Here's what you should know about EU Taxonomy
The EU Commission has published important guidance regarding the interpretation and implementation of specific aspects of the EU Taxonomy Climate Delegated Act.
The EU Taxonomy establishes technical screening criteria for economic activities that contribute significantly to climate change mitigation or climate change adaptation while ensuring they do not cause significant harm to other environmental objectives.
This brief compilation highlights the most important questions and answers from the EU Commission’s notice, offering our customers a condensed overview with essential insights into critical topics relating to the EU Taxonomy. The following provisions present a comprehensive FAQ section addressing various inquiries. The answers provided in this section are sourced directly from the EU Commission and cover a wide range of topics, including
the classification of non-EU real estate assets,
the treatment of building standards such as LEED, BREEAM, and DGNB,
the use of energy performance certificates for proving Taxonomy alignment,
thresholds for nearly zero-energy buildings (NZEB) in different member states,
compliance with changing legislation,
criteria for demonstrating no significant harm to biodiversity,
definitions of a major renovation,
assessment of buildings in countries without NZEB thresholds, and many other pertinent matters.
FAQ on EU Taxonomy a.k.a. ‘Draft commission notice on the interpretation and implementation of certain legal provisions of the EU taxonomy climate delegated act’
Q) How can non-EU real estate assets be classified as Taxonomy-aligned? How are building standards (LEED, BREEAM, DGNB) treated in the EU Taxonomy? Is there any way to demonstrate that a LEED or BREEAM building is Taxonomy-aligned? As of today, many Energy Performance Certificates (EPC) in some Member States are based on energy consumption rather than energy demand. Can these consumption-based energy certificates be used as an equal basis to prove Taxonomy-alignment?
A) The standards mentioned are not explicitly considered in the Climate Delegated Act. Where they can help demonstrate compliance with the TSC (Technical Screening Criteria), they can be accepted for the purpose of compliance with the TSC.
Q) What are the actual Nearly Zero-Energy Buildings (NZEB) thresholds in each Member State (region)?
A) This information can be obtained from national authorities. Any new building in the EU should have an Energy Performance Certificate (EPC), and the EPC indicates the relevant value for the respective building and how it compares to reference values, such as NZEB.
Q) For the activity “Construction of new buildings” in Section 7.1., is the date of submission of the building application decisive for the technical screening criteria to be applied?
A) Yes, the date of submission of the complete application is the relevant date for deciding which TSC apply at that point in time.
Q) Point 1 of the substantial contribution criteria of the activity “Construction of new buildings” in Section 7.1. provides that “the Primary Energy Demand (…) is at least 10 % lower than the threshold set for the (NZEB) nearly zero-energy building (…) in national measures implementing Directive 2010/31/EU (…)”. Where national legislation related to Energy Performance of Buildings Directive (EPBD) and the Nearly Zero-Energy Buildings (NZEB) concept has recently changed, should compliance with this criterion be performed using the legislation applicable at the time of the building licensing (the old one) or the legislation currently in force?
A) The TSC (Technical Screening Criteria) applicable at the time of the building permit should be used (i.e., the date of the complete application for receiving the building permit).
Q) How should it be demonstrated that a new construction does not fall under point a) of the criterion for DNSH (Do No Significant Harm) to biodiversity of the activity “Construction of new buildings” in Section 7.1., if for that piece of land soil fertility is still under research at EU level and below ground biodiversity maps have not yet been published?
A) It should be noted that if according to the applicable laws and spatial planning regime it would be allowed or permitted by the authorities to build on the parcel of land, this DNSH criterion is always met. So, the provisions here are most relevant in places with no clear zoning/planning law.
Q) For the activity “Renovation of existing buildings” in Section 7.2., what is the definition of major renovation in each Member State?
A) According to Article 2(1)(10) of the Energy Performance of Buildings Directive (EPBD), “major renovation” means the renovation of a building where:
(a) the total cost of the renovation relating to the building envelope or the technical building systems is higher than 25 % of the value of the building, excluding the value of the land upon which the building is situated; or
(b) more than 25 % of the surface of the building envelope undergoes renovation.
Member States may choose to apply option (a) or (b) or both. The information can be checked with the Member State concerned.
Q) For the activity “Renovation of existing buildings” in Section 7.2., can all renovation measures taken during a three-year period be counted to determine if the 30% reduction (compared to the starting-PED-value as at the beginning of the three-year period) has been realised?
A) Yes.
Q) Are bioenergy and hydropower eligible under the activity “Installation, maintenance and repair of renewable energy technologies” in Section 7.6.?
A) The renewable energy technologies included in Section 7.6 are the ones likely to be installed on-site, and for which an assessment has been performed, concluding that they contribute substantially to climate change mitigation, and do not cause significant harm (DNSH) to any other environmental objective. The list provided in Section 7.6 of the Climate Delegated Act is exhaustive. Therefore, hydropower and bioenergy are not covered by this section. Additional technologies could be included in the future, subject to a more detailed assessment.
Q) For the activity “Acquisition and ownership of buildings” in Section 7.7., what happens if a building has several Energy Performance Certificates (EPCs)?
