The impacts of EU taxonomy on construction production

The EU taxonomy is a key tool for promoting environmentally friendly construction and achieving climate goals. The goal of the EU taxonomy is to establish common criteria and definitions for sustainable economic activities and investments. It also provides an opportunity to obtain ‘green finance,’ thus reducing the construction costs of a project. Although the regulation is already in force, the implementation of the taxonomy, especially at the practical level for construction companies, is still relatively new.

Finland has adopted the taxonomy regulation, making it applicable to all new– and renovation construction, as well as various maintenance activities. The most significant impact of EU taxonomy on the construction industry relates to the criteria for financing. It covers both the construction of new and existing buildings, including construction works and preparatory earth and waterworks for the latter.

Financial institutions can provide more favorable loans for projects that meet the taxonomy’s requirements. This offers an incentive, especially for large and long-term projects. Although the taxonomy requirements are not extremely detailed yet, they clearly guide construction towards environmentally friendly practices. Changes in this matter are likely to occur in the coming years as the regulation is supplemented in three-year periods.

Structure of the Regulation and Future Outlook

Understanding the taxonomy regulation’s criteria affecting construction is challenging due to the extensive material. Directly construction-related objectives are in Chapter 7. The regulation refers to many standards that govern the conditions of the regulation, hence they must be considered. The European Commission has also issued question-based communications that complement the regulation.

The EU taxonomy affecting construction consists of two technical criteria, the first being the promotion of climate change mitigation. This is accomplished by assessing three separate conditions.

Firstly, energy efficiency is examined, aiming for a ten percent lower value than the national Nearly Zero-Energy Building (NZEB) threshold. This leads to an energy efficiency value of 81 kWhE/(m2 a) at that time. This can be relatively easily achieved with minimal measures and can be verified by an energy certificate, which must be updated after the project’s completion. For renovation projects, the equivalent requirement is reducing primary energy demand by 30 percent compared to the previous state.

The second condition for new buildings is the testing of air tightness and thermal performance for buildings over 5000 square meters. There is no set threshold for the testing requirement, so it is advisable for the project initiator to determine it. An alternative traceable and stringent quality control process replaces the test, which partly undermines the regulation as the definition includes variability due to the executor.

The third condition for new buildings involves calculating the global warming potential (GWP) on areas larger than 5000 square meters, expressed in terms of carbon dioxide emissions. The amount of emissions is assessed for a 50-year research period.

Environmental Impact of Construction

The second technical criterion of the regulation consists of five conditions regarding construction that must not cause significant harm (DNSH 2…6).

1. The first condition is adaptation to climate change, assessed, among other methods, through a separate table focusing on climate risks and adaptation measures. The regulation primarily addresses this during the planning phase with solutions and reporting. It considers the nature of the property’s future operation and lifespan, along with environmental impacts.

2. The second condition involves the use of water resources and marine resources, primarily focusing on limiting flows in the property’s water systems. Flow times for water-using devices also apply to residential buildings, except for individually constructed apartment units. New buildings must meet the condition of not degrading or increasing environmental water quality with construction-related actions.

3. The third condition is transitioning to a circular economy. The regulation aims for at least 70 percent by weight of hazardous construction and demolition waste produced on-site to be prepared for reuse, recycling, or other material recovery. This includes earthmoving operations where excavated material is used to substitute other materials. However, the challenge arises in determining the suitability of excavated materials for reuse.

The calculation of the percentage for reuse differs from the standard method used in Finland regarding incineration. Previously deemed acceptable, in the EU taxonomy, the use of hazardous construction and demolition waste for incineration that significantly increases incineration is not considered environmentally safe. Therefore, it cannot be counted towards the 70 percent threshold.

The taxonomy of the circular economy also requires the use of ISO 20877 as a basis for design, which might come as a surprise to many builders. The standard should be introduced to designers in the project development phase. It focuses on designing and constructing buildings that support recycling, are more resource-efficient, adaptable, easily dismantled, and recyclable through collective effort.

4. The fourth condition involves preventing environmental pollution. This is challenging during the construction phase as not all construction materials have other classifications such as CE marking and M1 classification that verify their harmlessness. The condition sets stricter limits for substances like formaldehyde. Additionally, soil surveys and measures to reduce noise and dust emissions must be implemented during construction.

5. The fifth condition for new buildings pertains to the conservation and restoration of biodiversity and ecosystems. The regulation implies that construction should not occur in areas designated for cultivation, unbuilt green areas, or environments defined as forests. In Finland, construction sites are mostly defined as planned areas, thereby limiting the builder’s influence. According to the current approach, a building permit can be considered evidence of compliance.

In addition to the above technical criteria, it’s advisable for construction projects to acquire an environmental certification, as they align well with the regulation’s requirements. Integrating the company’s own environmental, social responsibility, and governance goals into the project supports these aspects. This interrelation makes producing the necessary evidence more straightforward when they simultaneously serve all the aforementioned requirements.

Client’s Influence on Projects

Fulfilling the aforementioned technical criteria is sufficient to make a project compliant with the EU taxonomy.

To implement the EU taxonomy, the initiator of a construction project must demand compliance from all parties involved. Based on preliminary observations, adhering to the EU taxonomy does not significantly increase construction costs.

Markku Kainulainen
Business Unit Director
+358 44 745 4930
markku.kainulainen@premico.fi 

The article has been published in the Rakennustekniikka magazine in December 2023