The ‘Platform on Sustainable Finance’, a stakeholder group advising the European Commission on the EU taxonomy, presented a new report on Monday 28 March in which it argues to extend the scope of the taxonomy by creating additional categories of economic activities.
The aim is to provide better guidance to private investors by further qualifying the classification system for determining whether an economic activity can be deemed to be environmentally sustainable.
“We expect it will remove the fear held by some that the ‘not green’ [classification] is a negative signal that requires no finance at all”, said the report.
While the Commission has recently adopted a draft delegated act to include electricity generation in gas and nuclear power plants in the EU taxonomy, the Platform, which is highly critical of the delegated act (see EUROPE 12911/22), would like to provide greater clarity on the different levels of environmental performance of economic activities.
“Just like the successful EU energy efficiency label, we need the taxonomy to contain different categories and cover all key sectors to clarify where we are now and accelerate the transition to a sustainable economy”, said Sébastien Godinot, Senior Economist at the WWF European Policy Office and member of the Platform.
The Platform therefore recommends extending the framework of the taxonomy by adding four categories in addition to the current category of ‘sustainable economic activities’.
The first two categories (red categories) would cover activities deemed ‘unsustainable’, distinguishing between those that could benefit from taxonomy-recognised investment as part of a transition plan to urgently raise their environmental performance to intermediate levels (category 1), and those that will continue to cause significant environmental damage and should therefore be prioritised for taxonomy-recognised investment as part of a decommissioning plan.
The third category (‘amber category’) would be for activities that have an intermediate environmental performance. They are defined as those activities that fall between the first two categories mentioned above and the ‘sustainable economic activities’ (or green category), and which could benefit from an investment recognised by the taxonomy within the framework of an intermediate transition plan.
Taking the example of an existing natural gas plant, the report presents a transition pathway that could be considered to be an intermediate transition: retrofitting the plant for blending renewable natural gas and low-carbon gas and/or possibly installing carbon capture and storage technology to reduce the plant’s emissions to less than 270 g CO2e/kWh (one of the thresholds foreseen in the Commission’s delegated act for inclusion in the taxonomy of gas plants for which a construction permit has been granted before 31 December 2030).
The fourth category would be activities with a low environmental impact, i.e. those that do not significantly harm the environment, but also do not make a substantial contribution to any of the 6 environmental objectives of the taxonomy.
According to the Platform, this category could allow companies to illustrate that their overall activities, although not considered to be green, do not cause environmental or social damage.
The full report will be published on the European Commission’s website on Tuesday 29 March. (Original version in French by Damien Genicot)