By Kate Abnett

BRUSSELS (Reuters) – The European Union is not doing enough to steer its own spending away from polluting activities or to mobilise private funds for green investments, the European Court of Auditors (ECA) said on Monday.

To raise funds for climate-related projects, the EU will be rewriting its financial regulations. This includes its new “taxonomy”, which is a complicated rulebook that tells investors what activities are really green.

Although the proposals of the EU executive Commission make clearer the activities that are sustainable, ECA reported in a document that the regulations do not discourage investment which harms the environment.

Eva Lindstroem (ECA member), who led the report, said that “unsustainable activities remain too lucrative.”

A request for comment was not received by the European Commission immediately.

A dispute has broken out between EU member countries over the EU’s sustainability finance taxonomy. They disagree about which investments should be called “green”.

Brussels delayed a decision about whether to include nuclear energy and gas in its rules until later in this year. The Commission’s advisors said that the sustainability of gas-powered plants is not possible. They also raised concern about nuclear power.

Lindstroem stated that a taxonomy which is too different from the recommendations of experts could be deemed untrustworthy.

Since the EU’s own budget is a source of pollution, its auditors concluded that it was not practicing what it preached on green finance.

The auditors stated that parts of the EU budget could be used for infrastructure, which is a fossil fuel. However, most EU spending programs do not need individual investments to meet strict environmental standards.

Lindstroem explained that in practice this could mean that EU funds “harmful activities.”

Auditors suggested the EU adopt consistent sustainability criteria in its budget. These include the “do No Significant Harm” principle, which is used to determine whether an investment will undermine EU climate change goals.