EU taxonomy: Fuel for contemporary energy transition

Abstract

The European continent is undertaking major economic and infrastructural changes to accommodate the need for swift climate action. An energy transition, through decarbonization of the European energy fleet, is the main objective of many European legislative and political bodies. The energy transition towards renewable energies is actively enhanced by the European Framework for Sustainable Finance. This framework,through the EU Taxonomy, defines what suitable economic activities are and aims to reorient financial flows towards these activities.The aim of this thesis is to explore to what extent the EU Taxonomy enhances the European Energy Transition. Additionally, this thesis meticulously underlines which obstacles the EU Taxonomy inflicts on market participants. Finally, this thesis also offers an in-depth discussion on structural elements which represent a challenge for EU Taxonomy.The findings of the thesis indicate that the current energy transition is unique in its nature,compared to past transitions. Therefore, EU Taxonomy plays a critical role in providing legislative and financial legitimacy for the transition. Through facilitating and redirecting financial means, EU Taxonomy enhances the growth of renewable energies. However,EU Taxonomy is still influenced by certain structural and technological limitations.Geopolitical and socio-economic pressures in herently hinder the speed of the transitionand the impact of the Taxonomy becomes limited. Furthermore, the Taxonomy also imposes certain barriers for market participants. The most critical hurdles include technical uncertainties regarding calculations, as well as the legitimacy of certain threshold values. Additionally, there is a lack of communication regarding reporting standards and the EU Taxonomy still lacks many essential economic activities. However,EU Taxonomy is an evolving system; therefore, it has all the necessary means to delivera swift transition towards a sustainable economy.