Only July 1, POLITICO Pro expanded to cover the politics and policy of sustainability. From the circular economy, energy and carbon emissions, finance and ESG, supply chain management, governance and more — POLITICO Pro's newest coverage area will bring you the latest from the topic at the center of business and policy conversations. Here are three of our top recent sustainability articles.
Top 3 Sustainability Articles:
BY ELINE SCHAART | 07/27/2020 10:00 AM EDT
BRUSSELS — There’s a hole in EU finances, and so far the only way of filling it is with a new plastics tax.
The tax is the only so-called own resource agreed to by EU leaders last week as part of the €1.82 trillion budget and pandemic recovery plan. Although there are supposed to be other new levies — ranging from the Emissions Trading System to a digital tax — they’re much further in the future (and may not happen at all).
European Commission President Ursula von der Leyen called the new own resources — including the plastics tax — “the big winner of this summit.” However, with only five months to go before the tax will be introduced in January, there are still a lot of open questions.
Here are five things to know about the plastics tax.
1. What is it?
The proposal for the next seven-year budget includes a basket of new taxes to create a stable revenue stream, which could help pay back recovery fund debt or directly feed into the budget.
Plastics is the only tax with a real timetable for going into effect. It would charge a fee of 80 cents for each kilogram of non-recycled plastic packaging, which the European Commission calculates would generate €6.6 billion a year.
Because taxes are not an EU competence, it’s up to individual countries to decide how to finance these new payments to the EU. That means they can choose whether to set a tax on waste hitting industry or consumers, saddle local authorities with the bill, or simply send their portion of the money to Brussels without bothering to actually put such a levy in place.
2. How much will countries pay?
France and Germany, followed by Italy, would face the biggest bills from a proposed EU plastics tax, according to calculations by POLITICO.
The agreed deal also contains a correction mechanism, first introduced by European Council President Charles Michel in February, in order to get the support of Central European countries, which had voiced doubts about the “regressive” nature of the tax.
The mechanism would apply to countries with a per capita gross national income below the EU average, according to two officials familiar with the formula. The reduction would be calculated by multiplying a country’s population size by 3.8 kilograms of plastic waste, and applying the 80-cent levy to that number.
The correction mechanism would reduce the tax intake by about €700 million per year, with Italy, Spain and Poland benefiting the most from the rebate.
Warsaw’s €117 million rebate is “the price to pay to get Poland on board,” said Valérie Hayer, a French MEP from Renew Europe, part of the negotiating team for own resources reform.
3. What will be the effect?
The tax’s impact depends on each country’s implementation. Some, like Italy and France, already have some type of plastic tax or a proposal for such a levy in the pipeline, while others have not yet clarified how such a system would work.
“The real question is now whether countries will use the full potential [of the tax] and target producers or put the burden to pay on local authorities,” said Piotr Barczak, senior waste policy officer at the European Environmental Bureau, an NGO. In any case, Barczak is hopeful that the tax will act as an incentive for countries to strengthen the separate collection of plastics and their efficient recycling, as well as reduce the overall consumption of plastics.
The plastic packaging industry, however, is warning that the tax may actually hamper recycling efforts. Martin Engelmann, general manager of the German packaging industry association, pointed to Italy where the “discussion about an Italian plastic tax has already led to more and more packaging made of plastic-paper composites coming onto the market.”
Such packaging cuts the proportion of plastics, so manufacturers pay a lower tax. But composite packaging is also more difficult to recycle.
There’s also the issue of the incentives created by the tax. If classical economics has it right, countries should respond to the charge by doing a better job of recycling their plastic waste. That’s great for the environment, but not so good for the EU’s budget — which might pull in less cash than expected from the levy.
“I am not really sure if a plastic tax, how that could work, because we want to reduce plastic … [so] to reduce the income you get out of it. I think that’s not really what we want to have — we want that the EU has the money for sure, for the next years,” Germany’s Environment Minister Svenja Schulze said earlier this month.
