Clarification of EU sustainable finance taxonomy regulation should avoid distortion of level playing field in automotive manufacturing
EU policy makers are redefining what it means for companies to run a business with a series of legislative initiatives related to corporate sustainability. Among the latest initiatives, the EU sustainable finance taxonomy regulation is intended to enable markets to effectively direct investments to economic activities contributing to environmental goals, including climate change mitigation. The European Commission has adopted a delegated regulation supplementing regulation EU 2020/852, which will enter into force on 1 January 2022. CLEPA welcomes this initiative but sees risks that the design and production of electric vehicle components will receive different treatment than vehicle assembly. Automotive suppliers are at risk of losing access to a significant part of the market for sustainable investment if the delegated act would be implemented in a discriminatory fashion. This would distort the level playing field, but more fundamentally could mean that vital activities for the realisation of sustainable mobility will be underfunded.
The delegated regulation establishes per economic activity criteria on the basis of which companies can label their business activities sustainable. The delegated act introduces distinct criteria for the production of hydrogen vehicles and components (category 3,2), battery and battery components (category 3.4) and electric vehicles (3.3). Concerning the manufacturing of automotive components for electric vehicles, the delegated regulation could be at risk of being interpreted as excluding the development process of car parts and technologies. EV components could in that case only be marked sustainable if suppliers can demonstrate substantial life cycle GHG emission savings compared to the best performing alternative technology/product/solution available on the market. For the production of the vehicle itself, a tailpipe assessment would suffice.
The workings of the automotive supply chain do not justify an artificial distinction between the assembly of a finished vehicle and the production of components, as the majority of the value creation and R&D to create market ready electric vehicles are connected to the design and production of components. Whereas vehicle manufacturers play an important role in translating consumer preferences in clear parameters for the design and assembly of vehicle, automotive suppliers deliver the technologies and components that meet those parameters.
CLEPA has reached out to European Commissioner for Financial Stability, Financial Services and the Capital Markets Union Mairead McGuinness raising that any potential distinction between the conditions under which automotive suppliers and vehicle manufacturers could qualify economic activity as taxonomy eligible and aligned should be avoided. The application of the screening criteria should reflect that co-design and production by automotive suppliers and vehicle manufacturers will continue to be critical to optimise and further the market uptake of low and zero emission vehicles for road transport. Equal access to markets for sustainable investment will be critical to maintain competitiveness of the supply industry globally.
For further information on CLEPA’s position on the matter, you can reach out to our Trade and Market Affairs Manager Nils Poel.
In: CLEPA News, Environment & Energy