|A nuclear power station in Germany. The technology should not be labeled green in the EU green finance rulebook, an environmental expert group recommended.
Source: RelaxFoto.de/E+ via Getty Images
Nuclear power and natural gas should not be labeled as green transition fuels under the European Commission's sustainable finance rules, a group of sustainability and finance experts advising the commission said Jan. 24.
In a report, the EU Platform on Sustainable Finance – whose members include utilities, corporations, banks and nongovernmental organizations – largely rejected the commission's draft legislation, which labels nuclear and gas infrastructure as "green" investments.
Acknowledging the challenge ahead in reaching ambitious climate targets across the EU, the group argued that boundaries between economic need and environmentally sound business models were being blurred in the EU's proposal.
The group said it recognizes that "transitioning our whole economy to meet climate neutrality by 2050 and the 55% greenhouse gas emissions reductions by 2030 goals require consideration of environmental, social, cost and supply issues and not environmental performance alone."
However, "the focus of the Platform on Sustainable Finance, upon request from the European Commission, is on the environmental performance of economic activities," the group said. "This is also the purpose of the taxonomy regulation."
Meanwhile, the commission's approach seemed skewed toward implementing the energy transition rather than identifying truly sustainable activities, according to the group.
The commission published the draft taxonomy in the final hours of 2021, after months of delays, lobbying and anticipation from industry and environmental groups. Member states and other groups had three weeks to respond to the proposals during a consultation period that ended Jan. 21.
"We will be coming forward with a proposal as soon as we can," commission spokesperson Eric Mamer said at a Jan. 24 press briefing, when asked to respond to the findings of the Platform on Sustainable Finance. "We need a bit of time to analyze the reactions that have been received."
Under the proposed taxonomy rules, nuclear projects permitted until 2045 will be classified as green, on the condition that countries can safely dispose of the toxic waste and do not create significant harm to the environment.
Gas is only included until 2030 and emissions thresholds are also in place. Direct greenhouse gas emissions need to be below 270 grams of CO2 equivalent per kWh of energy output, or annual emissions cannot exceed 550 kilograms of CO2e/kW of energy output over 20 years. Gas will be considered sustainable if it replaces coal power, and operators need to demonstrate that co-firing of low-carbon gases will be possible and that plans are in place to use at least 30% of them from 2026.
'Not green at any point'
The Platform on Sustainable Finance studied the environmental impact of gas plants that stay under the required emissions threshold and concluded that even such a modern asset "is not green at any point in its life." Despite the conditions placed on gas, the platform said it does not believe the draft taxonomy legislation ensures that the gas plants provide a substantial contribution to climate change mitigation consistent with limiting warming to 1.5 degrees C.
The platform also found "usability issues for financial markets" from the staggered conditions placed on gas over time. "All performance improvements for the financeable facility would only occur in future years (2026, 2030, 2035 or after) even though taxonomy alignment of the activity would be recognized immediately," it said in its report.
In addition, the group found a dependency on the availability of low-carbon fuels such as hydrogen to meet the performance criteria, noting that the lifecycle emissions of using such fuels are not included in the taxonomy criteria. Further, there are insufficient verification provisions to ensure emissions reductions actually occur, it said.
Gas can play a part in the broader energy transition toward net-zero emissions, coupled with ambitious increases in renewables and energy storage deployment, but this does not mean gas investments should be labeled sustainable, the group said.
On nuclear, the platform found that the taxonomy's requirement for investment targets to "do no significant harm" to the environment would not be met, due to the involvement of toxic waste that cannot be reused or recycled. "Nuclear energy is already part of the transitioning energy system and has near to zero greenhouse gas emissions, but this does not make the activity green and sustainable for taxonomy purposes," the group said.
The purpose of the taxonomy is to identify investment targets that contribute to 2030 and 2050 climate goals. New nuclear plants that receive a building permit around 2045 will not play a role in meeting the targets due to their long construction timelines, the group noted.
The decision to consider natural gas and nuclear for inclusion in the taxonomy "is a disaster for the environment and for science, and legally a breach of the taxonomy regulation," according to Mathilde Crêpy, senior program manager at the Environmental Coalition of Standards, a member of the Platform on Sustainable Finance.
"We urge the commission to stop bowing to the gas and nuclear lobbies, and to end the institutional greenwashing of environmentally harmful energy activities," Crêpy said in a Jan. 24 statement.
Environmental group WWF said the platform's report debunks EU claims that inclusion criteria are strict and based on science. "Attempts have been made to stifle the science, but today the platform has given it a megaphone: fossil gas generates huge emissions, and nuclear power creates highly radioactive waste which we still don't know how to handle," said Sebastien Godinot, senior economist in the WWF European policy office and a member of the platform.
Pushback has come from a variety of places in the weeks following the publication of the draft taxonomy. An investor group with €50 trillion under management called for gas to be excluded from the rulebook earlier this month, and Austria and Luxembourg have declared plans to sue the commission should the proposal be passed as is.