Commission Delegated Regulation (EU) 2023/2485 of 27 June 2023 amending Delegated Regulation (EU) 2021/2139 establishing additional technical screening criteria for determining the conditions under which certain economic activities qualify as contributing substantially to climate change mitigation or climate change adaptation and for determining whether those activities cause no significant harm to any of the other environmental objectives

THE EUROPEAN COMMISSION,

Having regard to the Treaty on the Functioning of the European Union,

Having regard to 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 (1), and in particular Articles 10(3) and 11(3) thereof,

Whereas:

(1) Regulation (EU) 2020/852 establishes the general framework for determining whether an economic activity qualifies as environmentally sustainable for the purposes of establishing the degree to which an investment is environmentally sustainable. That Regulation applies to measures adopted by the Union or by Member States that set out requirements for financial market participants or issuers in respect of financial products or corporate bonds that are made available as environmentally sustainable, to financial market participants that make available financial products, and to undertakings that are subject to the obligation to publish a non-financial statement pursuant to Article 19a of Directive 2013/34/EU of the European Parliament and of the Council (2) or a consolidated non-financial statement pursuant to Article 29a of that Directive. Economic operators or public authorities that are not covered by Regulation (EU) 2020/852 may also apply that Regulation on a voluntary basis.

(2) Commission Delegated Regulation (EU) 2021/2139 (3) establishes the technical screening criteria for determining the conditions under which a specific economic activity qualifies as contributing substantially to climate change mitigation or climate change adaptation. The technical screening criteria cover economic activities from nine economic sectors because of their significant share in overall greenhouse gas emissions, and their proven potential for avoiding the production of greenhouse gas emissions, reducing such emissions, or removing such emissions. In addition, those economic activities have a proven potential to enable such avoidance, reduction and removal for other economic sectors and activities, or to ensure long-term storage of such emissions for other sectors and activities.

(3) Delegated Regulation (EU) 2021/2139 does not cover all economic activities that may contribute substantially to climate change mitigation or climate change adaptation. To further facilitate environmentally sustainable investments, it is necessary to lay down additional technical screening criteria for those economic activities that may contribute substantially to climate change mitigation or climate change adaptation without significantly harming the other environmental objectives, but which are currently not covered by Delegated Regulation (EU) 2021/2139. The additional economic activities that contribute substantially to climate change mitigation cover largely the transport sector and its value chain. The additional economic activities that contribute substantially to climate change adaptation cover largely activities enabling adaptation to the unavoidable effects of climate change, including desalination and services for preventing and responding to climate-related disasters and emergencies.

(4) The technical screening criteria for those additional economic activities should, where possible, follow the classification of economic activities laid down in the NACE Revision 2 classification system of economic activities established by Regulation (EC) No 1893/2006 of the European Parliament and of the Council (4). To facilitate the identification by undertakings and financial market participants of economic activities for which technical screening criteria should be established, the specific description of an economic activity should also contain the references to NACE codes that can be associated with that activity. Those references should be understood as indicative and should not prevail over the specific definition of the economic activity provided in its description.

(5) The technical screening criteria for economic activities that contribute substantially to climate change mitigation or climate change adaptation should ensure that the economic activity concerned has a positive impact on climate change mitigation or climate change adaptation or reduces negative impacts on such mitigation or adaptation. Those technical screening criteria should therefore refer to thresholds or performance levels that the economic activity should achieve to qualify as contributing substantially to climate change mitigation or climate change adaptation. The technical screening criteria for ‘do no significant harm’ (DNSH) should ensure that the economic activity has no significant negative environmental impacts, including climate-related impacts. Consequently, those technical screening criteria should specify the minimum requirements that the economic activity should meet to qualify as environmentally sustainable.

(6) The technical screening criteria for determining whether an economic activity contributes substantially to climate change mitigation or climate change adaptation laid down in Article 9 of Regulation (EU) 2020/852 and does no significant harm to any of the other environmental objectives should, where relevant, build on existing Union law, best practices, standards and methodologies, and well-established standards, practices and methodologies developed by internationally reputed public entities. Where those standards, practices and methodologies are not available for a specific policy area, the technical screening criteria should build on well-established standards developed by internationally reputed private bodies.

(7) Pursuant to Article 19(1), point (h), of Regulation (EU) 2020/852, the technical screening criteria are to take into account the nature and the scale of the economic activity and sector that they refer to, and whether the economic activity is an enabling activity as referred to in Article 16 of that Regulation or a transitional activity as referred to in Article 10(2) of that Regulation. For the technical screening criteria to meet the requirement of Article 19 of Regulation (EU) 2020/852 in an effective and balanced way, they should be set as a quantitative threshold or minimum requirement, a relative improvement, a set of qualitative performance requirements, process or practice-based requirements, or a precise description of the nature of the economic activity itself where that activity by its nature can contribute substantially to climate change mitigation or climate change adaptation. Technical screening criteria for enabling activities should further ensure that the activities directly enabling other activities to improve their environmental performance, have a substantial positive environmental impact and do not lead to a lock-in of environmentally harmful assets. To ensure that transitional activities remain on a credible pathway consistent with a climate-neutral economy, the technical screening criteria for transitional activities should be reviewed every three years as set out Article 19(5) of Regulation (EU) 2020/852, taking due account of changes in Union law.