A) When a building has several EPCs, the parts of the buildings covered by EPCs that qualify under the technical screening criteria are to be considered Taxonomy-aligned.
Q) For the activity “Acquisition and ownership of buildings” in Section 7.7., to determine when a property was ‘built’, which date should be used?
A) For the application of the Taxonomy criteria, the date of the application for a construction permit is relevant.
Q) Can companies use Energy Performance Certificate (EPC) equivalents for assessing alignment with the technical screening criteria (TSC) of the activity “Acquisition and ownership of buildings” in Section 7.7. in countries where EPC is not offered?
A) In the EU, all Member States have EPCs. However, some Member States may exclude specific types of buildings from EPC schemes e.g., industrial buildings and temporary buildings. Within the EU, whenever an EPC is available for the relevant building considered, it should be used. When this is not possible, equivalents can be used instead. Outside the EU, equivalents can be used instead of the EPCs.
Q) How are buildings assessed in countries where there is no Nearly Zero Energy Buildings (NZEB) threshold, i.e., countries outside the EU? Can companies use equivalents or thresholds from an EU country with a similar climate?
A) Some countries, even outside the EU, have defined NZEB and low-energy buildings. Wherever such definitions exist, they can be used. When NZEB are not clearly defined in the national legislation, equivalents can be used, e.g., equivalents or thresholds from an EU country with a similar climate, when possible.
Q) Can the construction of a building for own use count towards the activity "Construction of new buildings" in Section 7.1. or “Acquisition and ownership of buildings” in Section 7.7.?
A) Yes, the construction of a new building for own use can be covered under Section 7.1 “Construction of new buildings”, or Section 7.7 “Acquisition and ownership of buildings”.
Q) Does the Energy Performance Certificate (EPC) class A in the substantial contribution criteria for activities related to the construction and real estate sector refer to primary energy demand or total energy demand?
A) The Energy Performance Certificate (EPC) ‘class A’ that is required under the substantial contribution criteria of activity in Section 7.7. (“Acquisition and Ownership of buildings”) refers to the EPC class of the EPC scheme in the relevant Member State. The numerical indicator expressed in kWh/m2, mentioned in the EPC, is relevant and should be considered.
Q) What are the rules for defining the top 15% and top 30% benchmarks of the national market (with a distinction between residential and commercial) as referenced in the technical screening criteria of the activity “Acquisition and ownership of buildings” in Section 7.7.? What should be done if there is no Energy Performance Certificate (EPC) nor any data to determine whether a building belongs to the best 15% of the national building stock?
A) By adequate evidence. There are no specific rules for defining the top 15% or 30% of the building stock, beyond the requirements of referring to the national or regional building stock expressed as operational Primary Energy Demand (PED), and distinguishing at least between residential and non-residential buildings.* In the absence of a relevant EPC, a technical study can be done to estimate the relevant threshold for the top 15% of the national (or regional) building stock for that category of building. There may be information available from national databases or studies produced by certain organisations (e.g. World Green Building Council).
Whenever there is such a study publicly available, it can be used. When there is no study available, it has to be conducted. It can be expected that e.g. interested market actors or associations/institutes/public authorities could be willing to conduct or commission such studies and make them public, so that other entities (in particular smaller ones) could use them afterwards.
*BuildingMinds’ note: distinguishing only between residential and non-residential buildings will result in significantly reduced chances of achieving the 15% or 30% benchmark for several more energy-intensive sub-types of non-residential buildings. Food retailers have higher energy demand than offices or distribution warehouses. If studies (“evidence”) with different levels of granularity of the non-residential building sector can be used, each company can pick the “evidence” that works best with its specific building use type mix in the portfolio. Companies will have to clearly communicate their approach to avoid the reproach of Greenwashing.
Q) Are heritage or protected buildings that are exempt from the Energy Performance Certificates (EPC) under national law, also exempt from demonstrating compliance with the EPC or Primary Energy demand requirements specified in Section 7.7 (“Acquisition and ownership of buildings”)?
A) Section 7.7 does not provide a derogation for buildings with heritage or protected status. Therefore, in order to qualify as making a substantial contribution to climate change mitigation, all buildings that are built before 31 December 2020 must have at least an Energy Performance Certificate of Class A or be within the top 15% of the national or regional buildings stock expressed as operational Primary Energy Demand. However, entities have the option to explain in the narrative part of their reporting under Section 1.2.3. of Annex I to the Disclosures Delegated Act why certain assets are not Taxonomy-aligned, e.g. because they are heritage buildings.
Q) Is the scope of the activity “Construction of new buildings” in Section 7.1. only limited to companies constructing the new buildings or also companies that commission the construction of buildings (e.g. car manufacturing company which contracts a construction company to build an office building)?
A) This applies to both construction companies and entities that commission a new building. However, the way they can claim relevant turnover/CapEx/OpEx as Taxonomy eligible/aligned may differ, and for the entity owning the building, it is also possible to use the relevant criteria in Section 7.7. of Annex I.
