EU taxonomy increasing transparency of sustainable investments

By developing a taxonomy for sustainable investments, the EU Commission has created the first standardized criteria for climate-friendly economic activities.To achieve the goal of climate neutrality by 2050, firms and investors must be well informed of which investments avoid greenhouse gas emis- sions and can thus be categorized as sustainable. The present report investigates to what extent the EU taxonomy achieves this goal. The study reaches the conclusion that the criteria are compatible with a path to climate neutrality in some economic sectors, such as the automotive sector. However, in others, such as the emission-intensive basic materials sector, the cri- teria are insufficient. Thresholds that are too low carry the risk of a carbon lock-in, the entrenchment of emission-intensive technologies and structures. Instead, the EU taxonomy should offer incentives for innovations in decarbonizing the economy. This can be achieved by setting different thresholds for new investments and existing assets, as the EU taxonomy already does in the buildings sector.