EU may propose tax breaks and guarantees for green investments at COP24

A resolution is being put to vote tomorrow ahead of December’s climate negotiations

The European Parliament is planning to put forward a resolution at this year’s Conference of the Parties, COP24, calling for public guarantees and tax breaks for green investments.
A motion due to be put to vote at Plenary tomorrow outlines a series of measures that could be taken to bolster the transition to a Paris-aligned world. In it, it says the European Parliament “calls for specific public guarantees in favour of green investments, labels and fiscal advantages for green investment funds and for issuing green bonds”.
The European Commission is currently developing green bond standards and a broader ‘green’ taxonomy, on which it is expected to create official EU green finance labels for eligible deals and products. These could become the basis for tax breaks or changes to capital requirements for banks. The development of such green standards was one of the top priorities for the High Level Expert Group on Sustainable Finance (HLEG).
Although fiscal incentives have been part of a wider discussion around suitable green finance policy incentives in Europe, HLEG itself did not propose them in its final recommendations earlier this year. It has, however, suggested that the EU could “consider encouraging member states to subsidise the green [bond] transaction costs for issuers for an initial period”. This is similar to the approach adopted by Singapore, Japan and Hong Kong, which all have a subsidy programme in place for the asset class to encourage issuance.
The resolution has been tabled on behalf of the Committee on the Environment, Public Health and Food Safety, by a number of MEPs from different parties, including: Adina-Ioana Valean, Peter Liese, Jo Leinen, Gerben-Jan Gerbrandy, Estefania Torres Martinez, Bas Eickhout and Piernicola Pedicini.As well as its specific requests around climate finance and private investment, it also “calls on the European Investment Bank to put a rapid end to lending to fossil fuel projects and asks the EU Member States to end all export credit guarantees to fossil fuel projects”.
It adds that blended finance and guarantees to stimulate private investment currently favour “major-scale projects”. To tackle this, the motion calls for “an appropriate balance in the use of assistance funds”.

Other recommendations in the document include:

  • The enforcement of mandatory due diligence and disclosure around supply chains in relation to climate impact.
  • A “carbon border tax adjustment and consumption charge” for products that come from countries that are not fulfilling their commitments under the Paris Agreement.
  • More collaboration with other states and regions in linking up carbon markets and developing robust carbon pricing.
  • The creation of a dedicated public finance mechanism to support international climate goals.
  • A revision of the EU’s Nationally Determined Contribution and other emissions targets currently in place, to make them more ambitious.
  • The integration of climate change into trade and investment agreements.

If the resolution is approved, it will be sent to the European Council and Commission, as well as the governments and parliaments of all Member States and the Secretariat of the UNFCCC – on the basis that it will then be circulated to “all non-EU parties”.