The EU Taxonomy has set a first legal standard of what constitutes green investments in a variety of economic sectors. It’s an important market transparency tool that can help to validate and certify activities that represent an ambitious standard of sustainability — ones that can play a special role in supporting the EU’s transition to a sustainable future and its climate goals. But in the buildings and construction sector, the taxonomy is in danger of lagging behind. Unless the taxonomy is swiftly updated to integrate a ‘life cycle global warming potential’ (life cycle GWP) approach, it will no longer be able to serve its role of directing capital towards especially sustainable activities in the built environment.
A life cycle GWP approach is becoming mainstream
Until recently, few national governments had introduced binding measures to report on or limit buildings emissions using a whole life cycle approach.
The 2024 revision to the Energy Performance of Buildings Directive (EPBD) has changed that. It introduced dates by which Member States must ensure that life cycle GWP is calculated and disclosed for new buildings, with national governments also needing to publish roadmaps with life cycle GWP targets and limit values.
The EU Taxonomy must become more ambitious
While the EPBD remains the most important legislative driver for change in the buildings sector, the EU sustainable finance policy package — prominently through the EU Taxonomy — plays an important role in mobilising capital into the transition.
As a piece of legislation that defines green economic activities, it is essential that the EU Taxonomy is more ambitious than the EPBD, so it clearly differentiates green investments from those that simply follow the minimum performance standards that will be legislated for all buildings. The EU Taxonomy also presents an opportunity to target a select set of actors that have more resources and know-how than the mainstream market (made of smaller actors). In this way, it can help create new markets, capacities, databases and leadership in the transition.
This briefing looks closely at the EPBD and the EU Taxonomy and their respective life cycle GWP requirements.
We provide recommendations on how life cycle GWP criteria could be further integrated into the EU Taxonomy, including via the Climate Delegated Act, particularly addressing:
- databases and data collection
- capacity building
- usability and compliance
This will help the EU Taxonomy continue channelling capital into the most sustainable construction activities, so it can play a crucial supporting role to the EPBD.