(8) The manufacturing of electrical equipment has an important role in contributing substantially to climate change mitigation by, in particular, furthering the uptake of renewable sources of energy in the Union electric grids and developing recharging installations for zero emissions vehicles and smart energy usage tools for households. To further unlock the potential of electrification in the Union and to further accelerate investments into the manufacturing of electrical equipment, it is necessary to lay down technical screening criteria for the manufacturing of electrical equipment.

(9) The manufacturing of low carbon vehicles, personal mobility devices and rail rolling stock and infrastructure depends on components that play a key role in reducing greenhouse gas (GHG) emissions, or, in the case of rail, that are essential to the environmental performance, operation and functioning over the lifetime of Taxonomy-aligned trains and rail infrastructure, but are often manufactured by undertakings that do not assemble those vehicles or other means of transportation. To ensure that the role of those undertakings and of the components they manufacture in climate change mitigation is duly recognised, the manufacturing of the components that are essential for delivering and improving the environmental performance of the low carbon vehicle or other means of transportation should be included as a distinct economic activity in Delegated Regulation (EU) 2021/2139. Technical screening criteria for components which are decisive for environmental performance should be included. For vehicles, that includes, in particular, controllers, transformers, electric motors, charge ports and chargers, DC/DC converters, power inverters, alternators, controller units, regenerative braking systems, brakes with drag reduction technologies, thermal management systems, transmission system, hydrogen storing and fuelling systems, electronics when necessary for the operations of the powertrains, drivetrains, ‘best-in-class’ suspension systems leading to energy efficiency improvements, any auxiliaries when these are necessary for low-carbon vehicles and when these are substantially more energy efficient than alternatives, active aero features on low-carbon vehicles reducing air drag, and trailers that incorporate energy savings technologies such as a combination of regenerative braking or aerodynamic improvements. For rail, that includes, in particular, rail constituents as set out in Annex I to Directive (EU) 2016/797 of the European Parliament and of the Council (5).

(10) Tyres represent 20 % of a vehicle energy consumption and as such, tyre manufacturing has the possibility to reduce greenhouse gas emissions targeted by the entire transport sector, relying on innovation. Tyres can also contribute to a more circular economy. Accordingly, while tyre manufacturing is not included in the scope of the activity for manufacturing of components that are essential for delivering and improving the environmental performance of low carbon vehicles, it will be necessary to further assess the manufacturing of tyres in order to establish specific technical screening criteria for that activity, taking due account of legal requirements under the most recent proposals of Union legislation and best practices, particularly regarding microplastic release, air pollution, noise, direct greenhouse gas emissions, end of life. In the meantime, tyre manufacturing continues to be an eligible activity under Section 3.6 of Annex I to Delegated Regulation (EU) 2021/2139 on other low carbon technologies. In particular for road vehicles of categories M and N, tyres should comply with external rolling noise requirements in the highest populated class and with Rolling Resistance Coefficient (influencing the vehicle energy efficiency) in the highest two populated classes as set out in Regulation (EU) 2020/740 of the European Parliament and of the Council (6) and as can be verified from the European Product Registry for Energy Labelling (EPREL). Furthermore, tyres should fulfil the Euro 7 proposal for tyre abrasion requirements.

