Lobbying on the EU Taxonomy’s Green Criteria December 2020An InfluenceMap Report

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Lobbying on the EU Taxonomy's 'Green' Criteria, December 2020 1

Lobbying on the EU Taxonomy’s Green Criteria December 2020

Contents

Executive Summary 2

Glossary 5

Background 6

Methodology 8

Overview of Lobbying on the Taxonomy Criteria 9

Detailed Analysis of Key Sectors 11

Agriculture 12

Bioenergy 13

Gas 14

Hydropower 15

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Executive Summary

■ Intensive lobbying throughout 2020 from ‘real economy’ sectors has extracted significant concessions

from the European Commission on its EU Sustainable Finance taxonomy. The green criteria for a range of

sectors, including bioenergy, agriculture and hydropower are now at risk of diverging from the

Commission’s Technical Expert Group’s science-based recommendations, with natural gas also being

heavily lobbied on. The Commission is expected to publish the final delegated act on the EU taxonomy by

the end of the year, and fierce lobbying continues in the lead up to this.

■ The taxonomy is one of the central components of the EU’s Action Plan on Sustainable Finance and aims

to provide a common, science-based language to identify economic activities that contribute to achieving

the EU’s sustainability goals, including its 2050 net-zero target.

■ The taxonomy criteria will underpin a range of EU financial regulations on sustainable finance and

therefore are expected to impact private investment and lending decisions as well as potentially guiding

the EU budget and recovery funds. This has created a huge amount of interest from industry, which has

generally lobbied intensively for a lenient approach to their respective sectors. This research tracks the

deviations from the Technical Expert Group’s advice, which risk misaligning the taxonomy from EU’s

climate goals, back to the vested-interest lobbying of real-economy sectors that have demanded these

changes.

■ A group of 10 industry associations including Bioenergy Europe, European Biogas Association and

Confederation of European Forest Owners (CEPF) appear to have had their demands for significantly

weakened criteria for bioenergy recognized in the Commission’s draft criteria, removing the requirement

that would only allow “advanced biofuel feedstocks” and instead allowing a much wider range of

feedstock to be used, including forest biomass. The sector continues to push for an even more lenient

approach that would permit the use of food and feed crops in biofuels and manufacturing.

■ The lobbying on agriculture appears to be led by powerful industry association COPA-COGECA which

appears to have been successful thus far in its ask to remove the declining GHG emissions benchmarks

from the taxonomy. Minutes also demonstrate that the taxonomy was criticized by COPA-COGECA in at

least one of DG AGRI’s Civil Dialogue Groups in which the industry association is heavily represented.

■ Organizations including industry associations Finnish Energy and Energy Norway and companies Statkraft

and Agder Energi have had their request to remove the Technical Expert Group’s recommended ban on

small hydropower recognized in the Commission’s draft delegated act. There is also a continued pushback

by the sector against the perceived “prohibitive environmental requirements” in the hydropower criteria.

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■ InfluenceMap tracked industry lobbying on the taxonomy from the start of 2019, assessing publicly

available evidence on engagement including via official consultations, meetings with policymakers and

open letters. This analysis identified over 300 (non-financial) companies and industry associations actively

engaging on the taxonomy regulation. InfluenceMap has found over 400 consultation responses and over

80 meetings with policymakers on the subject of the taxonomy from these groups.

■ The analysis focuses on several sectors – bioenergy, agriculture and hydropower – for which there are

both significant divergences between the Technical Expert Group’s science-based recommendations and

the draft delegated act published by the Commission in November 2020 and evidence that this has been

accompanied by heavy lobbying from the impacted sector. In each of these cases, lobbying by the relevant

industries appears to have played a role in weakening the criteria. In-depth profiles on each sector’s

lobbying can be found at the end of this report. While there are further divergences, InfluenceMap has

not yet identified publicly available evidence of lobbying related to these changes, but will continue to

monitor the situation closely.

■ Whilst the Commission's draft would exclude unabated natural gas from the taxonomy, the gas lobby is

included in the analysis due to its very high engagement, continued pressure on the Commission and

indications that it may attempt to seek the inclusion of natural gas at a later stage via the Council which,

alongside the European Parliament, will have two months to accept or reject the delegated act. Whilst the

majority of lobbying has been led by industry groups including IOGP and Eurogas, in an apparent

escalation in strategy in November 2020, an industry letter was signed by numerous high-profile

companies including BP, Equinor, Total, Repsol and PGE.

