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EUROPEAN COMMISSION Brussels, 4.6.2021 SWD(2021) 152 Final

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EUROPEAN COMMISSION Brussels, 4.6.2021 SWD(2021) 152 Final EUROPEAN COMMISSION Brussels, 4.6.2021 SWD(2021) 152 final COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT REPORT Accompanying the document Commission Delegated Regulation (EU) .../... 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. {C(2021) 2800 final} - {SEC(2021) 166 final} - {SWD(2021) 153 final} EN EN Table of contents GLOSSARY ................................................................................................................................... V LIST OF FIGURES .................................................................................................................... VIII LIST OF TABLES ......................................................................................................................... IX LIST OF BOXES ........................................................................................................................... IX 1. INTRODUCTION: POLITICAL AND LEGAL CONTEXT ................................................. 1 1.1. How does the delegated act on climate change mitigation and adaptation fit with the political priorities of the Commission and the EU? ..................................................... 1 1.2. Legal and policy context of the delegated act – the Taxonomy Regulation..................... 2 1.3. The uses of the EU Taxonomy and interactions with other initiatives ............................. 5 1.4. Scope and structure of the report ...................................................................................... 8 2. PROBLEM DEFINITION ...................................................................................................... 9 3. WHY SHOULD THE EU ACT? .......................................................................................... 10 4. OBJECTIVES: WHAT IS TO BE ACHIEVED? ................................................................. 11 4.1. General and specific objectives .................................................................................. 11 4.2. Operational objective ................................................................................................. 11 5. KEY METHODOLOGICAL CHOICES .............................................................................. 13 5.1. Prioritisation, selection and classification of economic activities .............................. 15 5.2. Approaches to set technical screening criteria ........................................................... 17 5.3. Level of ambition for technical screening criteria ...................................................... 19 6. ASSESSING THE PROPOSED APPROACHES AND TECHNICAL SCREENING CRITERIA AGAINST THE REQUIREMENTS OF THE TAXONOMY REGULATION ..................................................................................................................... 20 6.1. Substantial contribution to climate change mitigation ............................................... 24 6.1.1 Policy Coherence ................................................................................................................. 25 6.1.2. Environmental integrity ...................................................................................................... 26 6.1.3. Level playing field .............................................................................................................. 28 6.1.4. Usability of the criteria ....................................................................................................... 29 6.1.5. Consistency with the requirements in Article 19(2)-(4) of the Taxonomy Regulation ....... 30 6.2. Substantial contribution to climate change adaptation ................................................... 30 6.2.1. Policy Coherence ................................................................................................................ 31 6.2.2. Environmental integrity ...................................................................................................... 33 6.2.3. Fair treatment of sectors, avoid distortion, and set right incentives .................................... 34 6.2.4. Usability of the criteria. ...................................................................................................... 35 6.3. Do no significant harm ................................................................................................... 37 6.3.1. Assessment of the DNSH to climate change mitigation criteria against the requirements of the Taxonomy Regulation ............................................................................................................. 38 6.3.2. Assessment of the DNSH criteria against the requirements of the Taxonomy Regulation for climate change adaptation ....................................................................................................... 40 i 6.3.3. Assessment of the DNSH criteria against the requirements of the Taxonomy Regulation for objectives 3 to 6 ....................................................................................................................... 43 7. HOW THE TAXONOMY WILL BE USED, MONITORED AND EVALUATED ................ 47 7.1 Monitoring and review of the technical screening criteria .............................................. 48 7.2 Uses of the EU Taxonomy, indicative impacts and broader monitoring and evaluation provisions .................................................................................................. 51 ANNEX 1: PROCEDURAL INFORMATION ............................................................................. 57 1.1. Lead DG, DEcide Planning/CWP references ................................................................. 57 1.2. Organisation and timing ................................................................................................. 57 1.3. Consultation of the RSB ................................................................................................. 57 1.4. Evidence, sources and quality ........................................................................................ 59 ANNEX 2: STAKEHOLDER CONSULTATION ........................................................................ 61 2.1. Technical Expert Group on Sustainable Finance (TEG) and Member States Expert Group (MSEG) ........................................................................................................... 61 2.2. TEG’S first call for feedback ......................................................................................... 62 2.3. TEG workshops with additional experts ........................................................................ 63 2.4. First stakeholder dialogue on sustainable finance .......................................................... 63 2.5. TEG’s second call for feedback ..................................................................................... 64 2.6. Second stakeholder dialogue on sustainable finance ..................................................... 68 2.7. Feedback by Member States on TEG report .................................................................. 69 2.8. Feedback on inception impact assessment ..................................................................... 73 2.9. Consultation on the Renewed Sustainable Finance Strategy ......................................... 75 2.10. Feedback on the draft delegated act: November-December 2020 ................................ 75 ANNEX 3: WHO IS AFFECTED AND HOW? ........................................................................... 83 3.1 Practical implications of the initiative ............................................................................. 83 3.2 Summary of costs and benefits ........................................................................................ 87 ANNEX 4: KEY METHODOLOGICAL CHOICES .................................................................... 96 4.1 Classification of economic activities - NACE ............................................................ 96 4.2 Methodology for selecting economic sectors and activities for climate change mitigation.................................................................................................................... 98 4.2.1. Prioritisation of sectors and activities for assessment ......................................................... 98 4.2.2. Inclusion logic of activities in the EU Taxonomy ............................................................ 100 4.3 Methodology for selecting economic sectors and activities for climate change adaptation. ................................................................................................................ 102 4.3.1. First category of included activities: Activities for which DNSH criteria for environmental objectives 3-6 were developed under the mitigation Taxonomy. ............................................... 103 4.3.2. Second category of included activities: (i) Activities not assessed by the TEG but for which DNSH criteria for activities already assessed can apply or (ii) Activities that have no or a very low impact on other environmental objectives. .................................................................. 103 4.3.3. Third category of
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