The Court of Justice of the European Union annuls the exclusion of business jets from the green taxonomy

The Court of Justice of the European Union has annulled the exclusion of the manufacturing of aircraft intended for private or business aviation from the category of "transitional activities" in the EU's green taxonomy. The decision comes after an action brought by Dassault Aviation against the European Commission and may affect how business aircraft manufacturers produce and report their activities in sustainability information and their access to financing conditions. The court found that the European Executive could not use the criterion of CO₂ emissions per passenger-kilometer, as this pertains to the operation of aircraft, not their manufacturing.

The Court of Justice of the European Union has annulled the exclusion of the manufacturing of aircraft intended for private or business aviation from the category of "transitional activities" in the European Union's green taxonomy. The ruling concerns a case opened by Dassault Aviation against the European Commission and touches on a sensitive area of European sustainable financing policy: who can tell investors that their activity contributes, at least temporarily, to the climate transition.

In short

The Court of Justice of the European Union accepted Dassault Aviation's action and annulled the contested exclusion from the Commission's delegated regulation.

The exclusion forced the manufacturer to present the manufacturing of business aircraft as an activity not aligned with the green taxonomy in its sustainability information.

The court found that the Commission's analysis was based on the criterion of CO₂ emissions per passenger-kilometer, although this criterion pertains to the use of aircraft, not their manufacturing.

The court noted that the European Executive did not take into account relevant elements, including the ability of these aircraft to use sustainable aviation fuels.

The EU's green taxonomy is the system by which economic activities are classified based on their contribution to environmental objectives. It does not prohibit economic activities but influences sustainability reporting, investor decisions, and companies' access to financing. An activity considered aligned or eligible in the taxonomy can be presented more favorably in sustainability reports and can become more attractive for financing related to the green transition.

The taxonomy regulation, adopted in 2020, created a common system at the EU level to establish when an economic activity can be considered environmentally sustainable. In 2023, the European Commission adopted a delegated regulation with technical criteria for several activities, including aircraft manufacturing. Through that act, aircraft intended for private or business aviation were excluded from the category of activities considered capable of contributing to climate change mitigation.

Dassault Aviation, a French group active in the design, manufacturing, and sale of business aircraft, challenged the exclusion before the Court of Justice of the European Union. The company argued that the exclusion is illegal, and the court agreed, annulling the contested part of the Commission's act.

The court first confirmed that Dassault Aviation had an interest in bringing the action. The exclusion forced the company to present, in the sustainability information it publishes, the manufacturing of business aircraft as an activity not aligned with the taxonomy. The annulment of this exclusion removes this obligation and may affect the conditions of access to financing.

This part of the ruling is important for any company in a sector that is difficult to decarbonize. The taxonomy is not just a technical list but a tool that can influence how investors, banks, and markets view an economic activity. If an activity is treated as unaligned, the cost of capital and sustainability reputation may be affected.

The European Commission had excluded the manufacturing of business aircraft considering the CO₂ footprint per passenger-kilometer, compared to other available modes of transport. The court rejected this approach. The court pointed out that the European Executive could not consider that those other modes of transport are necessarily low-emission alternatives to business aircraft, given their specificities regarding emissions, flexibility, speed, and connectivity.

The difference between manufacturing an aircraft and using it was decisive. The court found that the criterion of CO₂ emissions per passenger-kilometer pertains to the operation of aircraft, not their manufacturing. However, the contested act referred to the classification of the activity of manufacturing aircraft, and the Commission could not base its assessment on a criterion that is not provided for in the Taxonomy Regulation and that refers to a different stage of the economic chain.

The court also noted that the European Executive did not take into account relevant factors. Among these is the ability of business aircraft to use sustainable aviation fuels. The court also observed that the Commission acknowledged that further analysis was necessary.

The ruling does not mean that business aviation is automatically declared sustainable. It means that the exclusion decided by the Commission was not legally and technically justified. The institution will need to cover the legal gap created by the annulment if the ruling remains final and take into account the reasons indicated by the court.

The Commission can appeal to the Court of Justice of the European Union within two months and ten days from the notification of the ruling. The appeal can only address legal issues, not a complete re-examination of the facts. Until a final clarification, the ruling creates pressure on how the technical criteria of the taxonomy are constructed for complex industrial sectors.

The case has broader implications for the green taxonomy. The climate transition includes sectors that cannot become neutral overnight, but in which technologies, fuels, materials, and processes can reduce emissions over time. The category of "transitional activities" exists precisely for activities that are not yet fully sustainable but can contribute to reducing climate impact when there are not sufficiently available low-emission alternatives.

For the aviation industry, the decision brings sustainable aviation fuels and the difference between design, production, and use to the forefront. For investors, it shows that labels in the green taxonomy must be based on legally provided criteria and a comprehensive analysis of the targeted economic activity. For the Commission, the ruling is a warning that climate objectives must be transposed into robust technical criteria, not into insufficiently motivated exclusions.

https://2eu.brussels/ro/stiri/tribunalul-uniunii-europene-anuleaza-excluderea-avioanelor-de-afaceri-din-taxonomia-verde