■ There appears to have been some increase in engagement by industry since the publication of the TEG

final report in March 2020, with approximately one third of organizations identified engaging publicly on

the taxonomy for the first time since then. However, it is the gas lobby, the least successful thus far of the

sectors identified in this report in securing its requests on the taxonomy, which has ramped up its lobbying

the most significantly in the last couple of months

■ Going forward, targeting EU member states is likely to be a key focus for sectors that are aiming to

weaken criteria. Thus far this has been targeted at the meetings of the Member State Expert Group on the

taxonomy but focus is likely to shift toward the Council.

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Glossary BIC Bio-based Industries Consortium

CAP Common Agricultural Policy

CEFS European Association of Sugar Producers

CEPF Confederation of European Forest Owners

CEPI Confederation of European Paper Industries

COGEN EUROPE European Association for the Promotion of Cogeneration

COPA European Farmers

COGECA European Agri-cooperatives

DG AGRI Directorate-General for Agriculture and Rural Development

DG ENER Directorate-General for Energy

DG FISMA Directorate-General for Financial Stability, Financial Services and Capital Markets Union

EBA European Biogas Association

EOS European Organisation of the Sawmill Industry

ePURE European Renewable Ethanol

EUBP European Bioplastics

EuropaBio European Association for Bioindustries

EUSTAFOR European State Forest Association

FEDIOL EU Vegetable Oil & Proteinmeal Industry

FTP Forest-based Sector Technology Platform

IOGP International Association of Oil & Gas Producers

PFP Primary Food Processors

RED II Renewable Energy Directive II

TEG Technical Expert Group

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Background Launched in March 2018, the EU's Action Plan on Sustainable Finance is seen as critically important in

achieving the EU's climate goals, through reorienting capital flows towards a more sustainable economy and

mainstreaming sustainability issues into financial decision-making. The Action Plan followed the

recommendations of the High-Level Expert Group on Sustainable Finance (HLEG) which highlighted the need

for “no less than a transformation of the entire financial system” to deal with the challenges raised by climate

change. One of the central components of the Action Plan was the need to develop a sustainable finance

taxonomy to provide a common, science-based language to identify economic activities that contribute to

achieving the EU’s sustainability goals. InfluenceMap's research on the lobbying of the EU’s Sustainable

Finance Taxonomy, published in December 2019, found intense lobbying activity on this key policy by both the

financial and corporate sectors.

Following the EU processes for financial regulation, the taxonomy regulation involves two types of text: ‘level

1’, where the Commission proposes and the Parliament and Council agree on the framework principles of the

legislation; and ‘level 2’, where the technical details are overseen by the Commission. There are numerous

opportunities for corporate engagement on both the 'level 1' and 'level 2' texts, as demonstrated in the

infographic on the next page.

To assist in developing the technical details, the Commission set up a Technical Expert Group (TEG) in July

2018. The TEG published its final report in March 2020, which set criteria for determining which economic

activities can be considered sustainable in-line with the EU's 2050 net-zero target.

In November 2020, the Commission's proposed delegated act on the taxonomy's climate change mitigation

and adaptation criteria were published. Whilst the Commission closely followed the work of the TEG for the

majority of criteria, the thresholds set out in the proposed delegated act were weaker than the science-based

guidance of the TEG in a few key areas. This appears to be at least in part due to a ramp-up in lobbying

activities by these sectors.

The window of opportunity to address this lobbying is narrow; the delegated act are open for feedback for

four weeks and the Commission expects to adopt the act by the end of 2020. After this, the European

Parliament and Council have two months to formulate any objections. During this period, industries are likely

to lobby the Parliament and Council directly as a last resort to attempt to weaken thresholds they are not

content with.

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Methodology InfluenceMap has identified more than 300 companies and industry associations that have engaged on the

taxonomy regulation since the start of 2019, when the TEG first started reporting its suggested criteria for

classifying what counts as an environmentally sustainable economic activity. This analysis focuses on

engagement by 'real economy' sectors on the taxonomy and does not include finance sector companies and

industry associations. The companies and industry associations included in this analysis were identified using

the following data sources:

■ Official consultations carried out by the Commission and the TEG

■ Meetings on 'taxonomy' and/or 'sustainable finance' disclosed by the Commission and MEPs1

■ Open letters to policymakers

■ Disclosure on lobbying in the transparency register

Responses to the official consultations and the contents of open letters to policymakers were analyzed to

determine whether each of the identified companies and industry associations were lobbying on any of the

key issues. These key areas were chosen by identifying areas where there were divergences between the TEG's

recommendations and the Commission's delegated act. InfluenceMap then analyzed information obtained

from the above data sources to determine where companies and/or industry associations had lobbied on

these issues. The gas sector was additionally chosen for analysis on the basis of its high engagement on the

taxonomy regulation and indications that it may attempt to weaken the regulation at a later stage via the

Council.