4. How will the money be used?
Any income generated from new own resources introduced after 2021 would be used to cover the repayment and interest costs of the planned €750 billion recovery plan, the deal says. Because the plastics tax comes in before that, its revenues go to the general EU budget.
Many industry groups aren’t happy with that idea, and would rather see the money flow back to initiatives that would improve waste management.
“The collected resources should be reinvested into better collection, sorting and recycling infrastructure, which is needed to increase the amount of packaging that is effectively recycled,” said Paul Skehan, senior director of EU public policy and communications at PepsiCo.
5. Can it still change?
Before the plastics tax can be implemented, the European Parliament has to vote on an opinion on own resources, which is expected to be adopted in the plenary in the week of September 14. It also needs ratification by every country, “according to its constitutional requirements before entering into force.”
There might be some modifications, with some MEPs opposing the proposed rebate mechanism.
“MEPs have been advocating for the creation of new own resources and the end of rebates for many years and now that we might get one new own resource, they apply a rebate on it. That’s puzzling, to say the least,” said Hayer.
But it’s unlikely to be killed off as it’s the only new resource with the stamp of approval from national leaders.
BY ANTHONY ADRAGNA | 07/23/2020 01:05 PM EDT
Seven Senate Republicans are directly urging Majority Leader Mitch McConnell to prioritize assistance for the clean energy sector as the upper chamber negotiates its next package of coronavirus assistance.
The effort, led by Sen. Thom Tillis (R-N.C.), does not detail what specific policies Congress should include in the recovery package, but the letter shows a significant bloc of support for the clean energy sector within the Republican conference. The senators note “investments in clean energy would be fiscally prudent.”
The details: In addition to Tillis, the letter's other signatories are Republican Sens. Lindsey Graham (S.C.), Susan Collins (Maine), Lisa Murkowski (Alaska), Cory Gardner (Colo.), Martha McSally (Ariz.) and Richard Burr (N.C.).
“Federal investments in clean energy have provided strong taxpayer returns, while also providing critical and sustained job growth,” the letter reads. “As we focus on getting the country back to work, we must include an industry that had already been putting Americans to work faster, and in more places, than the overall economy before the COVID pandemic hit.”
The GOP lawmakers say they would like policies that benefit “renewables, nuclear, carbon capture, efficiency, advanced transportation, and energy storage.”
The context: The letter lands as the sector remains down more than 500,000 jobs from its peak before the pandemic, though the industry did regain 106,000 jobs in June. House Democrats have vowed to prioritize assistance to the sector in future packages.
Tillis, Graham, Collins, Gardner and McSally are all up for reelection and facing potentially competitive races.
What’s next: Senate Republicans are still grappling with the scope and contents of a relief package and have not yet begun to negotiate with Democrats on it. The impasse comes even as the U.S. reported 1.4 million new unemployment claims in the past week and as federal unemployment assistance payments of $600 per week are poised to lapse.
Morgan Stanley will become the first major U.S. bank to publicly disclose the how much its loans and investments contribute to climate change, the latest sign that Wall Street giants are beginning to reckon with their role in heating the planet.
The move comes as financial regulators in many countries are considering whether to require greater disclosure from companies about the risks they face from climate change — and as a growing number of shareholders and investors worry about their exposure to fossil fuels that could suffer from future government policies to rein in greenhouse gas emissions.
“This is a journey, and I think that this is an incredibly important piece of it, because as we all know it's harder to make people respond to something when there's no data, it's hard to have data when you don't have measurement,” Audrey Choi, chief sustainability officer for Morgan Stanley and CEO of its Institute for Sustainable Investing, told POLITICO. “This is an important step towards getting more clarity.”
The bank is joining the Partnership for Carbon Accounting Financials, a global body with 66 financial company members managing $5.3 trillion of assets, that will count the greenhouse gas emissions from projects and investments that are financed by asset managers, banks and other institutions. Morgan Stanley will sit on the group’s steering committee to help deliver a final methodology for financial institutions to follow this fall.
Since 2016, 35 banks have poured $2.7 trillion into fossil fuel projects, according to environmental group Rainforest Action Network — and Morgan Stanley has accounted for nearly $92 billion of that total. Morgan Stanley declined to provide POLITICO details on the number of fossil fuel projects and assets are on its books.
