EU Taxonomy: criteria for biogas and biowaste digestion apply from 1 January 2022

From 1 January 2022 Delegated Regulation (EU) 2021/2139 applies in the European Union, which, within the taxonomy of sustainable investments, sets out when an economic activity can be considered to make a substantial contribution to climate change mitigation. The list includes activities close to the biogas industry: biogas production, anaerobic digestion of biowaste and sewage sludge, composting, energy production from bioenergy, and transmission and distribution networks for renewable gases.

What changes

The taxonomy is neither a ban nor a subsidy. It is a common "dictionary" that says what can be called an environmentally sustainable activity. For each type of activity the delegated act sets two elements: criteria for substantial contribution (for example the required level of greenhouse gas emission reduction) and the "do no significant harm" (DNSH) principle in relation to the other environmental objectives, such as the protection of water, soil and biodiversity, or the circular economy.

For bioenergy, the criteria refer to the sustainability and emission-saving requirements known from the RED II directive. For the production of biogas and biofuels, feedstocks from crops grown for food and feed are additionally excluded, which favours installations based on waste, residues and manure. For the digestion of biowaste, among other things, separate collection of the feedstock, the use of digestion products (for example as a fertiliser) and limiting methane leaks from the installation are important.

Significance for the industry in Poland

Polish agricultural and waste-processing biogas plants do not have to report on the taxonomy themselves, but they will be in its orbit indirectly. Large listed companies and banks report the share of activity eligible for the taxonomy; in the first year (turnover from 2021) the disclosures regulation requires non-financial undertakings only to indicate so-called eligibility, and only later full alignment. Financing institutions will therefore begin to ask for data that have not been collected until now: the share of waste feedstocks, the life-cycle emissions balance, or the way digestate is managed.

For projects based on manure, slurry and agri-food industry waste this is good news – meeting the criteria is realistic. Projects based mainly on maize silage may have difficulty meeting them.

How to read the criteria in practice

The "do no significant harm" principle is sometimes harder for an investor than the climate criterion itself. In an agricultural biogas plant it means, among other things, proof that digestate is managed in accordance with the law and does not worsen the condition of waters, that the installation is protected against leaks, and that methane emissions from the stores and the digestion system are monitored. It is good practice to collect such documents already at the project stage: a bank or fund assesses them together with the business plan.

What next

The European Commission is working on further taxonomy acts, including criteria for the remaining environmental objectives (among others the circular economy and the protection of water). Investors should already document the sources of feedstocks, the emissions balance and the route of digestate, because these data will become standard in assessing projects.