Statement Platform on Sustainable Finance Report with recommendations on technical screening criteria for the four remaining environmental objectives of the EU taxonomy Federation of German Industries 1 September 2022
Statement on the PSF report with recommendations on technical screening criteria Table of Content 1. Best Available Techniques Reference.............................................3 3. Manufacturing of Ships and Water Transport 3 4. Manufacturing of Aircraft 4 5. Passenger and Air Freight Transport ..............................................5 6. Leasing of Aircraft 7 7. Airport Infrastructure 7 8. Use of Sustainable Aviation Fuels (SAF) .......................................7 9. Electrical and Electronics Industry 7 10. Technical Textiles 8 11. Construction Industry .............................................................................8 12. Waste Management 9 13. Remarks on Objective 3 “Water and Marine Resources” 10 14. Remarks on Objective 6 “Biodiversity and Ecosystems” .....10 15. Activity “Non-Ferrous Metals” 10 16. Enabling Activities 11 About the BDI...................................................................................................12 Imprint 12 Editorial 12
Statement PSF report
2. Sustainability and the use of hazardous substances are not mutually exclusive. Especially the functionality or reactivity of chemical substances required for certain uses and processes is often inextricably linked to their hazardous properties. It is important to strengthen the safe and sustainable use of classified substances and at the same time identify and exclude specific, unacceptable risks. An assessment of the sustainable use of chemicals must therefore consider their entire life cycle and, in addition to their impact on human health and the environment, the benefits and economic viability of their use. Regulations or requirements that only consider the hazardous properties of chemicals unnecessarily restrict the variety of chemicals needed. This has a direct critical impact on the innovation and competitiveness of companies to produce sustainable products, which are needed, among other things, for the successful implementation of the Green Deal.
3. Manufacturing of Ships and Water Transport
1. Best Available Techniques Reference
2. Hazardous Substances
on the
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3. For deep sea shipping (chapter 2.16, Annex Part B) and especially for the timeline envisaged there is no technology today that could comply with thesecriteria.Therefore,arelianceonprovenenergyconverterslikeinternal combustion engines (ICE) is still necessary; evenifthese engines would run with green hydrogen, which due to its low energy density will not be the right fuel for deep sea shipping. These engines would not be able to reach zero direct emissions for all of the three pollutants. A hydrogen fuelled ICE would still produce NOx and a marginal amount of PM emissions; the latter due to the lubricants needed for the operation of the ICE. With modern exhaust gas aftertreatment solutions these emissions could be reduced to a very low and irrelevant level, in the future certainly below the emission levels described in MARPOL annex VI. If "zero direct emissions" is understood as "absolute zero", this will not be possible and the criterion remains unrealistic hindering a shift to more sustainable technology options in the short and medium term. While fuel cells or battery powered
1. Best Available Techniques Reference Documents (BREFs) represent an important part of the European environmental regulatory framework. They make references to technical solutions which are best in class and their use is widely accepted. Yet, we do not agree with the way how BREFs are suggested to be used within the Taxonomy Regulation. Requirements stipulating all emission levels must be below the midpoint of the BAT AEL ranges meaning to stay below a very low threshold should be significantly softened; they are basically a contradiction in terms as BREFs already represent the best possible technologies. Further, the work of the PSF must not replace the Sevilla process. This is particularly important for sectors not being covered by BREF yet (e.g. mining industry).
7. Concerning the scope of the economic activity manufacturing of aircraft (chapter 7.2, Part B Annex) we suggest excluding “military aviation” as it is not subject to the requirements addressed to “civil aviation”. However, as “military aviation” should be kept in the Taxonomy as an activity we suggest developing separate TSCs for SC and DNSH.
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propulsion solutions might be available in the future, these drive systems are for short distance coastal transport and their commercial availability until 2026 is uncertain.
4. In terms of the criteria for manufacturing of ships (chapter 2.16, Annex Part B) as well as sea transport (chapter 8.1 6, Annex Part B) the proposed criteria for emissions need to be amended and clarified or respectively deleted as they are unrealistic considering their narrow scope and unclear definition. It is proposedthat manufacturingof ships (passenger,seafreight, coastal freight) must comply with the criteria "vessels with zero direct emissions fleet for SOx, NOx, PM" (chapter 2.16, Annex Part B). Yet, it remains unclear whether a shipyard only manufacture ships that comply with these criteria or whether the criteria are set for each individual vessel produced.
