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EU Sustainable Finance Taxonomy – What Is Its Role on the Road towards Climate Neutrality?

Franziska Schütze and Jan Stede

No 1923, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: The EU Taxonomy is the first standardised and comprehensive classification system for sustainable economic activities. It covers activities responsible for up to 80 percent of EU greenhouse gas emissions and may play an important role in channelling investments into low-carbon technologies by helping investors to make informed decisions. However, especially in transition sectors much depends on the stringency of the technical performance thresholds that the Taxonomy applies to economic activities that are not yet “green”. This paper shows that for several sectors, the thresholds are not yet on track to support the transition towards climate neutrality. To this end, we analyse a large-scale public consultation with detailed responses to the specific thresholds from a variety of stakeholders. Two distinct use cases of the Taxonomy complicate the use of a single threshold for emission-intensive sectors: For new investments, criteria need to be stricter than for current activities of companies. We also argue that for the sectors not covered by the Taxonomy, there is a need to differentiate between low-emissions activities and high-emission activities that are incompatible with a low-carbon future.

Keywords: EU Taxonomy; sustainable finance; classification system; green investments (search for similar items in EconPapers)
JEL-codes: G00 G14 G18 Q01 Q54 Q56 (search for similar items in EconPapers)
Pages: 34 p.
Date: 2020
New Economics Papers: this item is included in nep-ene, nep-env and nep-reg
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