1 Data sourced using the Integrity Watch database

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Overview of Lobbying on the Taxonomy Criteria The taxonomy criteria, which define what activities can be considered green, are expected to underpin a range

of EU financial regulations on sustainable finance and therefore are expected to impact private investment and

lending decisions as well as potentially guiding the EU budget and recovery funds. This has created a huge

amount of interest from industry, who have generally lobbied intensively for a lenient approach to their

respective sectors.

The scale of industry engagement on the taxonomy is significant; InfluenceMap identified 318 companies and

industry associations who have engaged on the taxonomy based on EU consultations, meetings data, open

letters and the transparency register. The lobbying resources of these groups (as disclosed in the transparency

register) total in excess of €120M per year and they disclose more than 950 full time equivalent lobbying staff2.

Whilst these resources are clearly not spent exclusively lobbying on the taxonomy, this gives a sense of scale of

the resources available to the groups involved when lobbying the EU.

Since the start of 2019, when the TEG began to issue guidance, industry representatives have submitted 413

consultation responses to the Commission and the TEG. Industry representatives have met the Commission 52

times to discuss meetings on the taxonomy. A further 31 meetings with MEPs were identified, but the true

number is much likely to be much higher as only just over a third of MEPs publish details of their meetings

according to research by Transparency International. There are currently no transparency laws requiring

disclosure on meetings with member state representatives.

True access to policymakers is likely to go beyond this publicly available evidence. There are also examples of

industry discussions on the taxonomy with policymakers in Commission expert groups unrelated to the

taxonomy. These Commission expert groups act as consultative bodies to Commission departments on the

preparation and implementation of legislation. At a meeting of DG AGRI's Civil Dialogue Group on

"Environment & Climate Change" in November 2019, a COPA representative suggested that "some of the

political statements in the TEG report on taxonomy are unacceptable". Many of the organizations identified are

members of numerous expert groups within the Commission, however availability of minutes is not sufficient

to determine in how many the taxonomy may have been discussed.

There appears to have been some increase in engagement by industry since the publication of the TEG final

report in March 2020, with approximately one third of organizations identified engaging publicly on the

taxonomy for the first time since then. However, it is the gas lobby, the least successful thus far of the sectors

identified in this report in securing its requests on the taxonomy, which has ramped up its lobbying the most

2 53 of the 318 organizations identified do not appear in the EU Transparency Register and therefore do not contribute to these statistics.

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significantly in the last couple of months. Until recently, engagement was led by key industry associations

including IOGP and Eurogas but, in a clear escalation strategy in November 2020, an industry letter was signed

by numerous high-profile companies.

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Detailed Analysis of Key Sectors The section that follows contains analysis of lobbying by key sectors on the taxonomy criteria for determining

which economic activities can be considered environmentally sustainable. This includes sectors for which the

taxonomy delegated act diverged from the final recommendations of the Technical Expert Group (TEG), where

lobbying appears to have played a significant role in weakening the criteria. The gas sector is also covered, due

to its extensive lobbying on the taxonomy and ramp up in recent months. A common theme among a number of sectors is pushing for alignment with existing, less stringent regulations

over the science-based thresholds recommended by the TEG. This argument has been used numerous sectors

pushing for more lenient criteria including gas (asking for alignment with the Clean Energy Package), bioenergy

(asking for alignment with RED II), agriculture (asking for alignment with the CAP).

Even where concessions appear to have been secured, industry lobbyists are continuing to lobby for a more

lenient approach to classifying their activities. The agricultural sector continues to push for greater alignment

with the CAP which has less rigorous requirements than the proposed taxonomy criteria, the bioeconomy

sector is pushing back against the exclusion of food and feed crops and the hydropower sector appears to be

opposing some of the environmental requirements for hydropower. Further to this, there are increasing

indications that organizations will target member states in attempts to secure more lenient criteria. Thus far

this has been targeted at the meeting of the Member State Expert Group on the taxonomy (held in late

November following the publication of the delegated act) but focus is likely to shift toward the Council which,

alongside the European Parliament, will have two months to accept or reject the delegated act.

