Making Europe Climate-Neutral by 2050
February 15, 2022
By Sarah Ryan
The European Union (E.U.) is undertaking a few initiatives to achieve its goal of becoming climate-neutral by 2050. This article offers a brief look at three key efforts:
- The European Green Deal
- The E.U. Taxonomy
- The Sustainable Finance Package
The European Green Deal
In 2019, the E.U. published the European Green Deal (the “Green Deal”), with the central objective of having the E.U. become the first climate-neutral continent by 2050.
The Green Deal’s goals extend across various sectors and its aim is to improve the overall quality of life for E.U. citizens, both present and future. Key actions are being taken across the following areas:
- Climate – a key milestone in meeting the objectives of the Green Deal is the European Commission’s target of a 55% reduction of greenhouse gas emissions by 2030 (compared to 1990 emission levels).
- Energy – ensuring a secure, affordable and efficient energy supply to E.U. citizens, with greater reliance on renewable sources.
- Agriculture – reducing the environmental impact of the E.U. food system and implementing a farm-to-fork strategy, which aims to make food systems fair, healthy and environmentally friendly.
- Industry – harnessing the potential in global markets for low-emission technologies as well as sustainable products and services throughout the E.U.
- Environment & Oceans – moving toward a more circular economy, which designs the cycles of production and consumption in a way that reduces the depletion of natural resources, tackles the amount of waste and pollution, and protects biodiversity and ecosystems.
- Transport – overhauling the current arrangements around public transport to achieve a 90% reduction in transport-related greenhouse gas emissions by 2050.
- Finance & Regional Development – ensuring a significant increase of financing to more sustainable investment and putting policies in place to encourage countries to implement greener investment strategies.
- Research & Innovation – the launch of Horizon Europe, the E.U.’s key funding programme for initiatives which tackle global challenges.
The E.U. Taxonomy
The E.U. Taxonomy (the “Taxonomy”) will play an important role in reaching the European Commission’s 2030 target of reducing greenhouse emissions by 55%. The Taxonomy is a comprehensive, science-based classification system, establishing a list of environmentally sustainable economic activities. The aim of the Taxonomy is to help investors make more sustainable choices – ensuring investments are funnelled to where they are needed most, creating security for investors and reducing greenwashing.
The Taxonomy Regulation came into force on 12 July 2020, and establishes six environmental objectives against which investment can be measured:
- Climate change mitigation;
- Climate change adaptation;
- The sustainable use and protection of water and marine resources;
- The transition to a circular economy;
- Pollution prevention and control; and
- The protection and restoration of biodiversity and ecosystems.
Regulatory requirements on the climate change mitigation and climate change adaptation objectives above came into effect on 1 January 2022. The requirements for the remaining four objectives will come into effect on 1 January 2023.
The Sustainable Finance Package
On 21 April 2021, the European Commission published its Sustainable Finance Package containing three important sustainable finance legislative developments:
- The E.U. Taxonomy Climate Delegated Act (the “First Delegated Act”), formally adopted on 4 June 2021, aims to support sustainable investment by providing clarity on which economic activities most contribute to meeting the E.U.’s environmental objectives. A second Delegated Act will be published this year and will outline the European Commission’s remaining objectives.
- The proposal for a new Corporate Sustainability Reporting Directive (CSRD) amends the existing reporting requirements of the Non-Financial Reporting Directive, which lays down the rules on disclosure of non-financial information by certain large companies; and
- Six Amending Delegated Acts on fiduciary duties, investment and insurance advice will ensure that financial firms include sustainability in their procedures and their investment advice to clients.
The European Green Deal was entered to make Europe a net-zero emitter of greenhouse gases by 2050 and hopes to demonstrate that economies can develop without increasing resource usage, even after the effects of the COVID-19 pandemic.
The E.U. Taxonomy is ambitious and considered the most comprehensive and sophisticated initiative of its type. The U.K. is currently working on its own, separate taxonomy.
With the disclosure regime as part of the Sustainable Finance Package now in effect, there will be a significant learning curve as investors move to meet the criteria set out and transition to financing greener projects.