CLEPA Sector Paper – Keys to a successful implementation of the EU’s sustainable financial taxonomy

Executive Summary

The EU Sustainable Finance Taxonomy is intended to direct financing to sustainable activities. The delegated act on sustainable activities for climate change adaptation and mitigation objectives provides screening criteria that explicitly recognise the contribution of the manufacturing of hydrogen vehicles and components, batteries and electric vehicles (EV) to the realisation of climate objectives.

The delegated act however does not address EV components explicitly. CLEPA considers automotive supplier investments and revenues related to the production of EV components taxonomy eligible and considers the tailpipe screening criteria of 3.3 more suitable than the life cycle assessment criteria identified in category 3.6 to declare taxonomy alignment. Vehicle manufacturers can declare revenues and capital expenditures related to electric vehicle sales taxonomy aligned on the basis of a tail-pipe assessment.

The costs of EV components is included in the EV sales price and included in the revenues reported by the vehicle manufacturer.  The same screening criteria of category 3.3 should therefore apply to revenues and capital expenditures related to the sale and production of EV components by suppliers. A distinction between vehicle assembly and component production in the implementation of the EU taxonomy would disadvantage automotive suppliers over vehicle manufacturers, as the methodology to determine tailpipe emissions is regulated and codified and is significantly less broad in scope than an LCA. Requiring different screening criteria for the production of finished vehicles and components would therefore constitute a breach of article 19(J)[1] and supporting point 45[2] of the EU taxonomy regulation.

Electric vehicles are complex systems made of software and hardware parts working together to deliver the final performance in terms of safety, comfort, useability, cost of ownership and emissions. Automotive suppliers are responsible to up to 75% of investment and value creation related to vehicles. The implementation of the EU taxonomy will only efficiently direct capital to the transport equipment sector, if automotive suppliers can apply similar screening criteria as vehicle manufacturers and thus access the market for sustainable investment at equal terms. Nothing less than the successful green transformation and global competitiveness of the EU’s automotive industry is at stake.

[1] Article 19 of REGULATION (EU) 2020/852: “[The technical screening criteria established pursuant to Articles 10(3), 11(3), 12(2), 13(2), 14(2) and 15(2) shall] cover all relevant economic activities within a specific sector and ensure that those activities are treated equally if they contribute equally towards the environmental objectives set out in Article 9 of this Regulation, to avoid distorting competition in the market

[2] 45) of REGULATION (EU) 2020/852: “The potential capacity to contribute to those environmental objectives can vary across sectors, which should be reflected in those criteria. However, within each sector, those criteria should not unfairly disadvantage certain economic activities over others if the former contribute to the environmental objectives to the same extent as the latter.


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