TEuropean legislators rejected proposals to call gas and nuke power green. This is a major victory for those who are concerned about climate change and investors that have opposed plans to utilize the technologies during energy transition.
Members of the environment and economy committees supported a cross-party objection to the European Commission’s proposal for the two technologies to be included in its so-called taxonomy by a margin of 76-62, with four abstentions. Now, the process moves on to a vote at parliament next month. If approved, it would block the inclusion of nuclear and gas in the list of climate-friendly economic activities.
“The EU has the chance to take the global lead in the fight against climate change and set the gold standard for investment in the climate neutral economy,” Bas Eickhout, a Green lawmaker said in a statement. “We need massive investment in the expansion of renewable energies, not the energies of the past.”
The European Commission’s proposal to label gas and nuclear as sustainable—as long as they receive construction permits by 2035 and 2045, respectively, and respect strict emissions criteria—has been highly controversial. These technologies are crucial in the energy transition. This is especially true when we move away from fossil fuels like coal.
But money managers and environmentalists have slammed the move, saying that it is not compatible with the EU’s green commitments and could feed greenwashing in the financial industry, where environmental benefits of an investment are misstated. This could lead to investments being diverted away from renewables.
Some of the Commission’s proposals:
- Gas projects replacing coal and emitting no more than 270 grams of CO2 equivalent per kilowatt-hour can get a temporary green label, or if annual emissions don’t exceed an average of 550 kilograms per kilowatt-hour over 20 years.
- These plants will need to have construction permits in place by 2030 and plans to transition to low-carbon or renewable gases before the end of 2035.
- The nuclear option is available if the new plants, whose construction permits are issued by 2045, do not pose a significant threat to the environment.
- Investors should be able to see more information from funds about nuclear and gaz holdings, as required by the taxonomy.
“There is no reason whatsoever to let risky technologies like nuclear or fossil gas have access to the same cheap financing that the taxonomy can provide,” said Anders Schelde, chief investment officer at Danish pension fund AkademikerPension. “It’s now down to the Parliament to correct this mistake of including fossil gas and nuclear in the taxonomy.”
Both the Council of the EU, comprised of member states, and Parliament have the power to veto the Commission’s proposal. Although the barriers for countries to object are nearly impossible, around 20 of the 27 members states must support the rejection, the majority required by Parliament is only a simple majority. It’s a huge challenge due to its political makeup.
Russia’s invasion of Ukraine had also been cited by lawmakers as an example of why gas in particular should not be considered a transition fuel, given the recent price volatility and the risk of Moscow halting supplies to the EU.
Simone Tagliapietra, a senior fellow at the Brussels-based think tank Bruegel, said that the taxonomy shouldn’t be used to dictate energy policy, and that even without gas and nuclear’s inclusion, investors would still be able to finance the technologies if they choose to do so.
“With today’s pushback, the EU taxonomy now has a chance to become the international ‘gold standard’ in the field,” he said. It’s “an important step to reverse what has simply been a mistake.”
—With assistance from Ewa Krukowska.
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