European Council clears the EU Taxonomy Climate Delegated Act
The European Council has cleared the EU Taxonomy Climate Delegated Act (DA) after the extended scrutiny period ended on Wednesday 9 December. No objections were raised by the Council, leading to its publication in the EU Official Journal.
The DA specifies technical screening criteria (TSC) for economic activities that contribute to climate adaptation and climate mitigation, and will be applicable from 1 January 2022.
Mairead McGuinness, European Commissioner for Financial Stability, Financial Services and the Capital Markets Union, commented in a tweet: “I warmly welcome that the EU Council has cleared the EU Taxonomy Climate Delegated Act. This will help channel sustainable finance towards projects and businesses to help reach our climate targets”.
The European Commission released in April 2021 the first details for the two environmental objectives and the European Parliament effectively approved them in October 2021.
What does that mean?
The newly adopted Climate Change Delegated Act means that financial institutions and companies can start reporting on the taxonomy eligibility of their activities as of next year, although they are only required to report on the taxonomy alignment of their activities from January 2023.
The European Commission is expected to release detailed information for the four remaining environmental objectives by the end 2021. Also, it will be described how nuclear and gas will be labelled under the taxonomy. Financial market participants and companies will have to comply by the end of 2022.
What is the EU taxonomy?
The EU Taxonomy regulation sets a framework to classify “green” or “sustainable” economic activities executed in the EU. It supports the EU's 2030 climate and energy targets as well as guides the EU toward climate neutrality by 2050.
The classification system for sustainable activities aims to establish a common understanding. The EU Taxonomy focusses on the following six environmental objectives:
- Climate change mitigation
- Climate change adaptation
- Sustainable use and protection of water and marine resources
- Transition to a circular economy
- Pollution prevention and control
- Protection and restoration of biodiversity and ecosystems