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Agriculture

■ The pushback against the agricultural criteria in the taxonomy appears to have been led by COPA-COGECA, the union of two agricultural umbrella organizations representing the farming industry. Previous research by Corporate Europe Observatory has demonstrated the huge influence COPA-COGECA has in DG AGRI and, in particular, DG AGRI's Civil Dialogue Groups, of which it chaired 8 out of 13 in 2019. At a meeting of DG AGRI's Civil Dialogue Group on "Environment & Climate Change" in November 2019, a COPA representative suggested that "some of the political statements in the TEG report on taxonomy are unacceptable".

■ In feedback to the TEG in September 2019, COPA-COGECA and The Central Union of Agricultural Producers and Forest Owners (MTK)3 opposed the idea of the TEG's declining GHG thresholds, both arguing in their responses that "A threshold that implies a trajectory is not consistent with CAP policy" and that "30-year schemes are not know in CAP". In 2019, MTK met with the Commission three times to discuss the taxonomy.

■ In feedback to the European Commission on the taxonomy impact assessment in April 2020, COPA-COGECA suggested the criteria should be in line with the EU's CAP, which has less rigorous requirements than the proposed taxonomy criteria, arguing that "sustainability is already defined in sectorial regulation and must not be redefined for sustainable investment purposes". COPA-COGECA further pushed back against the TEG's recommended benchmark trajectory on the basis "Farmers that have already reduced emissions from production will find it harder to reduce them further than farmers who have not yet taken any steps to reduce emissions".

■ Also in feedback to the Commission on April 2020, The Federation of Swedish Farmers argued that it was "crucial that the technical screening criteria strive to be in line with the CAP" and MTK suggested that "the sustainable criteria and the DNSH-level should be integrated to the CAP criteria".

■ In November 2020, following the publication of the delegated act, a former COPA-COGECA Secretary-General wrote an article in Euractiv arguing that the taxonomy was an "Orwellian mechanism", had "complete absence of scientific rigour" and reported that "for COPA-COGECA, they emphasise that the taxonomy draft adds constraints going beyond the commitments recently agreed in the CAP reform"

3 The organization representing farmers, forest owners and rural entrepreneurs in Finland

Divergence from the TEG: The TEG recommended that, in order to be considered environmentally

sustainable, the agricultural sector should avoid or reduce GHG emissions through the application of

essential management practices each year or by following a stated 30-year GHG benchmark reduction

trajectory (-20% by 2030, -30% by 2040 and -40% by 2050). The GHG reduction benchmarks do not appear in

the Commission's delegated act, leaving primarily qualitative criteria.

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Bioenergy

■ There has been considerable lobbying on the bioenergy criteria, with the primary aim of pushing for alignment of the taxonomy with the criteria set out in RED II which are weaker than the science-based thresholds recommended by the TEG. This effort appears to be led by a group of powerful industry associations including Bioenergy Europe, CEPF, CEPI, COGEN Europe, COPA-COGECA, EBA, EOS, ePURE, Euroheat & Power and EUSTAFOR. This group includes numerous representatives of the forestry sector which has been highly engaged on the bioenergy criteria with the aim of securing a lenient approach to the use of forest biomass.

■ In an open letter in November 2019, this group of industry associations argued that "The sustainability technical criteria proposed in the Sustainable Finance Regulation should mirror the sustainability requirements agreed in REDII to maintain a sound investment environment". In joint statements on forestry in February and September 2019, a similar group of industry associations stressed that the taxonomy should follow the RED II approach to forest biomass. This group includes CEPF, CEPI, EUSTAFOR, COPA-COGECA, Bioenergy Europe, EOS and CEI-BOIS.

■ In feedback to the Commission in April 2020, more than 32 companies and industry associations called specifically for the alignment of the taxonomy regulation with RED II. This includes all of the above industry associations with the exception of ePURE. Powerful oil and gas industry associations FuelsEurope and IOGP also called for alignment with RED II, stating support for "full alignment between the delegated act and the sustainability criteria established in RED II". A number of companies also commented on the need for alignment with RED II in the April 2020 feedback. The most engaged of these appears to be Finnish company Neste, which manufactures renewable diesel, who argued that "The RED II Directive, adopted in 2018, sets stringent sustainability criteria for renewable energy, including biofuels". Neste has met with the Commission 3 times to discuss the taxonomy (including once since the publication of the TEG final report) and with MEP Gilles Boyer to discuss the policy.

■ There is ongoing lobbying by a similar group to weaken criteria in the delegated act that would currently rule out the use of food and feed crops in biofuels for transport, the manufacture of plastic and the manufacture of chemicals. After the delegated act was published, European Bioeconomy Alliance, whose members are BIC, CEFS, CEPF, CEPI, COPA-COGECA, ePURE, EUBP, EuropaBio, FEDIOL, FTP, PFP and Starch Europe, wrote to the Member State Expert Group on Sustainable Finance arguing that the "eradication of those bioeconomy outlets from the positive taxonomy is problematic". The statement also went further, accusing the Commission of "misusing its power" in setting these criteria.

