The EU Taxonomy provides a classification framework that helps define what constitutes a "sustainable" economic activity. This list of activities should give clear guidance on activities that qualify as contributing to environmental objectives to help inform investors about the investments that fund environmentally sustainable economic activities. The full list of economic activities is described in the article 'EU Taxonomy: full list of economic activities'.
Economic activity context in the EU Taxonomy
In the EU Taxonomy, economic activities are assessed based on their alignment with specific environmental objectives, such as climate change mitigation and adaptation, water and marine resource management, circular economy, pollution prevention and biodiversity protection. To be considered sustainable, an activity must make a substantial contribution to one of these objectives, do no significant harm to the others, and meet minimum social safeguards. There are also economic activities that are not directly contributing to one of the environmental objectives and these are considered as transitional or enabling activities.
Transitional vs. Enabling Activities
Transitional Activities: These are activities that are not yet fully sustainable but are on a pathway to sustainability. These correspond to sectors that lack feasible low-emission alternatives, and the goal is to gradually improve their sustainability. Those transitional economic activities should qualify as contributing substantially to climate change mitigation if their greenhouse gas emissions are substantially lower than the sector or industry average, they do not hamper the development and deployment of low-carbon alternatives and they do not lead to a lock-in of assets incompatible with the objective of climate neutrality, considering the economic lifetime of those assets.
An example is the cement-dependent industry shifting towards lower-carbon technologies.
Enabling Activities: These activities do not directly contribute to an environmental objective, but they enable other economic activities to make substantial contributions the environmental objectives.
For instance, manufacturing of batteries enables the activity of storing renewable energy.