicals and steel from countries with cheap renewable energy. The paper dismisses “deindustrialisation” fears, instead predicting “a global reconfiguration of trade and production”.

Alex, meanwhile, has examined data from Greenpeace East Asia, which suggests China’s local authorities could do more to issue municipal bonds as certified green bonds, with positive results for investment into climate adaptation and mitigation measures, and jobs.

Finally, a report from rating agency Fitch says fears about misinterpreting rules designed to prevent the greenwashing of European funds are likely to constrain the introduction of funds under the EU’s Sustainable Finance Disclosure Regulation this year. Reputational risk and the fear of fines may deter managers from upgrading funds from Article 6 to Article 8 status and launching new Article 8 funds, it says.

Until tomorrow,

Philippa

Philippa Nuttall is the editor of Sustainable Views 

A service from the Financial Times