In Two Separate Suits, NGOs Sue European Commission Over Green Investment Label

In Two Separate Suits, NGOs Sue European Commission Over Green Investment Label

Ten NGOs from across the EU have taken the European Commission to court over its decision to give a green label to investments in forest bioenergy, forest management and bioplastics activities as part of its controversial EU Taxonomy framework.

Part of the EU’s Green Deal plan to make Europe climate-neutral by 2050, this classification system seeks to channel billions of euros in investment into sustainable economic activities by signposting investors to economic activities that are truly environmentally sustainable.

ESG logoYet the European Commission’s decision to give a green label to nuclear and natural gas projects has drawn fierce criticism from lawmakers and NGOs, and prompted accusations of greenwashing. Several non-profits also threatened legal action when the taxonomy criteria proposed by the Commission were adopted by the European Parliament in July of this year.

Yesterday, they made good on that threat.

U.K. firm 11KBW and French firm Baldon Avocats, which won a climate lawsuit that has been referred to as “the climate case of the century,” filed a lawsuit over the inclusion of forest bioenergy and forest management activities on behalf of nine NGOs based across the EU.

 A press officer for environmental law charity ClientEarth, which today announced it had filed a lawsuit challenging the bloc’s decision to label bio-plastics and the use of forest biomass for bio-energy as green investments, told Law.com International that the case is being handled by its own legal team.

The NGOs were able to bring the lawsuit as a result of a recent law change that gives non-profits and citizens the right to legally challenge EU legislation with a perceived detrimental environmental impact. Under the 2021 amendments to the Aarhus Regulation, NGOs and citizens can ask EU institutions to review decisions deemed to breach environmental laws and take them to court if they refuse to do so. 

The lawyers behind the first case contend that the Commission’s implementation of the 2020 EU Taxonomy Regulation – the so-called Taxonomy Delegated Act – violates the regulation’s intent and legal requirements. By including forestry and biomass activities, the EU’s executive body did not meet the requirement under the regulation to only include economic activities shown to contribute to climate change mitigation based on scientific evidence, or the requirement to ensure that any activities included do not harm climate change adaptation or biodiversity, Clémentine Baldon of Baldon Avocats told Law.com International.

“We think that we have a strong case because the science is totally backing our case,” she said. “It’s clear that the decisions [to qualify forestry and biomass as green investments] were not based on science, but on political considerations.”

If they are successful, the Commission will have to exclude biomass and forestry activities from the new sustainable finance criteria, or severely restrict the circumstances under which such activities can qualify as green investments, Baldon said.

The EU Taxonomy is a key pillar of the European Commission’s Green Deal plan to make the bloc climate-neutral by 2050, along with a new corporate due diligence bill and a plan to cut greenhouse gas emissions by at least 55% by 2030. The Commission’s increased focus on ESG has made it a booming area of law for law firms across the continent, as clients seek advice on how to comply with the raft of new regulations. The threat of legal disputes over unsubstantiated environmental claims has also become a growing cause of concern, with enforcers expected to increasingly crack down on misleading environmental claims in advertising in the coming years.

And more lawsuits over the taxonomy criteria are likely to follow. In July, Greenpeace and the countries of Austria and Luxembourg also vowed to take legal action against the European Commission over the inclusion of fossil gas and nuclear energy in the list of sustainable investments.

The General Court usually takes one to two years to deliver a judgment from when a lawsuit is filed.

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