Achieving the goal of a climate-neutral EU

A climate-neutral EU

Rome [ENA] EU taxonomy makes available clarity on which activities are considered environmentally and socially sustainable for investors. The Taxonomy regulation should enable investors to identify environmentally sustainable economic activities that significantly impact on climate change mitigation, determined on scientific evidence, comprising evidence from existing life cycle estimates (production, use, end of life

and recycling), environmental impacts and long-term risks. European Parliament negotiators reached an agreement with Council on Monday 16 December on new criteria to determine whether an economic activity is environmentally sustainable. The so-called “taxonomy regulation” stipulates that the following environmental objectives should be considered when evaluating how sustainable an economic activity is: climate change mitigation and adaptation; sustainable use and protection of water and marine resources; transition to a circular economy, including waste prevention and increasing the uptake of secondary raw materials; pollution prevention and control; and protection and restoration of biodiversity and ecosystems.

An economic activity should contribute towards one or more of the above objectives and not severely harm any of them. Its environmental sustainability should be measured by means of a unified classification system, as national labels based on different criteria make it difficult for investors to compare green investment, thus discouraging them from investing across borders. The text does not preclude or blacklist any specific technologies or sectors from green activities, apart from solid fossil fuels, such as coal or lignite. Gas, and nuclear energy production are not openly excluded from the regulation, however. These activities can actually be considered as an enabling or transitional activity in full respect of the

“do not significant harm” principle. The new legislation should also protect investors from risks of ‘greenwashing’ as it makes it compulsory to provide a detailed description of how the investment meets the environmental objectives. The taxonomy criteria should also ensure that transition activities necessary to become a climate-neutral economy, but which are themselves incompatible with climate neutrality, should have greenhouse gas emissions levels corresponding to the best performance in the sector or industry.

The agreement reached by the European Parliament negotiating team will have to be approved first by the two committees involved and by a plenary vote. The Commission will regularly update the technical screening criteria for the transition and enabling activities. By 31 December 2021, it should review the screening criteria and define criteria for when an activity has a significant negative impact on sustainability.