Life cycle thinking considerations in EU Taxonomy for a sustainable finance

Main Presenter: Marzia Traverso 

Co-Authors: Suzana Ostojic

By adopting the Paris Agreement1 on climate change and the UN 2030 Agenda for Sustainable Development and its 17 Sustainable Development Goals in 2015, governments from around the world chose a more sustainable path for the planet and the economy. According to it, the European Union aims to become the first continent carbon neutral by 2050. For doing it, European Commission(EC) adopted the so-called European Green Deal, a set of proposals to make the EU’s climate, energy, transport and taxation policies fit for reducing net greenhouse gas emissions by at least 55% by 2030, compared to 1990 levels and be able to reach the carbon neutrality by 2050. The SDGs and Agenda 2030 has been integrated as well in the industrial sector, with a particular focus on the 12 and 13 SDGs on Sustainable Production and Consumption and Climate action.

However, in several sectors, achieving a sustainable consumption and production requires still today a substantial investment by the industry, and it has often been indicated as one of the most significant obstacles. Another important obstacle is frequently the lack of a harmonized concept of a sustainable performance and a substantial contribution to reach it in an economic activity.

To support and overcome the above challenges, the EC has published the Taxonomy Regulation 852/2020 on 22 June 2020. The EU Taxonomy is a classification system, which aims to identify those economic activities which substantially contribute to at least one of the 6 environmental objectives defined in the EU Taxonomy, without significantly damages the other 5 objectives and in compliance with the minimum social safeguards. For defining those economic activities since 2018 a set of criteria for each environmental objective and based on life cycle consideration has been developed.

The life cycle consideration as well as life cycle assessment indicators have been used in the development of the criteria for the definition of the substantial contribution of several activities. An overview of criteria included in the first Delegated Act, as well as the European Platform Report, Taxo4, (which will be published in March 2022) will be detailed presented and details on how the life cycle considerations and indicators have been used to support the development of those criteria will be in detailed described with its benefits and challenges.

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