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European Commission publishes Taxonomy Delegated Acts with criteria for remaining four environmental objectives and additional criteria for climate

The European Commission has approved in principle two Delegated Acts under the Taxonomy Regulation:

  • a Delegated Act with the technical screening criteria (“TSC”) for the remaining four environmental objectives (circular economy, water and marine resources, pollution prevention and control, and biodiversity and ecosystems - also known as “Taxo4” or “Taxo 4”) and which also makes the necessary amendments to the existing Taxonomy Disclosure Delegated Act; and
  • a Delegated Act which amends the existing Taxonomy Climate Delegated Act to include climate adaption and mitigation TSC for additional economic activities and some changes to existing climate TSC.

The Commission had consulted on the draft Taxonomy Delegated Acts in April-May this year (see our previous blog post).

Taxonomy Delegated Acts 

According to Commission Q&A that was published alongside the Delegated Acts, the Taxo4 Delegated Act sets out the TSC for economic activities substantially contributing to one or more of the non-climate environmental objectives of the Taxonomy Regulation and includes 35 activities in 8 economic sectors, mainly:

  • Environmental protection and restoration activities
  • Manufacturing
  • Water supply, sewerage, waste management and remediation activities
  • Construction and real estate activities
  • Disaster risk management
  • Information and communication
  • Services
  • Accommodation activities

The Explanatory Memorandum at the start of the Delegated Act notes that the Commission has made some changes to the TSC following its April 2023 consultation. In particular, these include technical clarifications, alignment for consistency with existing sectoral legislation and alignment to improve the coherence of the “do no significant harm” criteria. The Explanatory Memorandum summarises the changes that have been made to each Annex.

The other Delegated Act which amends the existing Climate Delegated Act sets out TSC for additional economic activities contributing to the objectives of climate change mitigation and adaptation. They include 12 new activities covering 6 sectors (including some manufacturing activities for key components for low carbon transport and electrical equipment and some transitional activities in waterborne transport and aviation where zero-carbon solutions are not yet sufficiently advanced), plus several updates to existing activities in the Climate Delegated Act:

  • Transport
  • Manufacturing
  • Disaster risk management
  • Water supply, sewerage, waste management and remediation
  • Information and communication
  • Professional, scientific and technical activities

The Explanatory Memorandum at the start of that Delegated Act also summarises the key changes made to the TSC following the April 2023 consultation, many of which are technical clarifications.

TSC for aviation and shipping – The Commission has included TSC for aviation activities, mostly as “transitional” activities for their potential contribution to climate change mitigation, which the Commission say are “ambitious yet achievable”. The TSC are intended to promote fleet renewal with best-in-class fuel efficient aircraft and incentivise an increased use of Sustainable Aviation Fuels (SAF). In particular, SAFs will have to make up 15% of a plane’s fuel mix by 2030 (an increase from the earlier draft TSC). The shipping industry will be subject to similar requirements.

Biodiversity offsetting - The TSC for biodiversity have been amended so that “only net biodiversity gains resulting from conservation/restoration can be accounted for as substantial contribution under this activity” – in response to concerns that the earlier first draft of the biodiversity criteria could have facilitated the greenwashing of ecologically harmful business activities by allowing companies to offset the damage they cause by investing in ecological projects elsewhere.

TSC for mining - The Commission will ask the Platform on Sustainable Finance to carry out further analysis on how to include mining and refining of critical raw materials in the EU Taxonomy.

The Commission will regularly review the TSC to reflect technological progress, new scientific evidence and future EU policy developments. So the EU Taxonomy will continue to evolve over time, with more activities being added to its scope by means of amendments.

The Commission says it has decided to take a two-step approach:

  • A first set of activities, for which the proposed TSC were considered more advanced, was prioritised for adoption in June 2023.
  • A second set of activities, for which the proposed TSC requires more time for further assessment (e.g. mining, agriculture, forestry and fisheries), has been postponed for adoption at a later stage (timing of that TBD).

The Q&A reminds users that the EU Taxonomy is not a mandatory list of activities to invest in, but rather a tool intended to facilitate the access of companies to sustainable finance, including for their transition projects. Banks and investors continue to finance investments in all sectors of the economy but are increasingly integrating climate and other sustainability considerations in their financing and pricing decisions. While the EU Taxonomy can guide market participants in their investment decisions, it does not prohibit investment in any activity. There is no obligation for companies to be Taxonomy-aligned and investors are free to choose what to invest in. 

As Commissioner Valdis Dombrovskis put it: “Sustainable finance is not only about companies that are already green, it’s also there to help companies that … clearly want to transition towards greener activities”.

Next steps 

The two Taxonomy Delegated Acts have been “approved in principle” and their formal adoption in all the official languages of the EU will take place later on, as soon as the language versions are available.

Once the Commission has formally adopted the two Delegated Acts, the European Parliament and Council will then have 4 months (which can be extended by an additional 2 months if either party requests it) to scrutinise the Delegated Acts. They do not have the power to amend the Delegated Acts – the most they can do is veto it.

Provided neither the European Parliament nor the Council object to either of the Delegated Acts, these would then be published on the Official Journal of the EU and would apply from 1 January 2024.

NOTE ADDED ON 28/06/23 - The Commission formally adopted the two Delegated Acts and accompanying Annexes on 27 June 2023 so the formal scrutiny period by the European Parliament and Council has now started. For links to the adopted versions of the Delegated Acts and Annexes (the content of which has not changed), see the section called "Commission adoption" at the bottom of this page.

Links to Taxonomy Delegated Acts and Annexes  

Wider package of sustainable finance measures 

The two Delegated Acts form part of a wider package of measures on the EU sustainable finance framework, which the Commission published on 13 June 2023 (see our previous blog post).

That package included FAQs on the EU Taxonomy and links to the SFDR, which address certain issues related to the minimum safeguards and clarify that investments in “environmentally sustainable economic activities” within the meaning of the EU Taxonomy can be qualified as a “sustainable investment” within the meaning of the Sustainable Finance Disclosure Regulation (SFDR).

The package also included a Taxonomy User Guide to help non-financial and financial undertakings assess their Taxonomy eligibility and alignment.

The Commission also has a EU Taxonomy Navigator website which includes:

  • EU Taxonomy Compass: a visual representation of the economic sectors, activities and TSC included in the EU Taxonomy Delegated Acts;
  • EU Taxonomy Calculator: an interactive step-by-step guide on reporting obligations for calculating Taxonomy eligibility and alignment ratios; and
  • FAQs repository.


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