The European Commission presented, on Wednesday 2 February, its final draft delegated act to include fossil gas and nuclear energy in the European Union’s taxonomy, a classification system to determine whether an economic activity is considered environmentally sustainable in order to guide private investment.
“Today we are setting out how gas and nuclear could make a contribution in the difficult transition to climate neutrality”, said the European Commissioner for Financial Services, Mairead McGuinness.
According to the Commission, this delegated act - which complements the delegated act on the climate component of the EU Taxonomy Regulation (2020/852) (see EUROPE 12850/13) - will allow investors to “see whether a potential investment includes nuclear or gas activities”.
They will then be free to “choose if they want to invest in nuclear or gas”, the Commissioner continued, as the taxonomy is “a voluntary tool” that does not require investment in the activities covered and does not prohibit investment in those outside the taxonomy.
An “imperfect” delegated act
As evidence of its highly controversial nature, the delegated act was voted on within the College. This is a rare event, as EU Commissioners usually adopt draft texts by consensus.
“Today’s delegated act may be imperfect, but it is a real solution. It moves us further towards our ultimate goal of carbon neutrality”, said Ms McGuinness.
Although the Commission claims to give priority to the development of renewable energies, it considers that fossil gas and nuclear power are needed for a transitional period in order to move away from coal quickly in the absence of sufficient renewable energy capacity.
Therefore, it proposes to include in the taxonomy: (1) research and innovation in future technologies in terms of safety standards and nuclear waste reduction; (2) projects for new nuclear power plants of the third or higher generation for electricity generation, for which the construction permit has been approved before 2045 (3) projects for life extension of existing nuclear power plants that have been approved before 2040; (4) electricity generation from fossil gas; (5) combined heat or cold and electricity generation from fossil gas (cogeneration); (6) heat or cold generation from fossil gas in a district heating and cooling system.
A “historical mistake”?
In Ms McGuinness’ view, the delegated act includes “strict conditions” for the inclusion of fossil gas and nuclear in the taxonomy.
It also pointed out that the Commission proposes to classify these two energy sources as “transitional” activities (Article 10.2 of the Taxonomy Regulation) and not as “sustainable” activities (Article 10.1) (see EUROPE 12392/14).
The Commission defines this category as activities “that cannot yet be replaced by technologically and economically feasible low-carbon alternatives, but do contribute to climate change mitigation and with the potential to play a major role in the transition to a climate-neutral economy (...) without crowding out investment in renewables”.
This position does not convince the Greens/EFA group in the European Parliament, nor environmental NGOs.
Bas Eickhout (Greens/EFA, Netherlands), one of Parliament’s two co-rapporteurs on the Taxonomy Regulation (2020/852), called the delegated act a “historical mistake” by the Commission during an interview with the press.
In particular, he criticised the Commission for trying to ‘sidestep the issue’ by creating this distinction between Article 10.1 and 10.2, in making it appear that there is a separate “additional label”, whereas the taxonomy “remains a green label”.
For him, nuclear and gas could, for example, be included in green bonds, even if they are included in the taxonomy as “transitional” activities.
Asked about this possibility, the Commissioner simply said that the issue of green bonds is currently in the hands of the EU co-legislators in the context of the proposed regulation to establish a voluntary European standard for such bonds (see EUROPE 12756/14).
A relaxation of the conditions
Like Mr Eickhout, many stakeholders and some Member States believe that the inclusion of fossil gas and nuclear in the taxonomy will undermine the credibility of the tool and therefore its usefulness.
Throughout January, following the leaking of a provisional version of the delegated act to the press (see EUROPE 12860/1), the Commission was criticised both for the criteria proposed in the delegated act and for the lack of transparency in the procedure followed for its adoption (see EUROPE 12872/5). Some NGOs have even accused the Commission of “institutional greenwashing” (see EUROPE 12861/1).
However, despite protests, letters from MEPs and Member States (see EUROPE 12881/3, 12874/1) and a negative assessment by the ‘Platform on Sustainable Finance’ (a group of stakeholders advising the Commission on the issue - see EUROPE 12875/9), the final draft of the delegated act did not change much from the draft text.
The greenhouse gas emission thresholds for gas plants, for example, remain the same.
The think tank E3G even claims that the Commission has relaxed the conditions for including fossil gas in the taxonomy.
While the draft text was to require the development of plans or actual commitments that the gas plant will use at least 30% renewable or low-carbon gas starting from 1 January 2026, at least 55% from 1 January 2030 and 100% by 31 December 2035, the Commission decided to withdraw the intermediate targets for 2026 and 2030.
It justifies this change by the need to better take into account the availability of renewable and low-carbon gases.
For nuclear, the Commission has relaxed the requirement to use accident-tolerant fuel, on the grounds that this type of fuel is not yet authorised for commercial use in the EU. The delegated act thus includes an exemption from this condition until 2025.
Improving transparency
In order to help investors to clearly identify financial products that are not exposed to economic activities in the nuclear and gas sectors, the delegated act also provides for specific transparency requirements for fossil gas and nuclear.
If adopted, this would require financial and non-financial companies to present “specific disclosure requirements that would show to what degree gas and nuclear energy activities, complying with the technical screening criteria, is in the numerator and denominator of the key performance indicators of those undertakings”, the Commission said.
Action before the CJEU?
The delegated act will now be examined by Member States and MEPs who have 4 months (or 6 months if they request an extension) to object.
A rejection from the Parliament’s side cannot be excluded, according to Michael Bloss (Greens/EFA, Germany). According to him, about 250 MEPs, mostly from the Greens/EFA, The Left and S&D groups, are currently prepared to vote against the text. A number that he hopes will grow in the coming months with increased support from members of the EPP group.
On the side of the Member States, a rejection of the delegated act is highly unlikely, as it requires a reverse reinforced qualified majority of at least 20 States representing at least 65% of the EU population.
However, some EU countries may try to derail the text by taking it to court.
Criticising the inclusion of nuclear power in the taxonomy, Austrian Environment Minister Leonore Gewessler has already announced that her country will refer the matter to the Court of Justice of the European Union with the support of Luxembourg.
“We will prepare all the legal steps in the next weeks, and if or when the taxonomy takes effect, we will file legal action at the European Court of Justice”, she said.
See the delegated act: https://aeur.eu/f/55
And its annexes: https://aeur.eu/f/56; https://aeur.eu/f/57; https://aeur.eu/f/59 (Original version in French by Damien Genicot)