5. Regarding the manufacturing of ships for inland freight (chapter 2.16, Annex Part B) as well as inland freight/passenger water transport (chapters 8.5 and 8.6, Annex Part B) it is proposed they comply with the criteria "zero tailpipe direct emissions fleet for SOx, NOx, PM during navigation, operations and at berth" (chapter 2.16, Annex Part B). The criteria do not specify the difference between this requirement (tailpipe) and the requirementformanufacturingofshipsforpassengersandforseaandcostal freight.
8. We believethat the criterialisted under DNSH on pages511 and 512 should also be applied to business aviation. Business aviation fulfils an important function as a technology pioneer, e.g. in the area of digitalization in civil aviation, and will stimulate the market ramp up as a fuel customer of SAF.
Statement on the PSF report with recommendations on technical screening criteria
6. The term "zero emissions" needs clarification. This is very critical when assessing pollutant emissions like SOx, NOx and PM. Their relative emission level per kWh power output is several orders of magnitude lower than the relative emission level of CO2 (for example around 600 g/kWh CO2 emission for a ship powered with fossil diesel fuel compared to 2 g/kWh NOx emissions). Also, for inland waterway transport a clear definition is critical: In the EU, inland waterway vessels with engines above 300 kWh power output already must comply with PM emission limits of 0,015 g/kWh. This could already be considered as "zero" when compared to the relative (per kWh) CO2 emissions of such a vessel running on fossil fuel.
4. Manufacturing of Aircraft
10. Thresholds such as the year 2027 for meeting the “best in class” criteria for commercial aircraft (chapter 7.2, Part B Annex) are not in line with the product strategies in the aviation industry. These strategies aim at continuous incremental product improvements as well as leap innovations in eco efficiency occurring at large intervals with product changes. Therefore, criteria which cannot be met will make it impossible to fund sustainable aircraft investments and in turn, will not help the sector reach its emission reduction targets. The focus must be on realistic targets considering the level of maturity of next generation aircraft, efficiencies created by maintenance, repair and overhaul to optimise performance and environmental impact of existing fleets, and the CO2 reduction opportunities provided by the uptake of Sustainable Aviation Fuels.
12. The “scrapping rule” (chapter 7.4, Annex Part B) is counterproductive. The “one in one out” rule neglects the fact, that despite the growth of fleet, the overall CO2 emissions will shrink, due to changes in network structure, more use of alternative fuel and higher fuel efficiency of newer aircraft. The reduction of CO2 emissions per 100 km since 1990 (minus 40 percent) is
5. Passenger and Air Freight Transport
1 Global air transport contributes 3.5 percent to global warming DLR Portal
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11. Scientific studies have shown that about two third of the climate impact of air traffic can be attributed to non CO2 effects. In some cases, climate optimizedflight paths result in higher CO2 emissions.In this case,the green taxonomy has a climate damaging effect.1
9. We propose as a key principle of future CO2 performance criteria that investments in the latest generation of aircraft as well as eco efficiency improvements of in service aircraft through retrofit and maintenance measures should always be treated positively within the Taxonomy Regulation (chapter 7.2, Part B Annex). It should be acknowledged that investments in thelatest generation of aircrafts alwayshave a positive effect on the specific eco balance of the fleet. Climate protection measures and economic efficiency are drivers for technical progress in aircraft manufacturing. Thus, narrow criteria regarding timeframes to implementation and technology could prevent important investments and therefore progress as to the decarbonisation in aviation in the short term. The proposed margins to the ICAO CO2 standard applicable until the end of 2032 could become problematic, as ICAO is likely to adapt a new CO2 standard before 2032. This would make the proposed EU margins, referring to the current standard, outdated before 2032. In addition, with these margins, the EU would effectively be setting their own CO2 standards for the Taxonomy, diverging from internationally recognised standards for sustainable aviation. Therefore, no margins are needed with regards to ICAO CO2 standards and once a new, more ambitious standard is set at ICAO level, the EU could adjust its taxonomy criteria accordingly.
