Leaseurope Contributes to EC Consultation on Taxonomy for circular economy criteria

This DR will establish the technical screening criteria for determining the conditions under which an economic activity qualifies as contributing substantially to the following environmental objectives: 

1. the sustainable use and protection of water and marine resources, 

2. the transition to a circular economy, 

3. the pollution prevention and control, or  

4. the protection and restoration of biodiversity and ecosystems. 

Leaseurope provided feedback to this consultation mainly with regards to the description of the activity: “Product-as-a-service and other circular use- and result-oriented service models”, where leasing is mentioned. The description of this activity is as follows:

Providing customers (physical person or legal person) with access to products through service models, which are either use-oriented services, where the product is still central, but its ownership remains with the provider and the product is leased, shared, rented or pooled; or result-oriented, where the payment is pre-defined and the agreed result (i.e. pay per service unit) is delivered. 

In its response, Leaseurope highlighted the important role that leasing and rental industry can play on green transition. Particularly, Leaseurope requested that many other activities/assets be included in the description of the activity “Product-as-a-service and other circular use- and result-oriented service models”. For example, renting and leasing of agricultural machinery and equipment, renting and leasing of construction and civil engineering machinery and equipment, renting and leasing of office machinery and equipment (including computers). Motor vehicles and trailers should also be included in the description of activity CE 5.5 “Product-as-a-service and other circular use- and result-oriented service models”. 

Moreover, Leaseurope commented with regards to the criterion of ownership that equal treatment should be ensured for all models of leasing solutions and with regards to the criterion of life span (of at least twice the Union average for that product category) that it is not realistic to require a second or a third life after the end of lease. Following this consultation, the EC adopted the final DR which it submitted for scrutiny to the European Parliament and the Council of the EU.

After Leaseurope’s response, the final DR replaces the strict life span criterion with: “the activity leads to an extended lifespan or increased use intensity of the product in practice”, which facilitates the recognition of leasing as an activity contributing to the transition to a circular economy. 

The Taxonomy Regulation (Regulation (EU) 2020/852) aims to help channel capital towards activities that substantially contribute to reaching the objectives of the European Green Deal, such as climate neutrality and resilience, zero pollution, preservation of biodiversity and ecosystems, the transition to a circular economy and sustainable use of water and marine resources. 

The Taxonomy Regulation lays down the framework for the EU Taxonomy by setting out four conditions that an economic activity must meet to qualify as environmentally sustainable. A qualifying activity must: 

(i) contribute substantially to one or more of the six environmental objectives set out the Taxonomy Regulation;  

(ii) do no significant harm to any of the other environmental objectives; 

(iii) be carried out in compliance with the minimum (social) safeguards; 

(iv) comply with the technical screening criteria set out by the Commission through delegated acts. 

The technical screening criteria operationalise the conditions (i) and (ii) by specifying the performance requirements for any economic activity that determine under what conditions that activity: (i) makes a substantial contribution to a given environmental objective; and (ii) does not significantly harm the other environmental objectives. On 4 June 2021, the Commission adopted a Delegated Act (Regulation 2021/21394) establishing technical screening criteria under which certain economic activities qualify as contributing substantially to climate change mitigation or climate change adaptation and not causing significant harm to any of the other relevant environmental objectives (the so-called “Taxonomy Climate Delegated Act”).