EU Taxonomy – Commission publishes draft green list



Published 23 November 2020
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The European Commission launched Friday 20 November 2020 a public consultation on the first two sets of criteria for determining which activities can qualify as environmentally sustainable under the EU Taxonomy. The draft delegated regulation amounts to 529 pages. Below you will find our immediate take on some of the key sectors covered by the Taxonomy.


The EU Taxonomy entered into force on 12 July 2020 and will (partly apply) from 1 January 2022. It creates the world's first-ever “green list” – a classification system for sustainable economic activities – and will create a common language for investors and businesses when investing in projects and conducting economic activities that have a substantial positive impact on the climate and the environment. Both financial and non-financial companies will be subject to disclosure requirements that will provide investors, shareholders and other interested parties with key performance indicators as regards sustainability. In short, all listed companies will have to disclose three "green percentages" identifying their green revenue, opex and capex (as a percentage of overall figures). Correspondingly, financial enterprises will need to "screen" their own and their client's portfolio´s and report their green percentages.

In order to qualify as environmentally sustainable, an activity must comply with technical screening criteria´s set by regulations of the Commission. On Friday 20 November, the Commission published a draft delegated regulation with annexes totalling 529 pages that is now open for feedback until 18 December. The draft concerns those activities that substantially contribute to climate change mitigation or climate change adaptation.

Mairead McGuinness, Commissioner for Financial Services, Financial Stability and Capital Markets Union, said:

“The EU's Taxonomy Regulation is a key piece of legislation that is central to the European Green Deal. It will be instrumental in channeling investment to green and sustainable projects. By contributing to this public consultation, you can have your say on the development of these rules.”

The criteria are based on assessments and recommendations of the Technical Expert Group on Sustainable Finance (TEG) published in March 2020. However, the draft delegated regulation deviates and supplements the TEG report in some instances.

Key takeaways

  • The Commission upholds the "binary" approach and the importance of objective, technical criteria: Either an activity is "green", or its not green. Activities without screening criteria´s will effectively not be able to qualify as environmentally sustainable.
  • Offshore shipping is now included: Importantly, no vessels dedicated to transport of fossil fuels will qualify as green. Other vessels may qualify in the interim even though they do not have zero direct (tailpipe) CO2 emissions, provided they comply with certain CO2 thresholds. This also means that no financing of vessels dedicated to fossil fuels will qualify as green.
  • Fishery and aquaculture: Still not included in the Taxonomy.
  • Real estate and information services etc.: Strict energy efficiency criteria in line with TEG Report.
  • Energy: There are no criteria for O&G production. This was expected, as EUs objective is a fast transition into renewable energy with electricity as primary energy bearer. The Commission criteria identifies 8 different modes of green electricity production with a general technology-neutral emission threshold of 100 gCO2e/kWh, including solar power, wind power, hydro power and power generated by use of gas (and oil) but not electricity fuelled by coal. Ballpark-figures of emission levels are 820 g for coal-fueled electricity, 520g for oil-fueled and 380 for natural gas-fueled electricity, while the figures for solar power is 40, wind 10-15 and hydro power 10-20. Thus, electricity fuelled by gas will not qualify as green without carbon capture and storage (CCS), even if cutting Co2 emissions more than 50% compared to coal-fuelled electricity. The cost of CCS means that natural gas in practise have no role to play in the transition to a carbon neutral 2050. Electrification of O&G would have no impact on its (brown) classification under the Taxonomy but protect from expected higher prices on EUA's (emission permits issued under the European ETS scheme) and thus increase profitability for O&G to the extent the "polluter pay" principle is deviated from. The concept of "lock-in" etc. imply that wind- or hydro power production and electricity transmission dedicated for O&G production will not qualify as green. Consequently, financing of such efforts will most likely qualify as "brown" financing.
  • Services, science and technology: Efforts on "transition activities" are now excluded.