Divergence from the TEG: The TEG recommended that the manufacture of bioenergy should only be

considered environmentally sustainable if it met the criteria for 'advanced bioenergy feedstocks' in the

Renewable Energy Directive (RED II). This requirement has been removed in the delegated act and replaced

with a reference to the general criteria in RED II, encompassing a much wider range of bioenergy feedstock

including far less sustainable options such as forest biomass. The requirement for emissions for electricity

production using bioenergy to decline to 0gCO2e/kWh by 2050 has been removed.

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Gas

■ The gas industry has lobbied extensively over the last two years,

pushing back against the 100gCO2e/kWh threshold for electricity

generation in order to accommodate the inclusion of unabated

natural gas in the taxonomy. Whilst the Commission has maintained

this threshold, industry has ramped up its lobbying in past months.

■ The majority of gas lobbying in 2019 was led by industry groups

including IOGP, Eurogas and GasNaturally. These groups

consistently argued that the electricity generation threshold should

be brought into line with existing regulation which would result in

natural gas being considered sustainable4. In feedback to the TEG in

2019, IOGP suggested that "the value of 100gCO2e/kWh should be increased and made consistent with

the existing legislation such as the Electricity Regulation" and Eurogas proposed that the taxonomy should

be brought in line with the "threshold for power generation activities set at 550grCO2eq/kWh for new

projects under the Clean Energy Package".

■ In October 2020 a letter signed by 57 gas industry leaders was sent to the Presidents of the EU

Commission and European Council, as well as various Commission Director-Generals and all Permanent

Representatives of EU member states. The letter called for a more lenient approach to gas in the

upcoming delegated act on the taxonomy and was signed by companies including BP, Equinor, Total,

Repsol and PGE. Direct engagement from the companies themselves appears to demonstrate an

escalation strategy by the industry. In line with previous lobbying efforts, the letter argued that "The

threshold for enabling/transitional activities such as natural gas should be carefully designed, taking into

account existing EU legislation".

■ There has been a number of recent meetings with policymakers on the taxonomy file. Since the TEG final

report was published in March 2020, RWE and Siemens have each met with the Commission once to

discuss the taxonomy, whilst Engie has met with the Commission twice. IOGP have met with the

Commission three times in this time period to discuss the taxonomy specifically and have also met with

Romanian MEP Christian Ghinea to discuss the policy.

4 According to the IPPC, the median lifetime emissions for a Combined Cycle Gas Turbine (CCGT) plant is 490gCO2/kWh

Divergence from the TEG: There is limited divergence from the TEG recommendations. The threshold of

life cycle emissions lower than 100gCO2e/kWh has been retained but the decline to 0gCO2e/kWh by 2050

has been removed.

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Hydropower

■ Following the TEG guidance in March 2020, in feedback to the

Commission's impact assessment on the taxonomy in April 2020, a

number of representatives of the hydropower industry specifically

argued against the recommendation to avoid small hydropower under

10MW. This included industry groups Finnish Energy and Energy

Norway and companies Statkraft and Agder Energi. Eurelectric, the EU

industry association representing the electricity sector, released a

position paper in March 2020 suggesting that "no distinction should be

made between micro, small, medium or large hydropower as possible

positive as well as adverse effects of a plant are site and water body

specific and cannot be related to the size of a project".

■ In April 2020, Nordenergi5, Swedenergy and Finnish Energy met with the Commission to discuss the

taxonomy.

■ After the draft delegated act were published, a letter to the Finnish and Swedish permanent

representations from Fortum, Vattenfall, Finnish Energy, Swedenergy, and Uniper argued against

"prohibitive environmental requirements" attached to the criteria for hydropower, alongside concerns

about nuclear and hydrogen. They called on the permanent representations to pass on these concerns at

the Member State Expert Group Meeting on the taxonomy.

5 The members of Nordenergi are the Danish Energy Association, Energy Norway, Finnish Energy, Samorka – Icelandic Energy and Utilities,

Swedenergy

Divergence from the TEG: The TEG recommendation that the "construction of small hydropower (<10MW)

should be avoided" due to adverse impacts on freshwater biodiversity has been removed. The threshold of

life cycle emissions lower than 100gCO2e/kWh has been retained but the decline to 0gCO2e/kWh by 2050

has been removed.