EU lawmakers have reached an agreement on a proposed classification system for green financing after reaching a compromise on the definitions of nuclear and gas investments.

The system, known as a taxonomy, is designed to define a green investment and the EU hopes it will play a major role in unlocking the €175 billion to €290 billion annual private investment needed to make the EU economy carbon neutral by 2050.

While an agreement on the taxonomy had been reached Dec. 5, some EU member states, including France, the U.K., Poland, the Czech Republic, Slovakia, Hungary, Romania and Slovenia, blocked the deal Dec. 11 because they did not want nuclear and gas investments excluded from the taxonomy.

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Pascal Canfin, a French MEP who is also chair of the EU Parliament's Committee on the Environment, Public Health and Food Safety, said the agreement between the European Parliament and the European Council was "balanced" and represented a "huge step forward" for green finance.

"There was a risk that the taxonomy could have been taken hostage in the fight between the pro- and anti-nuclear on one side and the pro- and anti-gas on the other," he said.

The compromise means neither nuclear or gas can be included in the list of pure-green investments, but are not included nor excluded in other categories and are subject to the taxonomy's "do no significant harm" principles, which means technologies in the taxonomy must not harm the environment, he said.

"We now have a common language and new rules for the financial markets," Canfin said. "It will help us, not only avoid greenwashing, but to allocate many more assets to the financing of an economy aligned with the Paris agreement and increase the transparency of financial markets." Greenwashing is when a financial asset is made to sound more environmentally friendly than it really is. The Paris agreement aims to limit global warming to below 2 degrees C by the end of the century.

EU governments are expected to approve the deal Dec. 18. It will then return to the European Parliament and be finalized in early 2020. The new rules should be in place by 2021.