A Guide to EU Taxonomy Classification Framework for the Aviation Sector

EU Taxonomy guide for aviation sector feature image

In the world of sustainable finance, the EU Taxonomy represents a transformative regulatory instrument. Its objective is to classify economic activities according to their environmental sustainability, thereby providing unequivocal guidance to investors, companies, and policymakers 1.

This guide addresses:

The EU Taxonomy’s impact on the aviation sector is profound, acting as a catalyst for measuring ESG performance and promoting sustainability. It channels investment into environmentally sustainable activities, incentivising adoption of fuel-efficient aircraft, emission mitigation strategies, and transparent disclosure of the Green Asset Ratio (GAR) where applicable 2. By aligning with the Taxonomy’s criteria, aviation stakeholders advance the EU Green Deal, fostering a more sustainable sector. Its standardised approach enables consistent ESG performance comparisons, guiding aviation towards environmental responsibility.

What is the EU Taxonomy?

The EU Taxonomy is a classification system developed by the European Union to determine whether an economic activity is environmentally sustainable 1. It is a pivotal instrument for steering capital towards activities that underpin a low-carbon economy.

The Taxonomy is founded on six interrelated environmental objectives:

  • Climate Change Mitigation: Reducing greenhouse gas emissions to limit global warming.
  • Climate Change Adaptation: Enhancing resilience and reducing vulnerability to climate impacts.
  • Sustainable Use and Protection of Water and Marine Resources: Ensuring long-term water security and ecosystem health.
  • Transition to a Circular Economy: Encouraging resource efficiency, reuse, and recycling.
  • Pollution Prevention and Control: Minimising harmful emissions to air, water, and land.
  • Protection and Restoration of Biodiversity and Ecosystems: Safeguarding natural habitats and species diversity.

Each objective is supported by detailed Technical Screening Criteria (TSC) that define conditions under which an activity makes a substantial contribution to that goal while ensuring it does not significantly harm (DNSH) the others 2,5. This integrative approach ensures activities contribute holistically to sustainability.

EU Taxonomy Classifications

Economic activities are categorised as:

  • Green activities: Fully aligned with environmental objectives (e.g., adoption of low-emission aviation technology).
  • Transitional activities: Lacking current low-carbon alternatives but aligned with climate neutrality pathways (e.g., use of SAF). Under the TSC, aircraft may qualify as transitional provided they meet additional emissions and efficiency criteria. Specifically, aircraft must demonstrate CO₂ emissions per passenger kilometre that are below specified thresholds and meet fuel efficiency standards. The use of Sustainable Aviation Fuel (SAF) is not only encouraged but mandated 7.

Under the ReFuelEU Aviation Regulation, fuel suppliers are required to blend a minimum of 2% SAF into aviation fuel by 2025, increasing to 6% by 2030 and reaching 70% by 2050. A sub-mandate for synthetic aviation fuels starts at 1.2% in 2030, rising to 35% by 2050.

  • Enabling activities: Supporting other activities in meeting sustainability criteria (e.g., SAF infrastructure).
  • Excluded activities: Those causing significant harm to environmental objectives or violating social safeguards. The EU Taxonomy explicitly excludes aircraft produced for private or commercial business aviation. Only aircraft producing zero direct CO₂ emissions may be considered fully aligned 3.

ReFuelEU Aviation SAF Mandates

ReFuelEU Aviation, a component of the EU’s Fit for 55 package, supports the Taxonomy by mandating minimum SAF shares:

  • 2% SAF by 2025
  • 6% by 2030
  • 70% by 2050

A synthetic fuels sub-mandate starts at 1.2% in 2030, increasing to 35% by 2050. These mandates help aviation align with Taxonomy requirements and climate targets 3.

Discover the role of SAF in achieving Net Zero by 2050 >>

Who does the EU Taxonomy apply to?

  • Financial institutions: Banks, insurers, and asset managers.
  • Large non-financial corporates: Those with more than 1,000 employees and either a net turnover exceeding €450 million or a balance sheet total over €25 million.
  • Sectoral actors: Including those in aviation, energy, manufacturing, and agriculture, provided they meet the revised thresholds.

However, following the 2025 Omnibus Simplification Package, the Corporate Sustainability Reporting Directive (CSRD) has reduced the number of companies required to report under the directive. Consequently, fewer entities are subject to mandatory EU Taxonomy alignment disclosures.

 

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Who does the EU Taxonomy impact in the Aviation sector?