(11) In its Communication of 9 December 2020, ‘Sustainable and Smart Mobility Strategy – putting European transport on track for the future’ (7), the Commission pointed out that all modes of transport are indispensable for the transport system, and that aviation plays a crucial role in fostering cohesion, connectivity, and access to the internal market for all regions. Aviation has an important potential to reduce its greenhouse gas emissions, to contribute to the decarbonisation of transport, and thus has the potential to contribute substantially to climate change mitigation. It is therefore necessary to lay down technical screening criteria for the manufacturing of aircraft, leasing, passenger and freight air transport and air transport ground handling operations. Zero-emission commercial air transport operated with zero direct CO2 emissions or entirely on sustainable aviation fuels is not yet technologically available. Until such zero-emission commercial air transport is technologically available, air transport should be considered as a transitional activity, with the technical screening criteria based on best available technologies for airframe and engine fuel efficiency, and based on the potential to reduce substantially greenhouse gas emissions over the life cycle of aircraft through the progressive uptake of sustainable aviation fuels. To facilitate financing of more efficient and environmentally friendly best-in-class aircrafts, while avoiding lock-in effects of more carbon intensive assets and not hampering the development of zero-emission commercial air transport, the replacement ratio, that captures the proportion of aircraft permanently withdrawn from use to aircraft delivered at the global level, should only apply to the revenues generated by activities that comply with the technical screening criteria. The Commission, with support of the European Union Aviation Safety Agency established by Regulation (EU) 2018/1139 of the European Parliament and of the Council (8), may publish the replacement ratio to support the economic operators in their disclosures. In line with the transitional nature of the activities and to take account of the market evolution of aircraft technologies, the technical screening criteria for aircraft manufacturing should be applicable until 2032, and by that date those technical screening criteria should be reviewed to ensure compliance with Article 10(2) of Regulation (EU) 2020/852 in line with technological developments. Furthermore, the level of the use or blending of sustainable aviation fuels represented in the technical screening criteria should be reviewed every three years to take account of the emerging sustainable aviation fuels technologies and the current and expected future availability of sustainable aviation fuels in the market. However, in the area of climate change adaptation, certain disaster risk management related activities can only be supported by specifically designed and equipped aircrafts. It might therefore be necessary to establish separate technical screening criteria in a subsequent step for the manufacture of those aircraft.

(12) Delegated Regulation (EU) 2021/2139 lays down technical screening criteria for key waterborne activities. The technical screening criteria applicable after 2025 for inland waterway vessels reflect a gradual reduction of emissions towards 2050, based on the assessment of the greenhouse gas intensity of the energy used by inland waterway transport vessels, on a well-to-wake emissions basis. To ensure usability of the applicable technical screening criteria for maritime freight and passenger transport, and to align those technical screening criteria with recently adopted international and Union reference values, the technical screening criteria should be updated. Those reference values include the Phase 3 of the International Maritime Organisation Energy Efficiency Design Index (9) applicable from 1 January 2025, the Energy Efficiency Index of Existing Ships (10) that entered into force on 1 January 2023, and greenhouse gas intensity limits for the energy used onboard as established by a Regulation (EU) 2023/1805 (11) of the European Parliament and of the Council on the use of renewable and low-carbon fuels in maritime transport and amending Directive 2009/16/EC, applicable from 1 January 2025. To ensure a level playing field with rail transport, the technical screening criteria for inland waterway transport infrastructure should be revised and should include the inland waterway transport infrastructure modernisation as that infrastructure is essential to ensure the navigation of zero emissions vessels on waterways. To ensure a level playing field with rail, road, and water transport infrastructures, the technical screening criteria for low carbon airport infrastructure should be revised to include transhipment between modes of transport.

(13) The Commission Communication of 24 February 2021 setting out the EU Adaptation Strategy (12) points out that the frequency and severity of climate and weather extremes is increasing which in turn has caused a surge in the number of, and damages from, climate change related disasters over the last two decades.

(14) Emergency services save lives, protect property and the environment, assist communities impacted by disasters, and aid recovery during emergencies. The increased frequency of natural disasters caused by climate change thus render emergency services even more important. Emergency services are however not necessarily equipped to deal with the scale, nature, and frequency of emergencies in the changed climatic conditions. Emergency service activities therefore need to include adaptation solutions to adapt themselves to the impacts of climate change and, once adapted, provide adaptation solutions to improve the overall resilience of an area and society. To further accelerate investments into those emergency services that boost overall resilience, it is necessary to lay down technical screening criteria for such economic activities.

(15) Global warming is projected to lead to a higher intensity of precipitation and longer dry periods in Europe (13). Heavy rainfalls are periodically leading to floods across the Union. To incentivise further investments in adaptation solutions against floods, it is necessary to lay down technical screening criteria for preventing the risk of floods and protecting communities from their consequences.

(16) The effects of climate change, including increased evapotranspiration and more frequent droughts, can amplify the scarcity of water, which can jeopardise the water supply, which in its turn can lead to overexploitation of groundwater and surface water resources and increased competition for those resources. In line with the mitigation measures in accordance with the water hierarchy, consideration of feasible water efficiency measures and subsequently feasible water reuse measures are to precede measures on water desalination. At the same time, it is necessary to incentivise investments in desalination of sea or brackish water that can reduce the overexploitation of existing water resources and can also provide a stabilising buffer for the shortage of freshwater supply. It is therefore necessary to lay down technical screening criteria for desalination of sea or brackish water.

(17) Consultancy and software enabling climate risk management have the potential to provide adaptation solutions that support businesses in their forecasting, projection, managing and monitoring of current or expected future climate risks. It is therefore necessary to set out, for those activities, the technical screening criteria to determine whether an economic activity qualifies as contributing substantially to climate change adaptation by providing adaptation solutions in accordance with Article 11(1), point (b), of Regulation (EU) 2020/852.