IDEAS home Printed from https://ideas.repec.org/a/eee/enepol/v198y2025ics0301421525000266.html
   My bibliography  Save this article

Analysis of the impact of the EU Taxonomy on investments in District Heating

Author

Listed:
  • Lygnerud, Kristina
  • Romanchenko, Dmytro
  • Unluturk, Burcu
  • Popovic, Tobias
  • Schultze, Sebastian

Abstract

If policy meets its intended goals or not is important in the context of energy transition. We explore if a policy, the EU Taxonomy, designed to foster green investments, meets its intent. We built an overall understanding about the EU Taxonomy by reviewing literature and EU Taxonomy documents. Additionally, we test constraints from the EU Taxonomy on CO2 emissions and on new investments in fossil fuel-based technologies on a case study (district heating: DH). We find that the EU Taxonomy is complex, open to interpretation and that the policy maker needs to build capacity in the economic activity of DH. We also identify that future EU Taxonomy changes to DH activities need to be well thought through and tested as they can have negative impact on investment appetite in DH as well as lead to investments with minor sustainability additions. We also find that in terms of policy focus, the EU Taxonomy is policy output oriented rather than targeting to reshape financial structures to support energy transition, which is troublesome to foster DH investments. A major conclusion is that the EU Taxonomy can have the intended effect in some DH markets, but it can also be redundant in others.

