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February 22, 2023

Including best-in-class planes in EU taxonomy is ‘pure greenwashing’

Non-profit T&E says aircraft manufacturers need to focus their efforts and investments on building zero-emissions planes ‘that are truly green’.

The inclusion of “best-in-class” airlines in the EU taxonomy, aimed to show which investments are sustainable, would “greenwash” the aviation industry, according to Brussels-based environmental organisation Transport and Environment.

The European Commission is discussing criteria for aviation to be included in EU taxonomy rules. Under draft criteria recommended in 2022 by the Platform on Sustainable Finance, traditional aircraft can qualify as best in class if they are more efficient than older-generation aircraft and are replacing, not expanding, an airline’s fleet.

T&E cited research by the International Council on Clean Transportation suggesting that the most advanced new aircraft on the market are already ahead of standards set by the International Civil Aviation Organization and against which best-in-class criteria are set.

In a press release published last week, T&E argued that while the majority of Europe’s airlines do not yet qualify as best in class, future aircraft will.

More than 7,000 Airbus aircraft, or 90 per cent of Airbus’s future aircraft orders, could qualify as “sustainable” under this criteria by meeting “weak fuel efficiency standards, even though they still rely almost exclusively on fossil fuels”, it said.

“Sticking a green investment label on thousands of highly polluting planes is an act of pure greenwashing,” said T&E aviation director Jo Dardenne. “The European Commission must reverse [its] course.”

Airbus should “focus efforts and investments in zero-emissions aircraft that are truly green”, she added.

Emissions savings from more efficient fossil fuel aircraft are around 15-20 per cent, and carbon dioxide emissions from the EU aviation sector have risen by 129 per cent between 1990 and 2017, despite the fuel efficiency of new aircraft improving by 18 per cent over the same period, T&E said.

Luke Sussams, ESG strategist at investment bank Jefferies, said that rewarding “best-in-class” activities through the taxonomy can help further decarbonisation. He insisted, however, that certain criteria must be fulfilled for this outcome to become reality.

“Overall, I am not against rewarding best-in-class activities in the taxonomy, because for many companies that do not produce and sell climate solutions it is one of the few ways to incentivise them to push for further decarbonisation,” Sussams told Sustainable Views. “That said, this must come with a few caveats and stipulations.”

These caveats include “ensuring the threshold for what is aligned and what is not remains highly ambitious and additional”, he said.

“Companies should not be classified as best in class if they are delivering progress that would have occurred anyway,” Sussams added.

“Best in class should classify only those products that deliver significant additional gains versus the counter factual. There remains a question mark against this factor in the proposed amendment for aircraft.”

Impact for investors

If the current proposal were adopted, Sussams suggested it is unclear as to what would be the exact impact for investors.

“It is still very early days for the taxonomy. The alignment disclosures aren’t until next year,” he said.

“We don’t know if it will lead to a lower cost of capital for high-alignment companies, and we don’t know to what degree asset owners prefer more taxonomy alignment.”

Nonetheless, Sussams acknowledged that the proposal would be “a big tailwind for aircraft manufacturers that could see greater taxonomy alignment than investors would have ever expected, particularly when aggregating aligned revenues and capex”.

Aircraft companies could benefit from “a lower cost of capital and greater holdings in ESG funds, if the taxonomy is effective overall”, he added.

Photo credit: Lindsey Parnaby/Getty Images

A service from the Financial Times