NGOs take the EU Commission to Court over flawed sustainable finance criteria that label polluting planes and ships as green 

Press Release

  • The changes label new fossil fuel planes and ships as "sustainable" if they meet weak efficiency criteria (i.e. they produce slightly less CO2). 

  • The NGOs argue that these criteria are contrary to the requirements of the Taxonomy Regulation, as they are not based on conclusive science, do not support a 1.5°C pathway, and will hamper the development of low-carbon alternatives in these sectors. 

  • The NGOs formally requested the EU Commission to review the criteria in January 2024, but the Commission has refused. The NGOs are now taking the Commission to the European Court of Justice. 

(Wednesday 28 August, 2024)

A coalition of NGOs, backed by 35,000 concerned citizens, are taking the EU Commission to court over the decision to include polluting fossil fuel planes and ships in the EU’s flagship sustainable finance legislation, the EU Taxonomy. The coalition consists of Dryade, Fossielvrij NL, and Protect our Winters Austria, supported by legal experts Opportunity Green and CLAW. 

The EU Taxonomy should act as the ‘gold standard’ for informing ethical and sustainable investments. It exists to provide a verified list of ‘green’ investments to companies, investors and policymakers, with a view to directing huge amounts of private finance to activities that deliver a fair, green transition. 

At the end of 2023, the EU Commission added aviation and shipping criteria to the EU Taxonomy, a move which allows ships and planes running entirely on fossil fuels to be eligible for green finance if they meet certain weak ‘efficiency’ criteria. In January 2024, the five NGOs launched a legal challenge, requesting the EU Commission to review the criteria; a challenge which was subsequently rejected by the EU Commission in June 2024. Now, the NGOs are filing a case in the European Court of Justice which aims to force the Commission to review the criteria. 

As it stands, under the shipping criteria, enormous cruise ships which run on LNG would be deemed ‘green’. However, these ships not only produce CO2 but leak huge amounts of methane into our atmosphere, a greenhouse gas which is 80 times more potent than CO2 in the short term (IPCC, page 87). 

The aviation criteria are so weak that 100% of Ryanair, easyJet and Wizz Air’s order books, and 90% of Airbus’ upcoming deliveries, could be labelled ‘green’, according to analysis by Transport & Environment. Not only are these marginal improvements in CO2 efficiency incompatible with a 1.5°C pathway, they also don’t take into account the non-CO2 impacts of flights. Nor has the Commission properly considered low-carbon alternatives to flying, such as high-speed rail. 

The EU Taxonomy Regulation requires conclusive scientific evidence to prove that sustainable activities are consistent with a 1.5°C pathway. However, whilst the latest scientific studies warn of rapidly rising methane emissions and the exhaustion of aviation’s carbon budget by as early as 2032, the Commission is actively incentivising investment in ships and planes that fly in the face of this evidence. Given the expected lifespans of planes and ships range from 20-50 years, such investments will pollute our land, sea and air for decades to come, and risk making a credible 1.5°C pathway to decarbonise these sectors impossible. 

David Kay, Legal Director at Opportunity Green says:

“The Taxonomy is set to mobilise billions of Euros of private finance. But the aviation and shipping criteria send completely the wrong signal to investors – directing investments to planes and ships that will pollute the climate for decades to come. How are investors supposed to have confidence that their investments are truly green? We believe the criteria are unlawful and the EU Commission needs to be held to account.” 

Hiske Arts at Dutch NGO Fossielvrij said:

“While judges and regulators are finally stepping up against the relentless greenwashing in the aviation and cruising sectors, the EU is taking greenwashing to the next level. By rubber-stamping extremely polluting planes and cruise ships as green, and thereby driving investments into an already growing fossil-powered industry, the EU has chained us to climate catastrophe. This needs to be stopped." 

Florian Graber from CLAW – Initiative for Climate Justice said:

"If aviation and shipping are misclassified as green,  we could be setting a dangerous precedent that fuels the very future we’re striving to prevent. The Taxonomy is meant to be built on conclusive science not a cut and paste job from industry. This is why the lawsuit is crucial – it's about ensuring our investments align with our climate goals and what the science tells us we need to do to meet them." 

Elias Van Marcke of Dryade said:

“The EU Taxonomy should give investors clear, unequivocal recommendations about green investments. By allowing shipping and aviation to be included in the Taxonomy based on these flawed criteria, the Commission completely misses the ball. These criteria have been made to fit the industry, rather than driving investment towards green activities. This is unacceptable and completely undermines the credibility of the Taxonomy.” 

The NGOs filed their case on 27 August 2024. They are represented by Fred Logue of FP Logue Solicitors and Tim Johnston (counsel at the Law Library in Ireland and Brick Court Chambers in London), with support and input from Odette Chalaby (No5 Chambers), Esther Drabkin-Reiter (Francis Taylor Building), and Margherita Cornaglia (Doughty Street Chambers). 

 

Ends

Media contacts:  

Hannah Jolliffe  
Communications Director, Opportunity Green  
hannah@opportunitygreen.org

David Kay 
Legal Director, Opportunity Green 
david@opportunitygreen.org 

Notes to editors

What is the EU Taxonomy? 

The EU Sustainable Finance Taxonomy (often referred to as just ‘the EU Taxonomy’) is a classification system establishing which investments can be regarded as environmentally sustainable. It exists to provide a harmonised list of ‘green’ investments to companies, investors and policymakers, with the aim of directing investments to a fair, green transition. It is supposed to provide a gold standard in sustainability labelling, driving finance flows to green activities, giving investors confidence and addressing greenwashing. For an activity to be listed in the Taxonomy, it should make a significant contribution to one of the Taxonomy’s environmental objectives (e.g. climate change mitigation) and do no significant harm to the other environmental objectives.  

