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EU Taxonomy: unlocking the full potential of climate change criteria

Latest News 05 May 2022

Published in 2020, the EU Taxonomy Regulation is a green classification system establishing criteria to determine the sustainability of economic activities. To fall within the scope, activities should make a substantial contribution to at least one of the six EU-defined environmental objectives while avoiding any significant harm to the other stated ones. These include: climate change mitigation, climate change adaptation, contribution to a circular economy or water conservation. 

Watch APPLiA’s short explanatory video, here.

Whilst not setting binding requirements on companies’ performance, the Regulation puts forward a number of obligations for companies to indicate the extent and degree of alignment of their operations with taxonomy-related activities, in an effort to guide investors in their funding decisions and ultimately facilitate the green transition. Since it entered into force in January 2022, the ‘Climate Delegated Act’ spells out the first set of specifications for defining the activities that substantially contribute to the first two objectives of climate change mitigation and adaptation. 

As with any economic sector, the home appliance industry is covered by Taxonomy rules and is therefore directly affected by a number of listed criteria. In this regard, the Act only includes ‘appliances falling in the highest two populated efficiency classes’ of the energy label, “this way leaving aside several non-labelled appliances, which would fully match the inherent requirements,” pointed out APPLiA Director General, Paolo Falcioni. In addition to a consistency issue, the adopted approach has already generated a widespread lack of clarity within EU economic actors, on what makes for a taxonomy-eligible product, at a given time. To this end, an effective implementation of criteria implies an unequivocal source of information, that accounts for market evolutions and is available to all economic operators, indistinctly. Whilst not yet fully operational on all aspects, “EPREL is the most comprehensive and dynamic data source available to date, providing information on the energy efficiency class of all product models placed on the EU market and keeping track of all the latest updates on the legal obligations that apply to home appliance manufacturers,” detailed Falcioni, making it the best candidate for this role.

Information sharing and data availability are key to a smooth implementation of the climate criteria. If we take the case of a company seeking financing, it is key that “all Taxonomy-relevant data is made available in a timely manner, in order to assess which products are eligible within a specific set of objectives,” explained Falcioni. And the same applies to ensure companies can prepare for their reporting obligations. 

A number of aspects have not been tackled at this stage, including a definition of the geographical scope of the eligible economic activities. With a significant number of companies operating inside and outside the EU, “there is rising uncertainty within our industry, as to which operations should be considered for the purpose of the Taxonomy Regulation,” pointed out Falcioni. As such, clearer guidance on the application scope of the published criteria is needed, alongside an assessment on the EPREL usability, with an eye at complying with the Regulation requirements on time. 

Watch APPLiA’s short explanatory video, here.

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