Climate and reduction of CO2 emissions have reached the very top of the agenda in most countries. People have taken on the responsibility, and therefore, the topic has received the highest political interest – and priority. If we are not careful, investments, political focus and peoples understanding will work against our climate goals.
By Lars Gullev, Consultant, VEKS
In April 2021, the EU member states, and the European Parliament agreed to reduce CO2 emissions by 55% by 2030 compared to 1990 levels. Although it was a long, complicated process to agree on a common goal – a green EU – it was probably the most straightforward part.
Now it’s getting tricky, and the subsequent discussions have already begun – can green be graded?
At first glance, one would not think it possible – but on 2 February 2022, the EU has created serious, legitimate doubts about what is green and what is black.
As part of the EU Action Plan for a Greener and Cleaner Economy, in line with the Paris Agreement and the UN’s Global Goals, the EU has phased in a new classification system (taxonomy) to ensure uniform identification of green and environmentally sustainable investments in the European market…
The taxonomy classifies an economic activity as environmentally sustainable based on several criteria. The problem with the taxonomy is that most people now will feel great uncertainty and ambiguity about defining black or green fuels – and green technologies.
The European Commission has now recognized both natural gas and nuclear power as greenish – and we have initiated a process in which the colors “green” and “black” are no longer unambiguous.
Burning coal emits less CO2 than burning lignite – but does it make coal a green fuel? Most people will probably think that coal is a “black fuel.”
Burning oil emits less CO2 than burning coal – but does it turn oil into a green fuel? Most people will probably think that oil is a “black fuel.”
Burning natural gas emits less CO2 than burning oil – but does it make natural gas a green fuel? Although the word “natural gas” signals a product from nature, natural gas never becomes a green fuel.
Once the European Commission has classified nuclear power and natural gas as green technologies/fuels, the rationale is that it is necessary to accept imperfect solutions for a transitional period to achieve the goal of climate neutrality in the EU by 2050.
Others express that this is a case of greenwashing.
But how did we end up here, where the traditional colors “black” and “green” now take on a different meaning?
One could imagine that several countries slowly realize that the transition from a fossil-based society to a green, sustainable society is more complicated in the real world than in the political world. Therefore, there is likely to be a compromise between the EU’s two heaviest players, France, and Germany.
With the dramatically rising prices of, i.e., natural gas, France has been quick to catch the ball – about 75% of France’s electricity production comes from nuclear power.
With the decision in Germany to phase out nuclear power – and thereby increase the dependence on natural gas – the Germans have been dependent on natural gas also “joining the pool.”
It is thus a traditional barter.
With the introduction of taxonomy, one has – overstating it a bit – gone from a science-based standard to a political norm.
A significant challenge will be that if you choose to invest your pension in green investments in the future, you risk that part of the money going to natural gas or nuclear power. Unless, of course, the pension fund states explicitly that the investment only makes for renewable energy sources.
This taxonomy opens the door for money that would have gone to renewable energy, such as wind turbines and solar cells, to go to natural gas and nuclear power, making it very difficult for European consumers to invest sustainably.
Let’s hope that the European Parliament will end this redefinition of green and black colors.
There has been massive criticism from several countries that the Commission has not listened, as neither nuclear power nor natural gas should be called green in line with renewable energy.
The Commission sends an entirely wrong signal to investors, and the taxonomy will promote investment in technologies that are problematic for both the climate and the environment.
So, where is district heating on the green/black scale?
The district heating of the future will primarily be based on utilization of surplus heat from data centers, CO2 capture, from Power-to-X (PtX) factories and waste energy plants, heat from sea- and sewage water heat pumps, from geothermal plants, from electric boilers, and combined heat and power plants based on sustainable biomass. So, district heating will be the greenest you can imagine.
All in all, green, sustainable technologies that either utilize the energy resources in society without a well-functioning district heating system would be lost to society – or technologies based on sustainable fuels.
In our district heating world, there is no doubt about what is green and what is black.