  • Airlines and airport operators: Must report on fleet efficiency, emissions, and sustainable infrastructure—especially large carriers and hubs.
  • Aircraft manufacturers and lessors: Must exceed ICAO CO₂ standards; large firms remain within CSRD scope.
  • Financial institutions: Must report on GAR and Taxonomy compliance of aviation assets.
  • Ancillary businesses: Smaller firms may be exempt unless they meet CSRD thresholds or report voluntarily.

How are sustainable activities defined within EU Taxonomy?

Sustainable economic activities must:

  • Contribute to at least one environmental objective.
  • Do No Significant Harm (DNSH) to other objectives.
  • Comply with Technical Screening Criteria (TSC).
  • Respect minimum social safeguards (e.g., OECD Guidelines, UNGP).

This ensures a robust environmental and social performance framework 2.

How do you align with the Taxonomy’s environmental objectives?

You can assess your EU Taxonomy alignment by following these steps:

  • Identify eligible activities under EU delegated acts:
    Begin by reviewing the activities listed in the EU Taxonomy Delegated Acts to determine which parts of your operations may be considered eligible. These include sector-specific guidelines tailored to aviation, such as aircraft operation, manufacture, and infrastructure support.
  • Screen against Technical Screening Criteria (TSC):
    Evaluate each eligible activity against the relevant TSC to confirm it makes a substantial contribution to at least one of the six environmental objectives. Criteria for aviation may include emissions intensity thresholds, fuel efficiency standards, or SAF integration requirements.
  • Assess Do No Significant Harm (DNSH) compliance:
    Conduct a lifecycle environmental impact analysis to ensure that the activity does not significantly harm other environmental objectives. This assessment must consider emissions, pollution, biodiversity, and circular economy principles.
  • Verify compliance with minimum social safeguards:
    Ensure alignment with international human rights and labour standards, such as the OECD Guidelines for Multinational Enterprises, ILO conventions, and the UN Guiding Principles on Business and Human Rights. This safeguards the social dimension of sustainability.
  • Calculate Key Performance Indicators (KPIs):
    • % of turnover from Taxonomy-aligned activities
    • % of Capital Expenditure (CapEx) invested in alignment-related projects
    • % of Operational Expenditure (OpEx) dedicated to maintaining aligned assets
  • Report these metrics under Article 8 of the Taxonomy Regulation:
    Disclosures must be included in your sustainability statements, in accordance with CSRD and SFDR requirements, ensuring transparency for investors and regulators.
  • Monitor and update annually:
    Review and revise your assessments regularly to reflect changes in regulatory criteria, activity performance, and market developments. This ensures ongoing compliance and prepares for future amendments to the Taxonomy framework.

What are the EU Taxonomy Reporting Requirements?

Reporting includes:

  • Eligibility: Identification of Taxonomy-covered activities.
  • Alignment: Fulfilment of the four key conditions.
  • Key Performance Indicators (KPIs):
    • Turnover: Companies need to report the proportion of their turnover that is Taxonomy-aligned. This involves disclosing the percentage of revenue generated from activities that meet the criteria of the EU Taxonomy.
    • Capital Expenditure (CapEx): Companies are required to report the alignment of their CapEx with the EU Taxonomy. This entails disclosing the extent to which investments in long-term assets, such as infrastructure or equipment, are directed towards Taxonomy-aligned activities.
    • Operational Expenditure (OpEx): Companies must report the alignment of their OpEx with the EU Taxonomy. This involves disclosing the extent to which day-to-day expenses, such as operating costs, are incurred in support of Taxonomy-aligned activities.
  • Narrative disclosures:Methodologies used: A detailed description of the internal processes, tools, and criteria applied to determine Taxonomy eligibility and alignment. This includes any technical screening tools or lifecycle assessment models employed.
  • Data quality and assumptions: An explanation of data sources, estimation techniques (where exact data are unavailable), and the reliability of the information disclosed. Companies should identify any data limitations or gaps and explain how these were addressed.
  • Forward-looking statements: Projections or targets relating to future alignment with the EU Taxonomy, such as anticipated increases in turnover from sustainable activities or planned capital investments in eligible assets. These statements should include timelines, key assumptions, and risk factors.

Disclosure is required under the CSRD and reinforced by the SFDR 2,4.

Conclusion

The EU Taxonomy sets a clear standard for sustainability in aviation, guiding investment and operational decisions in line with the EU’s climate goals. As disclosure obligations and SAF mandates evolve, aviation stakeholders must adapt by investing in cleaner technologies and transparent reporting. Aligning with the Taxonomy is not just regulatory – it’s a strategic step toward a more sustainable aviation future.

