March 30. 2023. 4:52

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Gas and nuclear: Fate of EU green taxonomy ‘now in the hands of von der Leyen’

European Commission President Ursula von der Leyen has taken charge of a soon-to-be-published list of sustainable investments amid controversy around the possible classification of fossil gas and nuclear energy as “green” or “transitional” activities under certain conditions, according to several sources familiar with the process.

The European Union is moving closer to integrating nuclear power and natural gas into the bloc’s sustainable finance taxonomy – a set of rules designed to provide investors with a common definition of what is green and what is not in order to channel more capital into sustainable businesses.

The list of activities that Europe considers “green” or “transitional” investments will be laid down in a so-called ‘delegated act’ adopted by the European Commission setting out detailed implementing rules under the EU’s sustainable finance taxonomy regulation, adopted in December 2019.

But after several failed attempts and mounting controversy over the role of gas and nuclear power in the energy transition, President von der Leyen has now taken matters into her own hands, several sources told EURACTIV.

“It is possible that the Delegated Act will be presented to the college [of commissioners] next week,” said Pascal Canfin, a leading lawmaker who chairs the European Parliament’s powerful environment committee.

“The matter is now in the hands of Ursula Von der Leyen,” he told EURACTIV.

Bas Eickhout, a Dutch EU lawmaker with the Greens party who is one of the architects of the taxonomy regulation, confirmed that the matter has now reached the highest level in the European Commission.

“This delegated act is now Chefsache in the Commission, which is also logical since this decision is becoming a very important test for the credibility of the Commission on its Green Deal priority,” he told EURACTIV.

On Wednesday evening, the EU passed the first part of its taxonomy rulebook, setting out environmental criteria for investments including renewable energy, shipping and car manufacturing that will apply as of January 2022.

But no decision has been taken yet on the most politically sensitive part of the taxonomy, dealing with gas and nuclear investments.

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Von der Leyen’s personal handling of the dossier is testament to the intensity of the battle surrounding the potential classification of nuclear and gas as a “green” or “transitional” source of energy.

Legislative proposals tabled by the European Commission usually originate from one of the 27 commissioner before they are discussed in the College and validated by the president of the Commission.

“Here, it is the other way around: it is von der Leyen herself, through her cabinet, who will present the proposal to the college,” said an EU source with knowledge of the matter.

Contacted by EURACTIV, the European Commission did not confirm whether von der Leyen had taken charge. Most likely, the proposal will be presented to the College of Commissioners by Mairead McGuinness, the EU financial services commissioner, and Valdis Dombrovskis, the vice-president in charge of the economy, a spokesperson said.

Given internal procedures, a final proposal should be ready by Friday before it is submitted to the college for approval next week, according to an EU source.

Europe divided

European countries are deeply divided on the subject. While France is leading a group of twelve countries supporting the inclusion of nuclear energy in the taxonomy, five other EU countries expressed their opposition to the move, with Austria even warning it was ready to challenge the decision before the EU court of justice.

Central and eastern European countries are also pushing to include fossil gas as a “transitional” activity in the taxonomy, arguing that gas is needed as a stepping stone for them to exit coal, the most polluting of all fossil fuels.

But the United Nations Principles for Responsible Investment (PRI), a network of international investors, has advised the EU against allowing these energy sources a sustainable label.

The inclusion of gas-fired power “would seriously compromise” the taxonomy’s role as an independent and scientific tool in line with Europe’s climate goals, PRI warned in a briefing note.

And while a report from the European Commission’s Joint Research Centre (JRC) looked favourably at the inclusion of nuclear, it did “not sufficiently [address] risks related to the storage of nuclear waste, severe incidents and nuclear proliferation,” UNEP said.

The UN-supported initiative recommends that Europe explores alternatives, either by developing a proposal for sectors involved with the energy transition or extending the taxonomy “to recognise intermediate economic activities and transition pathways such as gas-fired power that operates below the ‘significant harm’ threshold of 270g CO2/kWh”.

How to save the scientific integrity of the EU’s green finance taxonomy

Decision-makers cannot let economic questions on energy security and cost thwart the scientific integrity of the EU Sustainable Taxonomy, write Elise Attal and Jan Vandermosten.

Compromise proposal

Pascal Canfin, the chair of the Parliament’s environment committee, has suggested a compromise proposal whereby gas and nuclear power would be included in the taxonomy’s “transitional” category – but only under specific conditions and with strict disclosure rules.

