Set up a mandatory green taxonomy

Governments should also set up a mandatory green taxonomy that sets out which economic activities are considered environmentally sustainable. A green taxonomy that uses science-based classification allows companies and investors to assess their exposure to activities aligned with the low-carbon transition. A green taxonomy should spur these entities to increase their share of green revenue and capital expenditure. A growing number of jurisdictions are introducing these mechanisms. But for these regulations to be impactful in the energy transition, policymakers will have to promote cross-regional alignment and turn them into regulations, rather than voluntary frameworks that can be brushed aside if they prove too challenging.