The European Union (EU) has taken a significant step towards sustainable finance with the launch of the EU taxonomy in 2020. This classification system aims to guide financial markets in identifying and supporting environmentally sustainable economic activities. As climate change remains a pressing concern, the taxonomy serves as a guide to direct investment towards green and sustainable projects.
What is the EU taxonomy?
The EU taxonomy is a comprehensive regulatory framework that aims to create a common language for sustainability across the EU. It defines which economic activities can be considered environmentally sustainable by setting precise criteria. This initiative is a cornerstone of the EU's Green Deal and its vision to become carbon neutral by 2050.
It has six environmental targets:
- Climate change mitigation
- Climate change adaptation
- Sustainable use and protection of water and marine resources
- Transition to a circular economy
- Pollution prevention and control
- Protection and restoration of biodiversity and ecosystems
For an economic activity to be considered sustainable according to the taxonomy, it must make a significant contribution to one or more of these targets without causing significant harm to any of the others.
Geothermal Financing
Geothermal energy, with its ability to provide low-carbon electricity and heat, stands to benefit significantly from the EU taxonomy. Traditionally, geothermal projects have faced challenges in securing large-scale investment due to high upfront costs, long development times and risks to success. However, the taxonomy provides a structured pathway to reduce these barriers, creating numerous strategic opportunities for stakeholders in the geothermal sector.
IGC Invest 2024
The EU taxonomy is a transformative step towards a greener, more sustainable future. By recognising geothermal energy as a key player in the transition to renewable energy, it clears the way for increased investment and development in the sector.
Specifically, how this EU taxonomy impacts the geothermal industry and whether it is indeed an opportunity to promote geothermal energy will be discussed at this year's International Geothermal Investment Conference (IGC Invest).