What are the latest changes? 

Since the adoption of the EU Taxonomy in 2020, the EU Commission has been using its delegated powers to add activities to the list. The supposed gold standard is increasingly being watered down, and things that cause significant pollution like forestry bioenergy and fossil gas have been brought onto the list in recent years. 

Its latest change, published in November 2023, has introduced aviation and shipping activities as potentially a sustainable investment if they meet, not very stringent, efficiency criteria. 

The EU Taxonomy is meant to include only activities which support a 1.5°C pathway. The NGOs argue that the EU has ignored that by bringing in fossil fuel-burning planes and ships that cause significant pollution and pose a serious risk to the EU’s 2030 and 2050 climate goals. 

Why does this matter? 

The Taxonomy is designed to promote investments in green activities needed for the transition by providing investors with a clear, verified list of green investments. Whilst still in its infancy, early indications suggest the Taxonomy will be hugely important in directing finance for the transition. In 2023-2024 (up to 6 May 2024), companies had already reported 440 billion Euros of Taxonomy-aligned capital investments and banks are beginning to use the Taxonomy in their investment strategies.  

The Taxonomy is going to be critical to finance flows between now and 2050 and the Commission needs to ensure it gets the criteria right so that investments are directed towards a new green economy and not false solutions. The risk of directing investment to the wrong activities is felt even more acutely in the aviation and shipping sectors where planes and ships have long asset lives, so the effects of investments made today will still be felt in the mid-century.  

What did the Commission say in its response to the request for internal review? 

The Commission’s response rejected the request for internal review. The Commission argues that the criteria do comply with the Taxonomy Regulation and support a 1.5 degree pathway.  

Despite the scientific evidence submitted with the request for internal review showing the contrary, the Commission has provided a number of reports which it says demonstrates 1.5 degree alignment as part of a ‘basket of measures’. The Commission relies in particular on a number of industry-related decarbonisation ‘roadmaps’, arguing that the required bar of ‘conclusive scientific evidence’ is lower, meaning only that the science must not be inconclusive.     

Why do the NGOs disagree with the Commission, and why are they taking court action? 

The NGOs are asking the court to overturn the Commission’s decision not to review the criteria. They argue that there is clear and conclusive evidence that the criteria do not support a 1.5 degree pathway as required by the Taxonomy Regulation.  

The NGOs say that the shipping criteria are unlawful for several reasons, including because: 

  • The Commission has failed to take into account the life cycle impacts of methane emissions from LNG-powered ships, as required by the Taxonomy Regulation. By using a CO2 metric, the Commission has ignored the significant climate change impact of methane from LNG-powered ships when it is burnt and leaked into the atmosphere. 

  • The Commission has failed to consider the risks of LNG assets and infrastructure leading to a carbon lock-in and becoming ‘stranded assets’, and the diversion of investment away from sustainable and renewable fuels. 

 The NGOs say that the aviation criteria are unlawful for many reasons, including because: 

  • The Commission’s CO2 standards and SAF percentages seem to be based on industry models rather than conclusive science – indeed, the criteria run contrary to the recommendations of the Commission’s own expert scientific advisors.  

  • Marginally more efficient planes do not meet the requirements for “transitional activities” under the Taxonomy Regulation.  The criteria will result in carbon lock-in for decades as planes produced today under the EU Taxonomy investment incentive will still be producing vast amounts of greenhouse gas emissions in 25 years’ time.  

  • The Commission has failed to take into account the non-CO2 impacts of flights, as well as low-carbon alternatives to flying such as high-speed rail. 

Will this affect other taxonomies that are being adopted around the world? 

It’s too early to say, but we expect that other governments around the world that are adopting taxonomies, such as the UK and Canada, will be watching the EU closely. This challenge is the latest in a growing list of legal challenges to the EU Taxonomy, evidencing a clear litigation risk where standards are adopted that potentially mislead investors as to green investments.  

What is the legal procedure used in this case? 

The coalition of environmental NGOs issued a request for internal review to the European Commission under the Aarhus Regulation in January 2024. This procedure allows NGOs to ask the Commission to review a decision if those NGOs consider it contravenes environmental law. 

The Commission considered the requested review and responded in June 2024, rejecting the request and refusing to review the criteria. 

The NGOs are now challenging that decision in the European Court of Justice. If successful, the Commission’s decision not to review the criteria will be ‘annulled’ and it will be forced to conduct the review.   

What are the next steps? 

The case was filed on 27 August. The Commission is expected to reply and then there may be a hearing before the court. The whole process may take around 1.5 to 2 years from filing to court judgment. The NGOs aim for a ruling that forces the Commission to review the criteria. 

Who are the NGOs involved? 

  • Opportunity Green is an environmental NGO that uses legal, economic and policy knowledge to tackle climate change. 

  • CLAW empowers a sustainable legal system against a tipping future and creates framework conditions for climate lawsuits. 

  • Dryade uses the force of law to defend the interests of both nature and mankind. 

  • Fossielvrij NL is a Dutch foundation that builds and supports the people-powered fossil free movement in the Netherlands. Their mission is to break the power of the fossil fuel industry to create space for a fast, just transition toward 100% renewable energy for all. 

  • Protect our Winters Austria helps passionate outdoor people protect the land they love by promoting non-partisan policies designed to protect our world. 

Who are the 35,000 concerned citizens? 

In the run-up to this court filing the coalition set up a petition to call on the European Commission to reverse their decision to label fossil fuel ships and planes as a ‘green’ investment. Nearly 35,000 European citizens have responded in support of this call with the message that if the Commission does not reverse the decision we will go to court.