Digitisation in the European Taxonomy

The European Taxonomy is crucial to redirect investment towards activities that meet EU environmental objectives and its alignment with European policy objectives is fundamental to establish a sound regulatory framework in the context of the European Green Pact.

Digitisation in the European Taxonomy
Pablo Barrionuevo

Pablo Barrionuevo

Reading time: 5 min

Recall that the primary objective of the European Taxonomy is to establish a robust framework that redirects investment towards activities that can have the greatest impact on achieving European environmental goals. Therefore, the Taxonomy should be viewed as a crucial component of the existing EU policy priorities, aimed at transforming the economy into a digital, green, and sustainable model. It is essential that the Taxonomy exhibits regulatory coherence by strictly aligning with European policy objectives. Consequently, the taxonomy should serve as the foundation for the regulatory framework established following the announcement of the European Green Deal.

From Telefónica’s perspective, we believe that the current model should fully embrace the enabling potential of communication networks. This recognition should not only acknowledge the substantial efforts made by European telecoms network operators to reduce emissions and minimize environmental impact but also acknowledge that next-generation telecoms are an indispensable component in the economy-wide transition to a green future.

Currently, the Delegated Act on Climate Change includes four activities related to the ICT sector in the Taxonomy list for both climate change mitigation and adaptation:

  • Data-driven solutions to reduce greenhouse gas emissions
  • Data processing, hosting and related activities
  • Computer programming, consultancy and related activities
  • Programming and dissemination activities

Each of these activities considers a different scope of the ICT sector, with activity 8.2 on “Data-driven solutions to reduce greenhouse gas emissions” being the one that mentions ICT solutions for data transmission and 5G as a technology within its description.

Problems of the current Taxonomy model in meeting European targets

However, even when digital solutions are mentioned in these terms, we consider that the role of telecommunications networks and their decarbonising potential is not fully and appropriately captured in the current taxonomy model and therefore does not support the achievement of the targets included in the Digital Compass. Although the enabling effect of connectivity solutions is undeniable, their limited consideration within the Taxonomy Regulation needs to be refined.

On the one hand, within the current consideration of ICT solutions, the language in the legal texts allows for the assumption that networks can be considered as divisible and attributed to different solutions, however, the reality is that networks cannot be considered as separate parts of the technology because they are not capable of transmitting data autonomously. The entire network must be functioning and operational in order to provide data transmission from one point to another.

Similarly, the opportunities offered by 5G in terms of data transmission and analysis are recognised in activity 8.2 of the Taxonomy Delegated Act. The description of the activity explicitly mentions 5G as an example of an ICT solution that enables the reduction of greenhouse gas emissions. However, 5G is a network technology in its own right. Therefore, the only way to provide this technology, and to fully exploit the opportunities of 5G in sustainable development, is through a corresponding network deployment.

It should be noted that the doubts raised by the Taxonomy go beyond the description of the activity. The technical criteria for considering the activity as “aligned” with the Taxonomy is extremely complex. This situation generates great uncertainty for the telecommunications sector and may condition the future sustainable deployment of networks. In addition, the complexity and cost of reporting the requirements of the technical criteria may deter companies from participating more actively and demonstrating their alignment with this initiative. 

The importance of full inclusion of networks and 5G in the Taxonomy

Telecommunications networks and their connectivity services offer significant potential in enabling other sectors to reduce their climate impact. These connectivity solutions serve as the foundation for the development of various digital solutions, including those based on technologies like IoT or Artificial Intelligence. They are ICT solutions that can provide environmentally-friendly applications across multiple sectors of the economy (e.g., transport, manufacturing) and society (e.g., households, public administration).

The quantified potential of next-generation networks has been highlighted in a recent BCG report, which states that the adoption of 5G-enabled digital solutions and fiber networks can lead to a reduction in carbon emissions by up to 15%.

5G technology acts as a catalyst for the green transition, bringing Europe closer to achieving its emissions reductions target as outlined in the Green Deal. Firstly, 5G technology is up to 90% more energy-efficient compared to previous generations, measured in terms of energy consumption per unit of traffic (W/Mbps). Thus, deploying 5G while phasing out energy-demanding legacy networks would make a significant contribution to meeting Europe’s climate neutrality targets.

Furthermore, the combination of new digital applications that facilitate the attainment of sustainability and decarbonization objectives, supported by a high-capacity and energy-efficient network architecture, will play a crucial role in accelerating the decarbonization efforts across various sectors.

Conclusion

The green transition and the digital transition are twin transitions. It will not be possible to achieve the environmental objectives at European level without full digitisation, but this must be done under the highest environmental parameters and without leaving anyone behind. So far, however, these transitions have proceeded in a parallel and loosely connected way.

We believe that a greater push for digitisation, starting with its basic infrastructures and followed by economy-wide transformative policies to increase the penetration of digitisation, will put society in a better position to meet the challenges of climate change and more sustainable economic development. To this end, the consideration of next generation telecommunications networks as green investments within the taxonomy of sustainable activities is essential and ensures that they are given appropriate attention and recognition within the context of sustainability.

Recognising the importance of sustainable telecommunications infrastructures and their impact on the transition to a green economy will stimulate the development of more efficient and environmentally and socially friendly technologies. If policy makers, businesses, and citizens support this transformation, the positive impact towards this transition will be multiplied in the coming years.


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