Taxonomic vandalism, EU-style

Published in (Wellington), 8 February 2022

The dictionary defines taxonomy as a system of classification, especially in biology. But as any biologist will tell you, this is not always a straightforward task.

The first problem with taxonomies is that they are rarely complete. Some species are also hard to define, and then naming gets clouded by vanity and particular interests.

Biologists have a name for this phenomenon: ‘taxonomic vandalism.’

Hence, the European Union should have been warned when it went to develop its own taxonomy: the EU’s taxonomy of environmentally sustainable economic activities.

As far as vandalism is concerned, the EU’s taxonomy is prone to the same problems biologists encounter. And as if that needed further proof, the decision to include nuclear power and natural gas as ‘sustainable’ just delivered it.

Last week, the EU Commission announced that nuclear power and natural gas are both bridge technologies towards Europe’s 2050 goal of net-zero emissions. This means both industries will have easier access to capital – and possibly even subsidies.

The EU’s rationale behind developing its taxonomy is ambitious. It shall “provide companies, investors and policymakers with appropriate definitions for which economic activities can be considered environmentally sustainable.” To do so, would then “create security for investors, protect private investors from greenwashing, help companies to become more climate-friendly, mitigate market fragmentation and help shift investments where they are most needed.”

Indeed, grand goals and visions. Yet, the reality is far grubbier than this statement suggests.

Depending on one’s politics, nuclear and gas may seem sustainable. If you think that minuscule carbon emissions trump the problem of long-term waste storage, then nuclear is for you. If, on the other hand, you believe natural gas is a cleaner alternative to coal, then you might want to include gas in the taxonomy.

Indeed, this is how the European Commission justified incorporating both forms of energy. “The reason we are including gas and nuclear in the way we are doing it is because we firmly believe that this recognises the need for these energy sources in transition,” said Mairead McGuinness, the EU Commissioner for financial services.

However, that is only the official reasoning. The reality is more mundane. The EU’s two most important countries, France and Germany, insisted on including nuclear and gas – respectively. France relies heavily on nuclear power to generate its electricity. Meanwhile, Germany is transitioning away from both nuclear power and coal, so it will need gas in its future energy mix.

France had no interest in describing gas as sustainable, just as Germany is ideologically opposed to nuclear power. But both countries made sure the other’s preferred source of energy made it onto the EU’s taxonomy – if only to protect their own.

Both France and Germany have thus inadvertently done the public a favour by revealing just how questionable the EU’s taxonomy is. It is even worse than the greenwashing the EU had meant to prevent. The EU’s whole taxonomy exercise is entirely political.

If a technology has influential political backers, there is a high likelihood it will find itself in the EU’s taxonomy. Without political support, however, the chances of receiving the EU’s blessing are slim.

This is ‘taxonomic vandalism’ in its purest form. Rather than creating clarity, the EU’s taxonomy helps to promote particular interests.

Still, the taxonomy’s vandalism goes further. It is not just that the EU Commission may favour the wrong technologies. The question is whether the EU Commission should even be in the business of deciding which technologies get its stamp of approval.

Once upon a time, the EU was established not least to create a common market. That was an economy based on freedom of contract, property rights and competition.

Against this background, the EU’s taxonomy is bizarre. As if a market-based economy needed a government to approve and disapprove of individual businesses, sectors and technologies.

A market economy would leave it to the market to decide which technologies succeed and which do not. Especially as the EU has established instruments like the European Emissions Trading Scheme for the energy sector, it should not need a political classification of what counts as a sustainable technology.

Instead, the EU’s taxonomy approach is the opposite of a market-based solution. It prevents market processes from finding the most suitable technologies under the EU’s existing environmental regulations. Instead, it pre-empts such decentralised decision-making with a political diktat.

The basic problem is that the taxonomy attempts to divide economic activities into supposedly green and non-green ones. But even that simple distinction can be highly questionable. Just look at the nuclear and gas issue.

Economic reality is too complex and dynamic for a taxonomic differentiation. Innovations constantly create new opportunities that a fixed taxonomy, drawn up by politicians and officials in Brussels, may not have foreseen.

In this sense, the approach of the taxonomy is not too dissimilar to central planning. Just like central planning, it is prone to political meddling – see above.

A further similarity to centrally planned regimes: the taxonomy will over time create its own growing bureaucracy, which will be busy with defining what counts and doesn’t count as ‘green’.

When the EU embarked on developing its own taxonomy, maybe it should have consulted with a few biologists. That may have prevented it from creating a monster.

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