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Explained: Why new EU rules have triggered a fight over what is “green energy”

Explained: Why new EU rules have triggered a fight over what is “green energy”

Explained: Why new EU rules have triggered a fight over what is “green energy”
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By CNBCTV18.COMJan 9, 2022 12:19:01 PM IST (Published)

The new norms demand energy companies to shift from carbon-emitting energy sources, as well as financial product sellers to reveal the impact of their investments on environmentally sustainable products.

In a bid to achieve a carbon-free economy, the European Union has proposed treating nuclear energy and natural-gas investments as similar to renewables in the coming years. But this move has been criticized by some sections of the government.

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In spite of widespread public support for action to combat climate change, the proposed recommendation, which needs approval from EU governments and the European Parliament, highlights the political controversy that has been sparked by environmental policies in the continent.


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Europe aims to accomplish a carbon-free economy by 2050

To accomplish its 2050 objective of becoming a carbon-neutral economy, Europe will require significant investment. In 2019, the European Commission, EU's executive division, estimated additional annual investment in the coming decades would hover between 175 to 250 billion euros. This is equivalent to approximately $200 to $285 billion. The private sector will contribute a majority share in this.

By defining what comprises green investment and setting stricter rules for what is needed to achieve that, the EU hopes to boost investment in green projects. It hopes to potentially reduce funding costs in comparison to other energy strategies.

The European Commission has proposed changes to environmentally sustainable energy investment. Investors and industries such as transportation, power generation, and manufacturing are keeping a close watch.

What do the new norms say?

Per new rules, energy companies must shift from carbon-emitting energy sources. And companies dealing in financial products must reveal the impact of their investments on environmentally sustainable products. This includes their spending on green projects.

The Commission's changes come as surging electricity prices raise concerns about the European Union's climate ambitions. By 2030, Europe has committed to reducing carbon emissions by 55 percent.

Each country is allowed to use its specific energy mix under EU law. The taxonomy rules have no bearing on this or the use of public funds for different energy sources.

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