13. The additional margin for the definition of "Best in Class" aircraft should be eliminated. The ICAO regulation defines the latest and most fuel efficient generation of aircraft. To simplify the procedure regarding "new aircraft", it would be helpful if the European Commission and its subordinated authorities (EASA) would provide a list of the aircraft type engine combination declared as sustainable. A list of taxonomy aligned aircraft type / engine combinations would be helpful.
16. Emissions trading expenditures and revenues under the EU ETS Aviation or CORSIA should be assessed as taxonomy compliant as these are important mechanisms for transforming the aviation sector. Aviation emissions are already offset through a carbon pricing system and expenditure on this should be found to be compliant in the taxonomy. In addition, measures in the area of retrofitting or fuel efficiency programmes should be taken into account, as these can achieve CO2 reductions in the existing fleet, which is particularly important in the air freight segment, where alternative, taxonomy compliant aircraft are only available to a limited extent.
14. One of the core problems with the aviation criteria is the lack of air cargo aircraft types that meet the taxonomy criteria proposed. At the present time there are no taxonomy compliant cargo aircraft onthemarket; therearenew cargo aircraft in the pipeline for long haul only, but their taxonomy compliance has yet to be confirmed. As far as it is known today, none are planned for short and medium haul cargo. This decisively limits the possibility of taxonomy compliant investments for air cargo companies. It is therefore necessary to adapt the criteria for cargo aircraft on the basis of the real market situation; this can be done, for example, through separate criteria for air cargo or through a transition period for air freight.
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mainly based on new aircraft with less fuel consumption (e.g. reduction of the overall weight of the new aircraft, components made with composite materials,fuelreserveoptimization,payloadanddragreduction,installation of wing tips/winglets, new engines etc.). Passenger and Cargo airlines are investing time,money and effort in sustainability initiatives and the renewal of their fleets. Therefore, the development of the net amount of emissions must be considered as well. Furthermore, the global approach of the “scrapping rule” will lead to further carbon leakage effects: According to the proposed rule, fleet growth outside Europe (Asia) will reduce proportionally the taxonomy alignment for companies in Europe, despite the fact that neither companies in Europa nor the EU governments have any influence on the development in other parts of the world.
15. There is a need for clarification with regard to the way the scrapping rule is calculated "performed by an aircraft acquired before [entry into force of the taxonomy], meeting C30.3 criteria in section 7.2 multiplied by the ratio of [aircraft decommissioned / aircraft delivered] averaged over the last 10 years as evidenced by publicly available data (e.g. Cirium)".
6. Leasing of Aircraft
20. Currently there is no adequate activity to reflect aviation hubs. The activity covers only zero tailpipe CO2 operations of infrastructure, without taking intoaccountthefacilitiestoenabletheactivitiesrelatedtoairport operations for air freight sector (i.e. sorting centres). When looking at the activity Infrastructure enabling road transport and public transport, “infrastructure dedicated to transhipment” is covered and it would be just consistent to either include aviation hubs in air freight activities.
9. Electrical and Electronics Industry
Statement on the PSF report
21. SAF play a central role in the decarbonisation of aviation. In the proposal, SAF is linked to the use of aircraft, which must meet certain criteria, e.g. taxonomycompliancefrom 2030.Inourview,SAFandassociatedrevenues and operating costs should be classified as taxonomy compliant, regardless of where it was fuelled, on which aircraft it was flown and whether the use was mandatory (e.g. ReFuelEU Aviation) or voluntary. A book and claim approach should also be allowed.
17. It is unclear how broad the scope of Activity 7.5 is. An open question would be whether infrastructure such as aviation hubs also fall under this activity. The term infrastructure should also be included in the activity description.