“We need to have a very clear safeguard system in place” in order to preserve the scientific integrity of the taxonomy, Canfin told EURACTIV in an interview.

The cornerstone of Canfin’s proposal is a mandatory disclosure requirement for investors that would let them choose whether they want gas or nuclear included in their asset portfolio.

“It would be like an opt-in system where a financial market participant would say: ‘gas and/or nuclear may be included in my investment portfolio, and that’s not a problem for me’,” Canfin explained.

Investors like pension funds “would have to say precisely whether they are using all the taxonomy, the taxonomy without gas, the taxonomy without nuclear or the taxonomy without gas or nuclear – that makes four possible categories. You tick the box and you have the flexibility to say whether your investments include gas or nuclear. It gives the necessary flexibility.”

For gas specifically, the “transitional” label would apply only when new plants replace coal in power generation and if emissions are below the ‘Do no harm’ threshold. And a sunset clause would apply as of 2030 after which investments in new gas power plants would no longer qualify.

Canfin MEP: ‘Here is my proposal to find the right compromise on gas and nuclear in the taxonomy’

With proper safeguards in place, both gas and nuclear power can be included in the “transition” category of the EU’s green finance taxonomy, says Pascal Canfin, a leading lawmaker in the European Parliament.

Technology neutral

In the end, it looks increasingly likely that both gas and nuclear will be included in the list of sustainable investments as transitional fuels.

“We need more renewables. They are cheaper, carbon-free and homegrown,” von der Leyen wrote on Twitter after an EU summit meeting in October where leaders debated the bloc’s response to rising energy prices.

“We also need a stable source, nuclear, and during the transition, gas. This is why we will come forward with our taxonomy proposal,” she added.

Last week, the EU’s energy commissioner, Kadri Simson, called for a “gearshift on investments” in nuclear power in order to extend the lifetime of existing power plants and maintain current production levels until 2050.

“The terms of the conversation around nuclear energy in Europe are changing” because of the climate emergency and the need to quickly decarbonise the EU’s energy mix, said Simson, who was speaking at the opening ceremony of the World Nuclear Exhibition in Paris.

The European Commission has always been clear that fossil gas was only necessary as a transitional fuel and should not be considered a long-term energy source.

For nuclear, however, the choice to call it transitional is still subject to controversy, with supporters arguing it should labelled “sustainable” because of its low-carbon nature.

“We don’t agree that nuclear should be treated any differently to renewables. Let’s be very clear about this: nuclear has very low lifecycle emissions, this has been confirmed by the IPCC,” said Jessica Johnson from Foratom, an industry body.

“What we need to make clear here is that the principle of technology neutrality, as enshrined in the taxonomy regulation, needs to be respected,” she told EURACTIV.

While Foratom itself would not be able to file a legal challenge, Johnson warned that affected companies may consider action “if the complementary delegated act which comes out does not meet the principle of technological neutrality and would affect nuclear in a negative way”.

Nuclear split in three categories

According to the EU’s energy commissioner Kadri Simson, the proposal “will be ready in the coming weeks…and it will clarify whether or not nuclear energy generation, waste disposal or fuel supply can be classified as sustainable activities for investors.”

Simson’s comments suggest that the upcoming delegated act could split nuclear activities into three categories: fuel supply, energy generation and waste.

If none of these are carbon intensive, the management of radioactive waste and the possibility of a nuclear incident remains a cause of concern for the United Nation’s PRI, which says these were not sufficiently explored in the JRC report.

“The materialisation of the risks above could seriously harm most – if not all – of the five environmental objectives other than climate mitigation that are part of the EU Taxonomy Regulation,” the PRI said in its briefing note.

The nuclear industry, for its part, contends that the safety of nuclear installations is strictly regulated and that long-term solutions are being developed to manage radioactive waste.

“Waste needs to be handled correctly and you need to have long term solutions for that,” Johnson told EURACTIV. But “the long term storage issue will soon be resolved because the Onkalo deep geological repository based in Finland is due to be operational by 2025,” she added.

There is still no confirmed date for the publication of the taxonomy’s delegated act, but the European Commission says it will be published before the end of the year. Some expect it to be published alongside the gas package on 14 December while others are talking about it coming out on 22 December.

The Green Brief: Gas, nuclear and the EU taxonomy saga

The European Union is moving a step closer to integrating nuclear power and natural gas in the bloc’s sustainable finance taxonomy after a summit last week where EU leaders discussed the bloc’s response to rising energy prices.

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