DNSH rule – what does it mean for planned investments?

Zasada DNSH

The Do No Significant Harm (DNSH) rule applies to not supporting and conducting economic activities that cause significant harm to the environment.

This approach presents the position of the European Commission, which will not support from the EU budget programs or investments that threaten the achievement of EU climate and environmental goals.

The need for a DNSH assessment stems from Art. 17 of Regulation (EU) 2020/852 of June 18, 2020. On establishing a framework to facilitate sustainable investments.

Application of the “do no grave harm” principle is mandatory for EU-funded programs and projects, with assessment of compliance with DNSH to be carried out already at the level of planning – strategic and investment.

Confirmation of compliance with the DNSH principle of planned activities is done by analyzing their impact on key environmental goals:

  • climate change mitigation,
  • climate change adaptation,
  • Sustainable use and protection of water and marine resources,
  • closed-loop economy,
  • Pollution prevention and control,
  • Protection and restoration of biodiversity and ecosystems.

How does the DNSH evaluation process work?

Performing a DNSH assessment is a two-step process. In the first place, the so-called “first of all” is carried out. screening, which involves performing a preliminary assessment of whether a planned project/activity may have a foreseeable negative impact on any of the environmental objectives.

If such a possibility is identified, in the second stage a proper DNSH (substantive) assessment is performed for the environmental objective in question. Examples of negative environmental impacts may include planning activities that result in significant greenhouse gas emissions or increased adverse impacts on climatic conditions. Another contraindication arises if the planned activity will harm the good status or good ecological potential of surface or groundwater bodies or the good environmental status of marine waters.

The evaluation process does not have to be an extensive analysis. For some activities or investments, it is possible to use a short, optimized justification, but for others, more detailed explanations may be required. Of course, this is related to the scale of interference of the planned activity with the environment. However, in the case of assessing plans or programs that contain a number of separate activities in different sectors – a comprehensive assessment of DNSH compliance is even an additional document. On the other hand, knowledge of many environmental aspects and their interrelationships is required to carry it out. It is worth emphasizing that the development of the document itself is only an assessment of compliance with the DNSH principle and is not a premise that proves compliance.

DNSH – implications and examples

Once potential risks to DNSH compliance have been identified, the necessary preventive and/or mitigating and/or compensatory measures for any identified harm to specific targets should be proposed. The EC has developed guidelines for assessing compliance with DNSH, referring to, among other things. to be developed in 2022. and regional program projects under evaluation. The material proposes various measures to avoid, reduce or mitigate the effects of planned activities/projects.

If the planned investment will significantly harm any of the environmental objectives, their implementation with EU funding will be impossible.

Examples of projects that are not financed by EU funds, due to the significant damage they can cause (which is due to the nature of the project and its rules of operation), are:

  • generating energy from residual waste due to its contradiction with the goal of a closed-loop economy;
  • Construction of a waste incineration plant;
  • Activities involving the implementation of new investments that have been granted a derogation from meeting the environmental objectives for water bodies (Article 4.7 of the WFD), such as the implementation of hydrotechnical facilities;
  • Investments in hydroelectric power plants – the possibility of implementing measures for existing hydroelectric facilities only.

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