References

  1. European Commission. (2020). Regulation (EU) 2020/ 852 on the establishment of a framework to facilitate sustainable investment. https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32020R0852
  2. European Commission. (2021). Commission Delegated Regulation (EU) 2021/ 2139 supplementing Regulation (EU) 2020/ 852. https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32021R2139
  3. European Commission. (2023). Commission Delegated Regulation (EU) 2023/ 2485 amending Delegated Regulation (EU) 2021/ 2139. https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32023R2485
  4. European Commission. (2023). Proposal for a Regulation on ESG ratings transparency. https://finance.ec.europa.eu/publications/sustainable-finance-framework-including-esg-ratings_en
  5. Platform on Sustainable Finance. (2022). Final report on technical screening criteria. https://finance.ec.europa.eu/publications/platform-sustainable-finance-final-report-technical-screening-criteria_en
  6. Steer. (2021). Taxonomy study for the aviation sector. https://www.steergroup.com/publications/taxonomy-aviation-sector
  7. Norton Rose Fulbright. (2024). EU taxonomy regulation and aviation.https://www.nortonrosefulbright.com/en/knowledge/publications/cea3bbd9/eu-taxonomy-regulation-and-aviation-a-transition-to-sustainability

FAQs

How does the EU Taxonomy support the European Green Deal objectives?

The EU Taxonomy underpins the European Green Deal by directing financial flows towards environmentally sustainable activities. It serves as a tool for investors and businesses to assess the environmental performance of investments and corporate operations. By establishing clear criteria for sustainability, the Taxonomy helps reduce greenwashing, promotes long-term economic planning, and fosters innovation in low-carbon technologies. It is instrumental in achieving the EU’s goal of climate neutrality by 2050 by making sustainable investment the norm rather than the exception 1.

What is a transitional activity in the EU Taxonomy?

A transitional activity is one for which there is no technologically or economically feasible low-carbon alternative available but which still supports the shift to a climate-neutral economy. In aviation, examples include the integration of Sustainable Aviation Fuels (SAF) and fleet upgrades to more fuel-efficient aircraft. These activities must meet specific Technical Screening Criteria (TSC), such as CO₂ emission thresholds and efficiency benchmarks, to be classified as transitional under the EU Taxonomy 3.

What is the Green Asset Ratio?

The Green Asset Ratio (GAR) is a mandatory disclosure metric for credit institutions under Article 8 of the Taxonomy Regulation. It measures the proportion of a financial institution’s assets—such as loans and investments—that are aligned with the EU Taxonomy’s sustainability criteria. This ratio provides a transparent way for investors and regulators to assess how green a financial portfolio is, supporting market integrity and the comparability of ESG disclosures across institutions 2.

How does EU Taxonomy impact ESG rating providers?

No. ESG rating providers are not currently regulated under the EU Taxonomy. However, in June 2023, the European Commission proposed a separate regulation to improve the transparency and reliability of ESG ratings. The regulation, if adopted, would bring ESG rating activities under the supervision of the European Securities and Markets Authority (ESMA), aiming to enhance trust and comparability in the ESG ratings market 4.

How often is the EU Taxonomy reviewed and updated?

The EU Taxonomy is updated on an ad hoc basis, depending on scientific advances, technological developments, and policy shifts. The Platform on Sustainable Finance, an expert advisory body, plays a key role in recommending updates to the European Commission. These updates can involve revising Technical Screening Criteria, adding new sectors or activities, or refining existing definitions to reflect evolving sustainability practices 5.

Who helped develop the EU Taxonomy for aviation?

The EU has consulted with several organizations in the aviation sector for the development of the EU Taxonomy.

    1. International Civil Aviation Organization (ICAO): The EU Taxonomy includes a principle that refers to ICAO certification standard. This indicates that the Taxonomy takes into account the certification standards set by the ICAO for aviation-related activities.

For example:

    • Aircraft efficiency requirements: The EU Taxonomy criteria for aircraft manufacturing and leasing activities include aircraft efficiency requirements based on the ICAO. This means that aircraft manufacturers and leasing companies will need to meet certain efficiency standards to be considered taxonomy eligible.
    • CO2 thresholds: The EU Taxonomy Report proposes thresholds for allowable levels of CO2 aligned with targets and standards already set by ICAO in 2017. This indicates that the EU Taxonomy is aligned with ICAO standards and recommendations related to reducing greenhouse gas emissions.
    • Sustainable aviation fuels: The EU Taxonomy draft document stipulates that by 2030, aircraft in use must use a “minimum share of sustainable aviation fuels (SAF), corresponding to 10%”. This requirement aligns with ICAO’s efforts to promote the use of sustainable alternatives to traditional aviation fuels, reducing the sector’s carbon footprint.
  2. Steer: A consultancy engaged by the European Commission to analyse aviation sector pathways, informing the development of aviation-specific Technical Screening Criteria.6

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