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

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  • Franziska Schütze
  • Jan Stede

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.

Suggested Citation

  • Franziska Schütze & Jan Stede, 2020. "EU Sustainable Finance Taxonomy – What Is Its Role on the Road towards Climate Neutrality?," Discussion Papers of DIW Berlin 1923, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwwpp:dp1923
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    File URL: https://www.diw.de/documents/publikationen/73/diw_01.c.806768.de/dp1923.pdf
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    References listed on IDEAS

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    Cited by:

    1. 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".
    2. 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.

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    More about this item

    Keywords

    EU Taxonomy; sustainable finance; classification system; green investments;
    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
    • 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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