Activists and regulators have begun to shine a spotlight on how banks, insurers and asset managers underwrite projects like pipelines, mines and power plants that contribute to rising temperatures that are fueling more devastating storms, floods and wildfires and that cause billions of dollars in global damages. Those same financial institutions also hold billions in assets that risk becoming “stranded” as nations adopt more aggressive climate policies.
“It’s almost inevitable ... that there’s going to be some sort of requirement around the measurement and disclosure around financed emissions,” said Ivan Frishberg, first vice president of sustainable banking at Amalgamated Bank and head of the North American chapter of the carbon partnership that Morgan Stanley is joining.
Giel Linthorst, executive director for the partnership and director of sustainable investment at Navigant, said Morgan Stanley has played a coordinating role with six other major U.S. banks that he hoped would join the initiative in the future, though he did not disclose which banks.
“What I’ve seen with measuring financed emissions is that it really is a game changer to many financial institutions,” Linthorst said. “Showing where emissions are in your portfolio really triggers discussions about what you can do about it.”
A Commodities Future Trading Commission subcommittee made up of asset managers, bankers, insurers and academics is expected to publish a report on climate risks this summer. The San Francisco Federal Reserve has explored how climate change disruptions could send shockwaves through the financial sector. Shareholder pressure, including from institutional investors like BlackRock, the world’s largest asset manager, which is making climate change central to its investing strategy, has also steered the sector.
Capitol Hill, too, has sharpened its focus on the issue. A burgeoning group of Democratic lawmakers has explored requiring banks to conduct stress tests or to build financial buffers to withstand climate-driven shocks.
Morgan Stanley hopes its effort to tally the greenhouse gas emissions from its investments will help it to develop new sustainable investing products for investors, said Matt Slovik, who heads the bank’s global sustainable finance team, noting the company has committed to financing $250 billion of low-carbon solutions by 2030. But he declined to say whether the bank would use the information to perform stress tests of how its portfolio would fare under varying climate scenarios.
Several banks faced resolutions from shareholders this year that would have required greater transparency on emissions resulting from their lending. JPMorgan Chase shareholders narrowly quashed such a measure, which garnered 48.6 percent support, and BlackRock voted down a transparency call, drawing criticism from environmentalists who said the asset manager violated a pledge to back climate change resolutions.
The Partnership for Carbon Accounting Financials, which is hoping to get its methodology approved by the Greenhouse Gas Protocol, the standard established by the World Resources Institute and World Business Council for Sustainable Development, is one of several efforts that have sprung up in recent years to draw companies into tackling climate change.
The Task Force on Climate-related Financial Disclosures, spearheaded by former New York City Mayor Mike Bloomberg and former of Bank of England Governor Mark Carney, has also prodded companies to assess climate risks to their physical facilities as well as so-called transition risks from a world with ambitious greenhouse gas-reduction policies. Many companies are including those results in corporate sustainability reports this year.
CDP, an independent organization that grades companies on environmental, sustainability and governance factors, this year published its first-ever guidelines for financial sector companies to assess the emissions of their lending portfolios.
And the Science Based Targets initiative, an effort from the United Nations Global Compact, World Resources Institute, World Wildlife Fund and CDP that has enrolled nearly 1,000 companies, will publish its guidelines later this year for firms to achieve emissions reduction aligned with keeping the world from heating 2 degrees Celsius above preindustrial levels. That threshold is seen as important to avoid the many of the worst impacts of climate change.
“Measuring financed emissions is broadly understood to be a critical part of the whole ecosystem of climate finance work,” Amalgamated’s Frishberg said. “There’s been a lot of conversations over how to do that over the past year.”
Only July 1, POLITICO Pro expanded to cover the politics and policy of sustainability. From the circular economy, energy and carbon emissions, finance and ESG, supply chain management, governance and more — POLITICO Pro's newest coverage area will bring you the latest from the topic at the center of business and policy conversations.