New taxonomy regulation and its impact on geothermal

On the 17th of December 2019, the European Parliament reached an agreement with the Council on the new criteria to determine whether an economic activity is environmentally sustainable – the so-called the “Taxonomy Regulation”. EGEC welcomes the positive outcome of this legislation, as it will play a crucial role in helping to redirect the necessary funding to investments in sustainable energy sectors.

According to it, the economic activities can only be categorised as “green” if they substantially contribute to mitigating or adapting to climate change, protecting and sustainably using the water and marine resources, transitioning to a circular economy, preventing pollution, or restoring or protecting ecosystems and biodiversity.

In the end, an economic activity should contribute towards one or more of the above objectives and not significantly harm any of them, as stipulated in the agreement. Its environmental sustainability will be measured using a unified classification system, as national labels based on different criteria make it difficult for investors to compare green investment, thus discouraging them from investing across borders.

Key recommendations:

• The sustainable finance regulation needs to prevent any investment that locks-in fossil fuel emissions and puts the European economy on track with net-zero carbon emissions by 2050. That means incentivising renewable energy projects.
• For geothermal projects, the LCA assessment of emissions need to differentiate the natural emissions of geological systems from those resulting from geothermal project developments. The GEOENVI project is a major resource in that regard, as it precisely aims at developing a methodology to this end.
• The threshold for the performance requirement of heat pumps is realistic and confirms the role of a shallow geothermal systems as key resources for the energy transition.
• The threshold for 0 gCO₂/kWh in lifecycle emissions in 2050 needs to be clarified: for geothermal projects, in most cases emissions from secondary activities linked to project development (typically transport) represent a very large proportion of lifecycle emissions.

Next steps

The agreement reached by the European Parliament’s negotiators will have to be approved first by the two committees involved and by a plenary vote. The Commission will regularly update the technical screening criteria for the transition and enabling activities.

By 31 December 2021, the European Commission should review and define the criteria for when an activity has a significant negative impact on sustainability.

Read here EGEC position on taxonomy regulation