bneGREEN: Gas and nuclear to be included in EU green taxonomy

bneGREEN: Gas and nuclear to be included in EU green taxonomy
EU Financial Services Commissioner Mairead McGuinness / European Commission
By Richard Lockhart in Edinburgh February 4, 2022

The EU has included gas and nuclear in the EU green taxonomy, the new rulebook that defines what types of private investment in energy projects are green and sustainable, and has denied that it was in fact promoting so-called greenwashing.

The rules mean that private investors will have EU backing to invest in certain types of gas and nuclear projects in the medium term.

The decision is backed by major gas-consuming countries such as Germany and Italy. Germany asked on 21 January for a number of gas restrictions to be eased, while at the same time opposing any inclusion of nuclear power, Euractiv reported.

France, however, has pushed for nuclear power to be included in the taxonomy. This position was also backed by many Central European member states such as the Czech Republic that rely heavily on nuclear power.

"With today's new rules, we are also strengthening transparency and disclosures of information, so that investors make informed decisions, thereby avoiding any greenwashing,” the European Commission said in a statement on February 2.

“Taking account of scientific advice and current technological progress, the Commission considers that there is a role for private investment in gas and nuclear activities in the transition,” 

“The taxonomy helps signpost the way for private investment to contribute to our climate goals,” said Finance Commissioner Mairead McGuiness.

Private investment is needed as government alone cannot provide the €350bn per year of investment Europe needs to become climate neutral by 2050, she added.

The Commission said that including gas and nuclear was compatible with the EU's climate and environmental objectives, which call for reaching climate neutrality by 2050 and reducing emissions by 55% by 2030.

“[They] will allow us to accelerate the shift from more polluting activities, such as coal generation, towards a climate-neutral future, mostly based on renewable energy sources,” the Commission said.

However, Brussels is setting what it calls stringent conditions on the temporary use of gas and nuclear. Both gas and nuclear must contribute to the transition to climate neutrality.

Nuclear projects must fulfil nuclear and environmental safety requirements, while gas projects must contribute to the transition from coal to renewables.

The new regulations are set out in a Complementary Delegated Act, which amends the existing EU Taxonomy Climate Delegated Act, which came into force on January 1, 2022.

 “Our mission and obligation is climate neutrality. We need to act now if we are to meet our 2030 and 2050 targets. Today's Delegated Act is about accompanying the EU economy in the energy transition, a just transition, as a bridge towards a green energy system based on renewable energy sources,” said Valdis Dombrovskis, executive vice-president for an Economy that Works for People.

“With today's new rules, we are also strengthening transparency and disclosures of information, so that investors make informed decisions, thereby avoiding any greenwashing.”

However, the mere mention of gas and nuclear prompted condemnation by green activists.

“The EU taxonomy today takes greenwashing to a completely new level. The people in power do not even pretend to care anymore. Now they are moving into unchartered greenwash territory,” said activist Greta Thunberg in a tweet.

At the start of January, the Commission revealed its proposals to include gas and nuclear in the Taxonomy.

The proposals included safeguards to ensures that the use of gas and nuclear would only be temporary.

Brussels proposed that there would be “clear and tight conditions” for classifying gas and nuclear investments as sustainable, it warned. By 2035, these gas investments must produce low emissions, it said, potentially through their conversion to renewable sources such as bio-methane and hydrogen. 

The EU Taxonomy is part of the EU Action Plan on Sustainable Finance, established by the EU Technical Expert Group on Sustainable Finance (EU TEG).

The taxonomy is a classification system enabling the categorisation of economic activities that play key roles in contributing to at least one of six defined environmental objectives, starting with climate change mitigation and climate change adaptation, and no significant harm done to the other objectives.

Including gas and nuclear has been opposed by most green and environmental groups. The Institutional Investors Group on Climate Change (IIGCC) said in an open letter to the EU in January that including gas would make it difficult for investors to channel capital towards environmentally sustainable activities and to pursue net-zero investment goals.

The IIGCC said that using gas and nuclear as a temporary measure while more green technology is adopted was unworkable.

The IIGCC said that while natural gas might have a role to play as a bridge to support the transition to net zero, it does not meet the prescribed requirements to be classified as a transitional activity, and its inclusion in the taxonomy would be misleading.