EU Sustainable Finance Taxonomy is clearly on the wrong path

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According to the European Commission’s recently proposed delegated acts for the Sustainable Finance Taxonomy, ordinary forest management is no longer to be defined as sustainable. The Swedish Forest Industries considers that the Commission has acted arbitrarily and that it is now much needed to “rethink and redo”.

– A delegated act is to supplement or amend nonessential parts of EU legislative acts, for example, in order to define detailed measures. The now proposed delegated acts go way beyond that. In fact, if they were to be adopted in their present state, they would undoubtedly set the framework for EU industry policy going forward. EU Member States cannot relinquish so much power to the European Commission. Furthermore, the Commission course of action during the last six months has been anything but transparent and it is not sustainable for such comprehensive legislative acts to be drafted in completely Commission internal process. Now the European Comission must rethink and redo to assure that the climate benefits created by sustainable forestry and forest-based products are included, says Magnus Berg, Head of the Industrial Policy Department at the Swedish Forest Industries.  

The Taxonomy will affect the Swedish forest industries in several ways, such as forest management, energy, transport and construction.  

Acknowledge industries contributing to climate neutrality 

– Our strongest objection on the delegated acts is the part about forest management. The Commission has arbitrarily changed the setup versus the Technical Expert Group report and now disqualifies ordinary management practices from being classified as sustainableThe Commission intention is apparently to guide sustainable investments to the conversion of fossil-based industries, which is a benevolent purpose. But at the same time, to exclude industries that already base their operations on renewable raw materials and fossil-free processes, is definitely not the right way forward. Excluding  ordinary forest management will have major negative consequences for the Swedish forest industries. It will undoubtedly affect the financial sector’s attitude towards us. We are also afraid that this incorrect perspective on forest management’s contribution to climate change and adaptation will penetrate other legislative initiatives, says Magnus Berg.  

Magnus Berg criticizes the starting points for the Taxonomy development.  

– We support that the EU develops a tool to help investors understand whether an economic activity is environmentally sustainable and creates climate benefits. Such a tool must, however, also stimulate growth in industries that already contribute the most. Otherwise, the Taxonomy will punish those who already have come far and are at the forefront, which is completely the wrong signal to send for the EU to reach climate neutrality. Every year, the Swedish forest industries contribute with climate benefits that are almost twice as large as the emissions Sweden reports. For the European forest-based sector, the overall and total benefit corresponds to approximately 20 percent of all fossil emissions in the EU. If anything, the EU should stimulate the reduction in fossil emissions that occurs when forest-based products replace fossil-based ones, concludes Magnus Berg.  

The forestry sector's climate contribution  

It’s all about the three S’s: sequestration of carbon in growing forests, storage of carbon in wood-based products and substitution when forest-based products replace fossil-based alternatives. The Swedish forest industry has a positive effect on the global climate equivalent to around 90 million tonnes of carbon dioxide per year. The overall and positive climate effect of the European forests and the forest-based sector is estimated at -806 million tons of carbon dioxide equivalents annually. This corresponds to c. 20 % of all fossil emissions in the European Union. 


Swedish forestry sector's climate contribution 

Climate effect of the forest-based sector in the European Union