January 12, 2022
The European Commission has provoked anger among EU member states and environmental activists after moving forward with a new classification system for sustainable investments that would designate some gas and nuclear activities as ‘green’.
The so-called “EU taxonomy” is a crucial element of the European Green Deal, which sets definitions for what can and cannot be classed as green investment. The goal of the taxonomy is to provide clarity to green investors, ensure billions of Euros in funding for energy infrastructure projects, and prevent so-called “greenwashing”, whereby firms and investors claim ecological credentials for polluting activities.
However, the European Commission has now itself been accused of greenwashing, after releasing a new draft of the guidance accompanying the EU Taxonomy Regulation for expert consultation, which included a series of activities related to gas and nuclear energy generation in its list of investments that would be considered sustainable. The rules include a range of strict limits on the types of gas and nuclear investments that qualify; gas activities are denominated as strictly transitional, and will be taken out of the taxonomy at the end of 2030, while nuclear projects must be based on “best available technology”, and meet a wide range of standards related to safety, carbon emissions, funding of waste disposal, and protection from external hazards. Sunset clauses will be in place for nuclear investment, of 2040 for projects involving existing plants, and 2045 for new nuclear construction projects.
The Commission argued in a statement on January 1st that, given the varying challenges facing EU countries as they approach the transition to a decarbonised economy, “it is necessary to recognise that the fossil gas and nuclear energy sectors can contribute to the decarbonisation of the Union’s economy.” The logic goes that some countries need gas as a stepping stone to wean themselves off much dirtier coal power, before transitioning completely to renewable energy, and that nuclear power, under the strict regulations envisaged by the Commission, can provide significant amounts of power with very low emissions.
Environmental groups responded with horror, arguing that the move would direct investment away from genuine renewables, delay decarbonisation of the economy, and undermine the goals of the European Green Deal. Sandrine Dixson-Declève, co-president of the Club of Rome, said that the proposal “disregards four years of rigorous scientific, financial analysis and stakeholder dialogue”. A coalition of NGOs has called on financial institutions to publicly reject the taxonomy, which they say would put them at risk of stranded carbon assets and backlash from the public.
The Austrian government, which is particularly opposed to the inclusion of nuclear energy, repeated an earlier threat that if the plans are taken forward, they would sue the Commission. “If these plans were to be implemented this way, we will sue,” said Austrian Climate Protection Minister Leonore Gewessler, adding that nuclear and gas power should not be included in the taxonomy “because they are harmful to the climate and the environment and destroy the future of our children.” At a European Council meeting in December, Austria insisted that any reference to nuclear energy and the taxonomy rules was omitted from the joint statement concluding the meeting.
However, the majority of EU member states are thought to be in favour of including nuclear power in the taxonomy. 10 states, led by France and the Czech Republic, have been lobbying the Commission hard to do so, emphasising the value of the nuclear industry to the EU economy, and the existing reliance of many EU states on nuclear as a clean and reliable energy source. “Nuclear energy must be part of the solution,” wrote a group of ministers from these 10 states in October. “Renewables play a key role in the energy transition, but we need other sources of carbon-free energy to meet our needs consistently and sufficiently. Nuclear energy is essential. It already accounts for almost half of Europe’s carbon-free electricity production.”
The Commission launched its “Action Plan on Financing Sustainable Growth” in 2018, which grew into the plans for an EU taxonomy. The rules governing investment in other sectors, including construction and transport, were finalised last year, and are now coming into force, but final decisions on the energy section of the taxonomy have been delayed pending the results of studies and intensive lobbying by member state governments on both sides of the argument.
On December 31st, the final draft was released to the Member States Expert Group on Sustainable Finance and the EU’s Sustainable Finance Platform, which have until January 12th to respond. The Commission is aiming to produce a final text by the end of January. It will then be sent to the European Parliament and Council, which have up to six months to examine the text for approval, though it cannot be amended. Environmental groups have also criticised the timing of the release and the short time-frame for responses, accusing the Commission of seeking to evade scrutiny. Assuming the European Parliament and Council do not block the progress of the text, the taxonomy will come into force at the end of the six months examining period. However, with strong language coming from both sides over the contents of the regulation, intense negotiations look set to continue until then.
