Image source: REUTERS/Yves Herman
In 2018, the European Commission adopted an Action plan on sustainable finance in order to achieve sustainable growth and consider the financial risks related to climate change and environmental destruction. To develop policies relevant to sustainable finance, the Commission set up a Technical Expert Group (TEG).
Now, in the context of the Green Deal and in respect to the decarbonisation target for 2050, the TEG published the first report on the EU Taxonomy on sustainable finance. The report and its technical annex establish the final recommendations to the Commission, as well as guidance documentation for investors and companies.
The role of solar thermal
The taxonomy includes a list of economic activities, from energy to transport, and technical screening criteria that will be adjusted over time and should list all sustainable activities. The taxonomy aims at planning and reporting on the green transition, and encourages CO2 emissions reductions in all sectors. However, some activities were not included due to the lack of NACE code, such as the energy performance of buildings.
Unfortunately, solar thermal heat appears to be missing from the taxonomy, with only the manufacture of “products, key components and machinery” essential for the production of solar thermal energy for district heat being considered under the activity Manufacture of low carbon technologies. Indeed, solar energy is only taken into account for concentrated solar power (CSP) and photovoltaic, which does not reflect the actual solar market in Europe.
About the EU taxonomy for sustainable finance
Financial markets will be required to report and communicate on the sustainability of their products and investments.
To be considered sustainable and fit within the taxonomy, all economic activities have to:
- Contribute to at least 1 of 6 environmental objectives (climate change mitigation, sustainability of maritime resources, transition to circular economy, etc.)
- Respect the “do no harm” principle towards to other 5 objectives
- Apply minimum safeguards based on the OECD and United Nations guidelines (human rights, transparency, etc.)
The assessment of the contribution to those criteria will also include the context and the location of the economic activity.
For the energy sector, electricity generation, heat production and co-generation should be required to comply with a 100g CO2e/kWh threshold. This threshold would be reduced every 5 years to be consistent with the 2050 carbon neutral target. However, the classification of the different types of energy generation raises some issues.
The Commission will soon open an online consultation to introduce new benchmarks to help investors looking at low-carbon technology investments. The consultation will be followed by a call for expression of interest and a delegated act. In Autumn, the Commission is expected to set up a sustainable finance platform working as an advisory group to continue the work done by the TEG. Following this, a communication on this subject will be published.
The first technical screening criteria for activities which contribute to climate change mitigation or adaptation will be adopted by the end of 2020, and should enter into application by the end of 2021. The adoption of the criteria for activities contributing to the other environmental objectives will follow from the end of 2021.
Solar Heat Europe is following the process, and we are working to have a more accurate representation of renewable energy sources in Europe. Solar thermal is a key technology in the decarbonisation of the heating and cooling sector and should be recognized fully by the taxonomy.
To provide insight on this issue, or for further information about the EU taxonomy for sustainable finance, please contact us at email@example.com