19. In the area of airport infrastructure (chapter 7.5), revenues, operating costs and investments are incurred for the apron and building areas. The charges for take off, landing and parking of aircraft can be allocated to the airport apron area, while passenger and cargo handling is linked to the corresponding buildings. This separationis not yet taken into account bythe taxonomy, but it would significantly support airports in the transition to sustainable operations. All investments in airport infrastructure, including runways, taxiways, aprons, parking areas and associated and essential equipment, should be considered taxonomy compliant if the airport infrastructure is used exclusively by aircraft meeting the established criteria or partially taxonomy compliant according to the proportion of use by aircraft meeting the criteria in section above. The airport's SAF quota shall be treated accordingly. For operating costs all processes which use renewable energy sources (i.e. ground power units, apron mobility, climatization etc.) should be taxonomy aligned.
22. According to the proposal almost all products of the electrical and electronics industry would be "unsustainable". This also includes products
8. Use of Sustainable Aviation Fuels (SAF)
18. Leasing (in or out) is a form of asset and property management. Criteria on sustainabilityshall not differfromtheregulationsof productionoroperation of aircrafts.
7. Airport Infrastructure
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25. Any mention to renewable materials must be removed. Most importantly, certifications for bio based materials do by no means ensure the circularity of the eventual construction product. Nor do they ensure the sustainability of suchmaterials.Certifications suchasFSC or PEFC are heavilycriticized. Also, they did not form part of the final Climate Delegated Act even though their use was proposed by the TEG. Consistency between the Climate Delegated Act and Environmental Delegated Act must be ensured. The certifications mentioned in the last paragraph (ISCC and RSB) are not even related for construction products. These schemes relate to other products andwouldthereforebeimpossibletoimplementbyconstructioncompanies. Hence, this criterion is not practical 26. Threshold values for hazardous waste need to be aligned across the EU, otherwise the classification as taxonomy aligned will depend, in the case of Germany,onthefederalstateinwhichconstructiontakesplace (chapter 4.1, Annex Part B).
that are required, for example, for the operation of renewable energies or the expansion of electromobility. We suggest re evaluating this approach.
10. Technical Textiles 23. The criteria for the Circular Economy and Environment seem to focus on "clothing" in particular. This focus is welcomed. However, an explicit exception is needed for technical textiles. The envisaged exceptions and the pure classification according to NACE codes do not go far enough. They can include, for example, everyday clothing as well as textiles and the manufacture of semi finished textile products with, for example, special protection or hygiene requirements (fall under technical textiles). Technical textiles do not focus on fashionable aesthetics but on certain technical and functional properties. Hence, functionality comes before sustainability Technical textiles should therefore not be considered in the taxonomy regulation.
24. Maintaining a level playing field is of utmost importance. At the moment, there is no common definition for recycling in Europe, not even within Germany. For instance, in Germany backfilling is not considered as recycling of materials whereas in other Member States it is. The taxonomy relying on EU wide concepts that are unequally implemented across member states will lead to an unequal competitive environment.
27. Regarding a recycled content rate of at least 30 percent (chapter 4.1, Annex Part B), we advise taking into account the availability of recycled content material in sufficient quality and quantity in proximity to construction sites. The materials need to be locally available to have beneficial effects on the environmental impact.
11. Construction Industry
12. Waste Management 28. The thermal treatment of non recyclable waste by way of incineration and co incineration is an integral part of a functioning and climate friendly circular economy. In this context, thermal waste treatment contributes decisively to the hygienisation of the environment, reduces dependence on fossil fuels such as oil, gas and coal, recovers valuable raw materials and reduces carbon emissions. The thermal use of waste focuses on the processing of non recyclable residues from recycling processes and waste that is not collected separately. In compliance with strict legal requirements and the waste hierarchy, low carbon energy or heat is thus used in the respective plants.
Should the thermal utilisation of non recyclable waste not be considered sustainable in the sense of the EU taxonomy, there is a danger that in the future the necessary access to the capital market will be made more difficult and subsidies will be denied. This would mean that the political goal formulatedintheEU's Circular Economy ActionPlanofmovingawayfrom landfill of waste, for reasons of climate protection among others, and of diverting hazardous substances from the economic cycles, would not be achievable. Without a high performance infrastructure for the thermal treatment of non recyclable waste, waste will continue to be disposed of in landfills.
On the one hand, thermal processes for the treatment of waste are operated as combined heat and power plants and make an important regional contribution to the goal of Europe and its member states to implement the energy transition towards more renewable energies and less coal and gas use. On the other hand, high quality refuse derived fuels from waste make a direct contribution to the substitution of fossil primary energy sources in industrial plants, e.g. in cement production.
