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EU Taxonomy Increasing Transparency of Sustainable Investments

Author

Listed:
  • Franziska Schütze
  • Jan Stede
  • Marc Blauert
  • Katharina Erdmann

Abstract

By developing a taxonomy for sustainable investments, the EU Commission has created the first standardized criteria for climate-friendly economic activities.To achieve the goal of climate neutrality by 2050, firms and investors must be well informed of which investments avoid greenhouse gas emis- sions and can thus be categorized as sustainable. The present report investigates to what extent the EU taxonomy achieves this goal. The study reaches the conclusion that the criteria are compatible with a path to climate neutrality in some economic sectors, such as the automotive sector. However, in others, such as the emission-intensive basic materials sector, the cri- teria are insufficient. Thresholds that are too low carry the risk of a carbon lock-in, the entrenchment of emission-intensive technologies and structures. Instead, the EU taxonomy should offer incentives for innovations in decarbonizing the economy. This can be achieved by setting different thresholds for new investments and existing assets, as the EU taxonomy already does in the buildings sector.

Suggested Citation

  • Franziska Schütze & Jan Stede & Marc Blauert & Katharina Erdmann, 2020. "EU Taxonomy Increasing Transparency of Sustainable Investments," DIW Weekly Report, DIW Berlin, German Institute for Economic Research, vol. 10(51), pages 485-492.
    • Handle: RePEc:diw:diwdwr:dwr10-51-1
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    File URL: https://www.diw.de/documents/publikationen/73/diw_01.c.807288.de/dwr-20-51-1.pdf
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    Citations

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    Cited by:

    1. Fuest, Clemens & Meier, Volker, 2023. "Sustainable finance and climate change: Wasteful but a political commitment device?," Journal of Environmental Economics and Management, Elsevier, vol. 118(C).
    2. Andrea Giacomelli, 2021. "EU Sustainability Taxonomy for non-financial undertakings: summary reporting criteria and extension to SMEs," Working Papers 2021:29, Department of Economics, University of Venice "Ca' Foscari".
    3. Sarah Wolf & Jonas Teitge & Jahel Mielke & Franziska Schütze & Carlo Jaeger, 2021. "The European Green Deal — More Than Climate Neutrality," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 56(2), pages 99-107, March.
    4. Suzana Ostojic & Lorenzo Simone & Mark Edler & Marzia Traverso, 2024. "How Practically Applicable Are the EU Taxonomy Criteria for Corporates?—An Analysis for the Electrical Industry," Sustainability, MDPI, vol. 16(4), pages 1-23, February.

    More about this item

    Keywords

    EU taxonomy; sustainable finance; green finance; green investment; energy transition; financial decarbonization; financial markets;
    All these keywords.

    JEL classification:

    • G00 - Financial Economics - - General - - - General
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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