Understanding the EU Taxonomy for sustainable activities

The Taxonomy Regulation provides companies, investors and policymakers with definitions of economic activities that can be considered environmentally sustainable, in order to direct private investments toward them. This redirection of investment flows could significantly accelerate the adoption climate-friendly technologies or the scale-up existing ones. Although the IPCC assesses Biochar / PyCCS as one necessary solution to address climate change, it was NOT included in the Taxonomy.

The EU is aiming at climate neutrality by 2050. In order to achieve this goal, the economy has to be re-structured. Investments in green tech in the scale of 300 – 400 billion Euro annually will be necessary. This exceeds the federal budget of France. These amounts are not additionally available in the EU budget, which means that private investment flows have to be directed towards sustainable, particularly climate-friendly, technologies.

In order to direct private financing, there are two approaches chosen by the EU: One is carbon pricing. It is evident that, if the cost of greenhouse gas emissions are (at least partially) taken into account, more climate friendly technologies will create more interesting business cases. This approach is already having an effect on businesses and developments across European member states.

The other approach, chosen by the EU, is a labelling of sustainable, climate friendly technologies. In 2020, the EU has passed Regulation 2020/852, listing criteria for ecologically sustainable technologies, in order to allow investors to chose investments that can be labelled „sustainable“. In the following, it was accompanied by delegated acts.

One of them is the Taxonomy Disclosure Delegated Act (2021/4987), regulating that large undertakings / businesses have to disclose their activities so that investors and the public are able to assess the proportion of sustainable activities carried out by them. [Comment: As large companies can hardly be considered sustainable, this allows to quantify the proportion of sustainable activities carried out by them.]

This is a prerequisite for sustainable investments (e.g. investment funds). As sustainability criteria have been and still are gaining importance, being listed as sustainable in the taxonomy does have an influence on the ability to acquire financing. A so called Climate Delegated Act (2021/2800) mentions criteria and technologies the EU Commission considers sustainable.

Now, a further Delegated Act has been drafted and is about to enter into force (https://ec.europa.eu/commission/presscorner/detail/en/IP_22_2). This one includes nuclear power and natural gas, which is creating quite a bit of frustration around environmental organizations.

Regardless of how we evaluate the need for those energy sources, it is a simple fact that they are per definition not sustainable. And this is the issue: Even if they might be considered a necessary bridge technology, e.g. to transit a national economy depending on coal to alternative technologies, the inclusion of such resources into the taxonomy for sustainable financing might be harming the credibility of the EU.

More importantly, the regulation, which was intended to guide private investments will also be used as a guideline for public ones. There are large amounts of money to be distributed (e.g. COVID aid) and the key criteria for how to spend those will be sustainability. In the end, we will see those COVID support funds entering into technologies that are part of the taxonomy, some of them will still harm the environment – and this part of the funds will NOT enter into the development and expansion of renewable energies, that we desperately need.

While gas and nuclear have succeeded in getting a step closer to finding large investments in new fossile power plants, there are truly climate-positive energy sources that have been neglected.

For instance, it is highly unfortunate that the EU, in these important documents, does not consider the role of pyrolysis and pyrogenic carbon capture and storage (PyCCS), the most promising short-term carbon-sink solution. PyCCS is technology ready with no negative side-effects and could be scaled to climate relevance within the next decade.

Reaching the goal of climate neutrality is not possible without the creation of carbon sinks, i.e. negative emissions, on a large scale. This is where PyCCS / biochar can make a decisive contribution: It represents an already available and scalable technology for the mitigation of climate change. Biochar is produced by pyrolysis of biomass and contains about half of the carbon in the feedstock that is now converted into a stable form. The rest of the carbon is converted into bioenergy. Pyrolysis even allows the utilization of biomasses that are unsuitable for energy production by combustion and that are commonly considered waste streams.

The EBI has calculated the potential of carbon sequestration (Negative Emissions)  by PyCCS to reach the order of 255Mt of CO2e annually by 2035 if current growth rates are maintained. This represents a third of the necessary negative emissions of the EU by that time if a reduction of 85% (compared to 1990 levels) is realized.

Biochar use cases:

Depending on feedstock and pyrolysis process control, biochar can be used in agriculture as a feed amendment to improve animal welfare, as a compost amendment avoiding nutrient leaching and non-CO2 greenhouse gas emission and a soil conditioner. In industry, biochar can be used as an additive in polymers or construction materials, as filter material, insulation or for fibers. Also high-tech carbon materials are being developed. In 2020, EBI members have realized the first climate positive asphalt, in 2021 the first climate-positive concrete. Pyrogenic carbon is the material that can be the basis for a carbon-based economy of the future, after the phasing out of fossil resources. It is key to a circular economy.

As acknowledged by the IPCC, “biochar is formed by recalcitrant (i.e., very stable) organic carbon” and thus a tool to sequester carbon that has considerable co-benefits, especially when applied in agriculture. By improving soil properties, it supports climate change adaption. The EBI is working towards a favorable legislation, adequate industry standards, precise market analysis and a coherent communication on pyrolysis and biochar, particularly on a EU level. But we are dependent on our members. Help us transmitting the message of the potential of PyCCS / biochar and if you are not yet a member: Be invited to join us, in order to achieve our common goals together.