European Union (EU) lawmakers and member countries on 16 December agreed on a deal to promote environmentally-friendly investment after weeks of discussions on whether to exclude nuclear projects.
EU countries were split over the green finance law, which aims to channel money into clean investment, in particular over whether financial products involving nuclear power could be labelled as green and receive funding. This is what France, the UK and some other Eastern European countries had wanted. The final agreement does not explicitly exclude nuclear energy.
Similar disagreements were manifest during the recent EU summit in Brussels where leaders discussed whether nuclear energy should be part of the bloc’s plan to make its economy carbon neutral by 2050. With the support of France, the pro-nuclear countries eventually won that argument with a clear reference to nuclear power in the meeting’s conclusions.
The compromise agreement on green finance adopted by EU Parliament negotiators and the European Council will exclude solid fossil fuels such as coal from any new investment support but will allow natural gas and nuclear energy.
“These activities can potentially be labelled as an enabling or transitional activity in full respect of the “do no significant harm” principle,” the EU Parliament said in a statement.
The agreement needs to still be approved by a plenary vote of EU lawmakers to be implemented. The “taxonomy regulation” stipulates that a number of environmental objectives should be considered when evaluating the sustainability and economic activity. These include climate change mitigation, protection of water and marine resources, waste prevention and increasing the uptake of secondary raw materials, pollution prevention and control and the protection and restoration of biodiversity and ecosystems.
The criteria are designed so the transition activities necessary to become a climate-neutral economy, but which are themselves incompatible with climate neutrality, should have greenhouse gas emissions levels corresponding to the best performance in the sector or industry. “Transition activities should neither hamper the development of low-carbon activities nor contribute to carbon-intensive lock-in effects,” the agreement stated. Such transition activities could include nuclear power plants. The taxonomy regulation should enable investors to identify environmentally sustainable economic activities that substantially contribute to climate change mitigation, based on scientific evidence, environmental impacts and long-term risks.
According to a parliamentary statement, all financial products that claim to be sustainable must offer proof in line with stringent EU criteria. A compromise reached as part of the agreement includes a clear mandate for the European Commission (EC) to start work on defining environmentally harmful activities at a later stage. “Phasing out those activities and investments is indeed as important to achieving climate-neutrality as supporting decarbonised activities,” the statement said.
“The taxonomy for sustainable investment is probably the most important development for finance since accounting. It will be a game changer in the fight against climate change”, said lead negotiator for the environment committee, Sirpa Pietikainen. “I am satisfied that we reached a balanced agreement with Council, but this is only the beginning. Greening the financial sector is a first step to make investments flow in the right direction, so it serves the transition to a carbon-neutral economy.”
The EC launched an Action Plan on Financing Sustainable Growth in March 2018 and adopted a package of measures in May. Then, in July 2018, a Technical Experts Group (TEG) on sustainable finance set up by the Commission began developing a unified classification system for sustainable economic activities. When TEG published its Taxonomy Technical Report, this June, nuclear energy was excluded from the list of sustainable economic activities. However, in September, the European Council decided to remain technology-neutral in its strategy on financing sustainable growth and the transition to a low-carbon, resource-efficient economy.
The European Council said the taxonomy for climate change mitigation and adaptation should be established by the end of 2020, to ensure its full application by the end of 2021. For the other environmental objectives, the taxonomy should be established by the end of 2021 for implementation by the end of 2022. European nuclear trade body Foratom welcomed the compromise agreement and nuclear's inclusion in the regulation. However, it said the 'do no harm' assessment of nuclear should be undertaken by experts with a strong knowledge of the nuclear fuel cycle.
James E Hansen Climate scientist and former director of Nasa’s Goddard Institute for Space Studies and others had written to the Financial Times, making a case for the inclusion of nuclear power in the EU Sustainable Finance Taxonomy. “Nuclear power is the single biggest source of low-carbon electricity in Europe today and is recognised in many of the scenarios assessed by the Intergovernmental Panel on Climate Change, the International Energy Agency and other organisations as having a critical role to play in responding to the climate emergency,” it said.