EU Taxonomy Regulation (2020/852) published in the Official Journal

On 22 June 2020 Regulation (EU) 2020/852 on the establishment of a framework to facilitate sustainable investment, known as the EU taxonomy, was published in the Official Journal of the EU. It will enter into force on the twentieth day after publication, that is, 12 July 2020. The regulation creates a common classification system that indicates which types of economic activity can be considered environmentally sustainable — which matters for the financing of biogas installations, biowaste treatment plants and wastewater treatment plants.

Six environmental objectives

The regulation identifies six objectives:

1. climate change mitigation,
2. climate change adaptation,
3. the sustainable use and protection of water and marine resources,
4. the transition to a circular economy,
5. pollution prevention and control,
6. the protection and restoration of biodiversity and ecosystems.

Criteria for sustainable activity

An activity can be considered environmentally sustainable if it:

• makes a substantial contribution to at least one of the objectives,
• does no significant harm to any of the other objectives (the "do no significant harm" principle),
• is carried out in compliance with minimum social safeguards,
• meets the technical screening criteria that the Commission will set in delegated acts.

The regulation also imposes disclosure obligations on entities covered by the Non-Financial Reporting Directive and on financial market participants offering products described as sustainable.

Significance for biogas and waste

The taxonomy does not determine which technologies are permitted, but it affects access to financing. Banks and funds that want to show a high share of "green" assets will prefer projects that comply with the criteria. For an agricultural biogas plant this means the need to document emission reductions, the origin of feedstocks and the limiting of methane leaks. For biowaste digestion plants and wastewater treatment plants — compliance with the requirements of the circular economy and water protection.

The report of the TEG (Technical Expert Group on Sustainable Finance, the EU expert group on sustainable finance) of March 2020 identified criteria for these types of activity; now they were to be transferred to delegated acts.

What next

Under the regulation, the Commission was to adopt a delegated act on the criteria for the climate objectives by the end of 2020, and for the other objectives in the following years. The application of the provisions is spread over time: Articles 4–7 and Article 8(1)–(3) apply from 1 January 2022 with regard to the climate objectives (climate change mitigation and adaptation) and from 1 January 2023 with regard to the other objectives (Article 27(2)). For investors this meant that in 2021 they should prepare documentation with a view to the compliance assessment, and after the acts were published — adapt it to the final criteria.

Controversies around the taxonomy

The hottest topic in the work on the regulation was the role of natural gas and nuclear energy, as well as biomass. States with a high share of coal demanded that transitional fuels not be excluded from the category of desirable investments. For agricultural biogas it was important that the TEG report contained separate criteria for bioenergy, referring to the sustainability rules of the Renewable Energy Directive.

What to do now

It is worth for biogas installation operators to start putting in order the data that will in future serve the compliance assessment: the feedstock balance, the size and type of emissions, the way digestate is managed and measures limiting methane leaks. Such documentation is useful regardless of the final wording of the delegated acts, because banks increasingly ask about it when assessing the climate risk of projects.