In order to meet the European Union’s climate and energy targets for 2030 and reach the objectives of the European Green Deal, investment must be directed towards sustainable projects and activities. To achieve this, a clear definition of ‘sustainable’ is needed. This is why the EU action plan on financing sustainable growth calls for a way of identifying those which qualify – the so-called ‘EU taxonomy’.
This classification system provides companies, investors and policymakers with appropriate definitions for which economic activities can be considered environmentally sustainable. As the EU says: “In this way, it should 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.”
But, asks Richard Lax of Kapsch TrafficCom, does the taxonomy run the risk of actually blocking the funding of sustainable mobility? Writing exclusively for ITS International, Lax lays out his concerns below:
Is the European Commission missing the boat on modal shift? Is a policy glitch about to disable EU funding for urban transport policy? Will urban arteries be clotted with electric vehicles, whilst public transport runs empty?
The taxonomy regulation may well set incentives to avoid investment in the change of mobility patterns and stymie the sustainable development of the Trans-European Networks (TEN-T). Do we want a taxonomy that de-incentivises investors and contracting authorities from procuring ITS?
European sustainability goals and Trans-European Networks
So let‘s take a step back. What‘s going on here? The Commission is encouraging and incentivising modal shift in various pieces of transport policy: the TEN-T Guidelines that EU Member States and European Parliament are discussing right now offer more than 400 EU cities support for the implementation of their urban transport policies.
Needless to say, noble causes such as air quality and traffic efficiency play key roles: cycling, public transport use and active mobility are central instruments to make urban mobility happen.
The Commission sets itself goals, such as the 90% reduction of transport-related CO2 emissions by 2050 or the 30 million zero-emission vehicles by 2030, by 2050 an all-zero-emission vehicle fleet and the significant decarbonisation of cities by 2030 (for the connoisseur: COM (2020) 789 ‘Sustainable and Smart Mobility Strategy’). It also outlines how digitilisation will contribute to these goals, making traffic more efficient, safe and secure. It also foresees setting incentives to drive the transition, such as the internalisation of external costs - in other words road charging and ITS. A crucial element: using digitilisation to encourage behavioural change in transport and to reward sustainable initiatives.
Funding sustainability goals – TEN-T guidelines
In its proposed TEN-T guidelines the European Commission also encourages sustainable urban mobility plans (SUMP) for cities to implement their mobility policies. SUMPs deal a lot with transparent governance and inclusive decision-making. They also encourage the use of technical instruments to manage mobility, find items such as Mobility as a Service, ITS, electric vehicles and electrification of public transport, urban access systems and road charging, urban freights logistics, shared mobility, cycling and walking.
The TEN-T guidelines in turn enable EU funds to be disbursed through the Connecting Europe Facility, that funds the implementation of the TEN-T Guidelines. So far, so good…
Green Deal taxonomy regulation
Enter the green deal‘s taxonomy regulation. This is a piece of financial regulation which dictates what publicly-traded companies may report as environmentally sustainable in their non-financial reporting. It has been in the news recently: the public debate in Europe on the environmental sustainability of nuclear power and gas concern the EU taxonomy.
The goal is the prevention of greenwashing – the practice by which companies hide the environmental harm their business does by detailing ‘green’ initiatives which do not have the stated positive impact.
Flicking through the legal text you may come across the objectives of the taxonomy regulation: does your economic activity serve decarbonisation, pollution prevention, etc? This looks like the material that gets investor relations or regulatory affairs specialists excited. The devil as always lies in the detail: there is legislation subordinated to the taxonomy regulation - so-called delegated acts. It is these delegated acts which exactly outline what requirements an economic activity has to meet. It is here that the fierce discussion about the sustainability of nuclear energy and gas erupted. Concerning modal shift, the impact of the delegated acts beyond the financial reporting is where the Commission misses the boat.
The taxonomy delegated acts will define environmentally-sustainable economic activity – and not just for non-financial reporting. It will eventually be used in green procurement as well. This means the delegated acts will impact the procurement procedures under the afore-mentioned Connecting Europe Facility and will complement the TEN-T guidelines.
Better products alone won’t address transport emissions
This is where things start to get sticky. The taxonomy improves the sustainability performance of individual products or services , or economic activities, as the taxonomy dubs them. Substituting one economic activity with another is not really in its focus. It does not address behavioural change and now may stymie investment the direction of changing mobility behaviour. Hence don‘t expect any.
To make matters worse: if the delegated acts start to be used for the procurement under the Connecting Europe Facility the world starts to look bleak for urban nodes. They are responsible for governing mobility, the digital tools to govern their mobility are not considered under the taxonomy, hence have the lowest priority in future procurement.
So are we facing the transport equivalent of the milk lakes or the butter mountains that the EU Common Agricultural Policy produced in the 1980s? Is ITS lost? It need not be. We need a so-called technical screening criterion that covers ITS and road charging, in some form or another.
Who is capable of doing this? The expert group responsible for the technical evaluation of the delegated acts is the Platform on Sustainable Finance and in the end the European Commission's directorate for financial affairs, DG FISMA. The European Parliament took an interesting initiative and MEPs Rovana Plumb and Istvan Ujhelyi proposed an according recital in the ongoing debate of the ITS Directive.
From 2023 onwards, industry has to report on its taxonomy compliance - and rest assured, public procurement is likely to follow swiftly. If sustainable mobility is to be incentivised, smart and sustainable mobility have to be in. Various ITS players have already appealed to the European Commission to change the situation.
ABOUT THE AUTHOR:
Richard Lax is executive expert, EU affairs, Kapsch TrafficCom
Where can I find the relevant EU taxonomy policy?
Find the taxonomy regulation 2020/852 here
Refer to articles 9, the objectives, why I believe ITS and road charging fall under the scope of the regulation. Check recital 43 for why I think there’s a link to public procurement; see article 19 for the criteria that ITS would need to fulfil to be included into the technical screening criteria.
Look at the Sustainable and Smart Mobility Strategy COM (2020) 789 here
Point 9 outlines EU goals, such as decarbonising cities or the 2030 30 million zero-emission vehicles. Check point 11 - how to implement that, if it’s at the bottom of the priority list of the procurement rules?
The proposed TEN-T Guidelines COM (2021) 821 look at how to distribute money through the Connecting Europe Facility.
Article 4 outlines the sustainability goals of the TEN-T, difficult to reach without incentives and traffic management; Articles 5 and 42 ditto (see the Sustainable and Smart Mobility Strategy above).
For the role of cities check Article 40 for funding for cities and the Annexes for a list of urban nodes and their requirements.
Fun fact! The European Parliament twigged it! See the proposed amendment 34 for linking the taxonomy and ITS.
Let’s hope the TRAN Committee agrees with this amendment in October.