'Climate change mitigation' means the process of holding the increase in the global average temperature to well below 2 °C and pursuing efforts to limit it to 1,5 °C above pre-industrial levels, as laid down in the Paris Agreement (Article 2(5) of the Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facilitate sustainable investment, and amending Regulation (EU) 2019/2088 (Taxonomy Regulation)).
The scope of this term is explained in Recital 24 of the Taxonomy Regulation:
'An economic activity that pursues the environmental objective of climate change mitigation should contribute substantially to the stabilisation of greenhouse gas emissions by avoiding or reducing them or by enhancing greenhouse gas removals. The economic activity should be consistent with the long-term temperature goal of the Paris Agreement. That environmental objective should be interpreted in accordance with relevant Union law, including Directive 2009/31/EC of the European Parliament and of the Council'
and Article 10 of the Taxonomy Regulation (see below).
The definition in Article 10 provides a range of eligible methods to achieve climate change mitigation, "including but not limited" to expanding production and use of renewable energy, energy efficiency, switching to more sustainable raw materials, increasing the use of negative emissions technologies and practices and enabling these actions in other parts of the economy (Transition finance report of March 2021, Platform on Sustainable Finance).
Moreover, Recital 7 of the First Taxonomy Delegated Act (Commission Delegated Regulation (EU) 2021/2139 of 4 June 2021 supplementing Regulation (EU) 2020/852 of the European Parliament and of the Council by establishing the technical screening criteria for determining the conditions under which an economic activity qualifies as contributing substantially to climate change mitigation or climate change adaptation and for determining whether that economic activity causes no significant harm to any of the other environmental objectives) explains:
"The technical screening criteria for determining under which conditions an economic activity qualifies as contributing substantially to climate change mitigation should reflect the need to avoid producing greenhouse gas emissions, to reduce such emissions or to increase greenhouse gas removals and long-term carbon storage".
Practical use cases regarding climate change mitigation
Potential practical use cases regarding climate change mitigation have been described in the document prepared for the European Commission in June 2023: "The EU Taxonomy User Guide" (p. 21) - see extract below.
How can my company assess if specific activities qualify as contributing substantially to climate change mitigation?
The EU Taxonomy recognises that activities are aligned when they make a substantial, Contextrather than a marginal, contribution to reaching at least one of the EU's environmental objectives (as well as doing no significant harm and meeting minimum safeguards, as described in Use Cases 3 and 6 respectively). It sets the criteria based on a level of ambition that is in line with what is needed to achieve the goals of the European Green Deal.
Economic activities can make a substantial contribution to one of the six environmental objectives through specific means that are listed in Articles 10 to 15 of the EU Taxonomy Regulation and articulated via the activity-specific Technical Screening Criteria for substantial contribution.
Proposed approach to address your challenge
Step 1 - check that your investment is aligned with the description of the relevant activity included in Annex I to the Climate Delegated Act and the Complementary Climate Delegated Act The EU Taxonomy Compass can serve as a helpful tool to get a quick overview of the activities and their descriptions.
For example, for energy efficiency measures, refer to activity "7.3 Installation, maintenance and repair of energy efficiency equipment": Individual renovation measures consisting in installation, maintenance or repair of energy efficiency equipment.
The economic activities in this category could be associated with several NACE codes, in particular F42, F43, M71, C16, C17, C22, C23, C25, C27, C28, 595.21, 595.22, C33.12 in accordance with the statistical classification of economic activities established by Regulation (EC) No 1893/2006.
Step 2 - understand what is required for the activity to be compliant (aligned" with the technical screening criteria for a substantial contribution to climate change mitigation.
The criteria will probably require the collection of specific data or information. It is therefore advised to already start defining actions to be taken to prepare the assessment (e.g., identify data requirements, identify sources for data collection, define responsibilities and timeline for data collection, define data quality checks, etc.).
For example: In the case of investment in energy efficiency equipment, the criteria include
(1) the reference to relevant compliance requirements at EU or national level (e.g., applicable national measures implementing the recast Energy Performance of Buildings Directive 2010/31/EU) and (2) the specific individual measures considered as eligible (e.g., replacement of existing windows with new energy efficient windows).
Next steps and references
Reference to recommended resources:
• EU Taxonomy Compass
Source: The EU Taxonomy User Guide, Document prepared for the European Commission, June 2023, p. 21