Suggested Citation

  • Lygnerud, Kristina & Romanchenko, Dmytro & Unluturk, Burcu & Popovic, Tobias & Schultze, Sebastian, 2025. "Analysis of the impact of the EU Taxonomy on investments in District Heating," Energy Policy, Elsevier, vol. 198(C).
    • Handle: RePEc:eee:enepol:v:198:y:2025:i:c:s0301421525000266
    DOI: 10.1016/j.enpol.2025.114519
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301421525000266
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.enpol.2025.114519?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Rohit Pathania & Arnab Bose, 2014. "An analysis of the role of finance in energy transitions," Journal of Sustainable Finance & Investment, Taylor & Francis Journals, vol. 4(3), pages 266-271, July.
    2. Dumrose, Maurice & Rink, Sebastian & Eckert, Julia, 2022. "Disaggregating confusion? The EU Taxonomy and its relation to ESG rating," Finance Research Letters, Elsevier, vol. 48(C).
    3. Abdmouleh, Zeineb & Alammari, Rashid A.M. & Gastli, Adel, 2015. "Review of policies encouraging renewable energy integration & best practices," Renewable and Sustainable Energy Reviews, Elsevier, vol. 45(C), pages 249-262.
    4. Fallahnejad, Mostafa & Kranzl, Lukas & Haas, Reinhard & Hummel, Marcus & Müller, Andreas & García, Luis Sánchez & Persson, Urban, 2024. "District heating potential in the EU-27: Evaluating the impacts of heat demand reduction and market share growth," Applied Energy, Elsevier, vol. 353(PB).
    5. Polzin, Friedemann & Sanders, Mark, 2020. "How to finance the transition to low-carbon energy in Europe?," Energy Policy, Elsevier, vol. 147(C).
    6. Zhang, Dayong & Zhang, Zhiwei & Managi, Shunsuke, 2019. "A bibliometric analysis on green finance: Current status, development, and future directions," Finance Research Letters, Elsevier, vol. 29(C), pages 425-430.
    7. Werner, Sven, 2017. "International review of district heating and cooling," Energy, Elsevier, vol. 137(C), pages 617-631.
    8. Ottmar Edenhofer & Christian Klein & Kai Lessmann & Marco Wilkens, 2022. "Financing the transformation: a proposal for a credit scheme to finance the Paris Agreement," Climate Policy, Taylor & Francis Journals, vol. 22(6), pages 788-797, July.
    9. Neve Fields & David Ryves & Rudolf Yeganyan & Carla Cannone & Naomi Tan & Mark Howells, 2023. "Evidence-Based Policymaking: Insights and Recommendations for the Implementation of Clean Energy Transition Pathways for Kenya’s Power Sector," Energies, MDPI, vol. 16(23), pages 1-20, December.
    10. Corrocher, Nicoletta & Cappa, Elisabetta, 2020. "The Role of public interventions in inducing private climate finance: An empirical analysis of the solar energy sector," Energy Policy, Elsevier, vol. 147(C).
    11. Brühl, Volker, 2022. "Green financial products in the EU: A critical review of the status quo," CFS Working Paper Series 677, Center for Financial Studies (CFS).
    12. Michael Migendt & Friedemann Polzin & Florian Schock & Florian A Täube & Paschen von Flotow, 2017. "Beyond venture capital: an exploratory study of the finance-innovation-policy nexus in cleantech," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 26(6), pages 973-996.
    13. Bovera, Filippo & Lo Schiavo, Luca, 2022. "From energy communities to sector coupling:a taxonomy for regulatory experimentation in the age of the European Green Deal," Energy Policy, Elsevier, vol. 171(C).
    14. Volker Brühl, 2022. "Green Financial Products in the EU — A Critical Review of the Status Quo," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 57(4), pages 252-259, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lin, Boqiang & Li, Minyang, 2024. "Micro Mechanisms Driving China's Clean Energy Flourish: Business Expansion and Financing," International Review of Financial Analysis, Elsevier, vol. 92(C).
    2. Wen-Hsiang Chiu & Wen-Cheng Lin & Chun-Nan Chen & Nien-Ping Chen, 2021. "Using an Analytical Hierarchy Process to Analyze the Development of the Green Energy Industry," Energies, MDPI, vol. 14(15), pages 1-15, July.
    3. Liu, Changyu & Wang, Jing & Ji, Qiang & Zhang, Dayong, 2024. "To be green or not to be: How governmental regulation shapes financial institutions' greenwashing behaviors in green finance," International Review of Financial Analysis, Elsevier, vol. 93(C).
    4. Aghilasse Kashi & Mohamed Eskandar Shah, 2023. "Bibliometric Review on Sustainable Finance," Sustainability, MDPI, vol. 15(9), pages 1-30, April.
    5. Yao, Shuai & Wu, Jianzhong & Qadrdan, Meysam, 2024. "A state-of-the-art analysis and perspectives on the 4th/5th generation district heating and cooling systems," Renewable and Sustainable Energy Reviews, Elsevier, vol. 202(C).
    6. van den Heuvel, Matthias & Popp, David, 2023. "The role of venture capital and governments in clean energy: lessons from the first cleantech bubble," Energy Economics, Elsevier, vol. 124(C).
    7. Hoepner Andreas G. F. & Schneider Fabiola I., 2022. "EU Green Taxonomy Data – A First Vendor Survey," The Economists' Voice, De Gruyter, vol. 19(2), pages 229-242, December.
    8. Malla, Aadit & Kranzl, Lukas, 2025. "Strategic planning and viability assessment for implementing district cooling networks," Energy, Elsevier, vol. 319(C).
    9. Gianluca Gucciardi, 2024. "Do venture capital investments contribute to the achievement of the sustainable development goals?," Business Strategy and the Environment, Wiley Blackwell, vol. 33(8), pages 8716-8746, December.
    10. Köppl-Turyna, Monika & Köppl, Stefan & Christopulos, Dimitris, 2023. "How to support cleantech start-ups? Lessons from European venture-capital deals," Research Papers 25, EcoAustria – Institute for Economic Research.
    11. Marc Ringel & Saranda Mjekic, 2023. "Analyzing the Role of Banks in Providing Green Finance for Retail Customers: The Case of Germany," Sustainability, MDPI, vol. 15(11), pages 1-24, May.
    12. Guelpa, Elisa, 2021. "Impact of thermal masses on the peak load in district heating systems," Energy, Elsevier, vol. 214(C).
    13. Chandra Ade Irawan & Dylan Jones, 2019. "Formulation and solution of a two-stage capacitated facility location problem with multilevel capacities," Annals of Operations Research, Springer, vol. 272(1), pages 41-67, January.
    14. Li, Haoran & Hou, Juan & Hong, Tianzhen & Nord, Natasa, 2022. "Distinguish between the economic optimal and lowest distribution temperatures for heat-prosumer-based district heating systems with short-term thermal energy storage," Energy, Elsevier, vol. 248(C).
    15. Sun, Xiaolei & Liu, Chang & Wang, Jun & Li, Jianping, 2020. "Assessing the extreme risk spillovers of international commodities on maritime markets: A GARCH-Copula-CoVaR approach," International Review of Financial Analysis, Elsevier, vol. 68(C).
    16. Persson, Urban & Wiechers, Eva & Möller, Bernd & Werner, Sven, 2019. "Heat Roadmap Europe: Heat distribution costs," Energy, Elsevier, vol. 176(C), pages 604-622.
    17. Østergaard, Poul Alberg & Werner, Sven & Dyrelund, Anders & Lund, Henrik & Arabkoohsar, Ahmad & Sorknæs, Peter & Gudmundsson, Oddgeir & Thorsen, Jan Eric & Mathiesen, Brian Vad, 2022. "The four generations of district cooling - A categorization of the development in district cooling from origin to future prospect," Energy, Elsevier, vol. 253(C).
    18. Aunedi, Marko & Pantaleo, Antonio Marco & Kuriyan, Kamal & Strbac, Goran & Shah, Nilay, 2020. "Modelling of national and local interactions between heat and electricity networks in low-carbon energy systems," Applied Energy, Elsevier, vol. 276(C).
    19. Łukasz Jarosław Kozar & Robert Matusiak & Marta Paduszyńska & Adam Sulich, 2022. "Green Jobs in the EU Renewable Energy Sector: Quantile Regression Approach," Energies, MDPI, vol. 15(18), pages 1-21, September.
    20. Wang, Yang & Zhang, Shanhong & Chow, David & Kuckelkorn, Jens M., 2021. "Evaluation and optimization of district energy network performance: Present and future," Renewable and Sustainable Energy Reviews, Elsevier, vol. 139(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:enepol:v:198:y:2025:i:c:s0301421525000266. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/enpol .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.