29. As to the treatment of hazardous waste as a means for material recovery (chapter 13.4, Annex Part B), the scope of this chapter should not exclude important waste streams, such as inorganic materials containing metals as well as inorganic materials from incineration processes like ashes, slags and dust. Why the latter is explicitly excluded from the scope of chapter 13.4 is not comprehensible since material recovery of ashes and slags replaces primary materials and prevents their disposal in landfills. Another obstacle to recovery activities could be rooted in the formulation that recovered materials “should substitute virgin materials in production processes”. Since “production processes” are not defined, important recovery options might be excluded, in particular the direct material recovery of treated waste, e.g. as building material. Hence, we propose to delete the term “production processes” or replace it by “production and recovery processes”.
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15. Activity “Non-Ferrous Metals”
31. As to sorting and material recovery of non hazardous waste (chapter 13.8, Annex Part B) the scope should be in line with NACE code 38.32 and therefore not only include mechanical but also chemical transformation processes. In addition, the substitution of virgin material should not be restricted to subsequent “production processes” in a narrower sense.
14. Remarks on Objective 6 “Biodiversity and Ecosystems”
Statement PSF report
33. The Report states that biodiversity offsets cannot be used as a mean of delivering SC (chapter 6.4, Report). We strongly disagree with this approach. If compensation of 100 percent of biodiversity impacts (not limited to areas with high biodiversity values) is carried out, this actually means that “no net loss of biodiversity” is achieved (which is not state of the art all over Europe). Therefore, biodiversity offset should be recognized as a mean to deliver SC 34. The Report suggests DNSH requirements related to biodiversity and ecosystems (chapter 6.4, Report). These requirements are not in line with the DNSH requirements of the Delegated Act regarding TSCs for climate environmental objectives and should therefore be eliminated. Different DNSH requirements would lead to an unequal treatment of sectors and industries (e.g. mining). Moreover, the criteria “no net loss of biodiversity” and “net gain” should not be applied as conditions for DNSH. This is because “no net loss” is not a common concept amongst Members States and “net gain” does not represent a legal requirement. Consequently, we advise the PSF to use the DNSH criteria of the Delegated Act regarding TSCs for climate environmental objectives.
on the
30. Regarding DNSH for pollution prevention and control, in addition to EU chemical legislation there should also be a reference to Directive 2008/98/EC in case the treated waste does not become a product.
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32. The headline ambition level for water “good status” (chapter 4.1, Report) ignores that not all water bodies can ever achieve this status. This is in contradiction with the Water Framework Directive that takes this into account andforeseesnotonlythe“goodstatus”butalsothe“goodpotential” and “less stringent objectives”. Consequently, the requirement “only activities are sustainable that can provide a substantial contribution to achieving a good status of water bodies” needs further clarifications. It should not mean that the good status has to actually be achieved; all levels of improvements should receive recognition as well.
35. As to the manufacturing of basic metals (NACE C24), we believe criteria to measure pollution prevention and control should be based on total dust, nitrogen oxides and sulfur oxides only. Any reduction of emissions
13. Remarks on Objective 3 “Water and Marine Resources”
Statement on the PSF report with recommendations on technical screening criteria regarding the defined criteria should always lead to a SC classification. Furthermore, the criteria should be defined in a way that the outstanding performance of companies in the non ferrous metals industry in recycling the various metallic secondary input materials is basically assessed as "environmentally sustainable" in the sense of the Taxonomy Regulation. 16. Enabling Activities 36. We welcome the current work of the Sustainable Finance Platform to establish a horizontal framework for so called enabling activities. It would be of utmost importance to include this framework and technical criteria in the upcoming delegated act.
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37. Regarding the framework we propose to enhance the definition of “directly enables” so that more than just the immediate upstream activity per target activity can qualify as enabling as long as there is a clear and non contested link between the enabling activity and the substantial contribution of the targetactivity.Thiswouldsupportthedevelopmentofnewtechnologiesand creates the opportunity for the enabling activity itself to become Taxonomy aligned.
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