EU Commission includes specific investments in gas and nuclear in the EU Taxonomy

Giorgia Termini

The “Taxonomy for sustainable activities” is a system that classifies activities and businesses according to their sustainability. The Commission started developing it back in 2020, aiming at redirecting private funds towards sustainable initiatives. At the core of the bloc’s sustainable finance policy, the EU Taxonomy aims to help achieve the EU’s climate neutrality goal in 2050 by providing incentives for those activities labelled as “green” according to its technical screening criteria.

The debate taking place over the past few months on the EU Taxonomy became particularly heated after the European Commission announced, at the end of 2021, that it had started consultations on including gas and nuclear in the taxonomy framework. Finally, on Wednesday 2 February, the Commission presented a Complementary Climate Delegated Act on climate change mitigation and adaptation, disciplining specific gas and nuclear activities in the EU Taxonomy.

As a consequence of the debate surrounding the EU’s sustainable finance tool, two factions had emerged. On one side, anti-nuclear countries such as Austria, Belgium, Spain, Luxembourg, Portugal and Denmark, which pressured the Commission to exclude both nuclear and, to a lesser extent, gas from the Taxonomy. For these countries the main concern was the idea that labelling these two energy sources as “green” would be misleading and detrimental to the green transition. On the other side, countries such as Bulgaria, Croatia, the Czech Republic, Finland, France, Hungary, Poland, Romania, Slovakia and Slovenia, which still extensively rely on fossil fuels argued for nuclear to be essential for the energy transition, and insisted on the Commission labelling nuclear energy as “transitional”. That means as a source of energy to resort to provisionally while more sustainable sources become available.

However, in the end, the Commission’s decision to include specific nuclear activities in the taxonomy also stemmed from the assessment made by the Joint Research Centre (JRC) and later backed by the High-Level Experts’ Group, which concluded that nuclear energy does not harm humans or the environment more than any other power-producing technologies considered sustainable.

By including some gas and nuclear related activities in the taxonomy, the Commission de facto acknowledged that these activities are in line with the EU’s climate and environmental goals. It also declared that these activities were essential for Europe to keep up with the transition to climate neutral energy forms and with its ambitious climate objectives.

The delegated Act presented on Wednesday adds to another on sustainable activities that had already been adopted in June 2021. The latter specified the criteria under which certain economic activities qualified as contributing to climate change mitigation or adaptation and did not cause “significant harm” to any of the other relevant environmental objectives. The former extends, under specific conditions, the criteria to additional economic activities – to be defined as “transitional”- in the natural gas and nuclear sector. To qualify as such, activities should contribute to the transition to climate neutrality. Moreover, nuclear-related activities should meet environmental safety standards and gas-related activities should foster the shift to renewable energies. As far as transparency is concerned, the Act demands that the industry outlines which activities within its businesses are in line with the taxonomy, while investors need to disclose how their investments meet the taxonomy climate-related requirements.

The delegated Act will now be made available in all other EU languages for the scrutiny of the co-legislators. The European Parliament and the Council will then have up to two months to present any objections. If no objection has been raised, the delegated act will be formally adopted. On the contrary, should the Parliament decide to reject the Act, 353 votes will be needed to veto it during a Plenary session. Instead for the Council, for the Act to fail, 20 EU Countries need to reject its adoption.