The recent assessment by the EU's scientific body, the Joint Research Centre, that nuclear energy does no more harm to human health or the environment than any other power-producing technology considered to be sustainable may be a sign of the green stamp of approval needed for the inclusion of nuclear in the EU Taxonomy on sustainable finance, write Elina Teplinsky, Vincent Zabielski and Victoria Judd, partner, special counsel and counsel, at Pillsbury Winthrop Shaw Pittman LLP.

Victoria Judd, Elina Teplinsky and Vincent Zabielski (Image: Pillsbury Winthrop Shaw Pittman LLP)

"The EU Taxonomy Regulation, a system that classifies economic activities as environmentally sustainable to help the EU meet its Green Deal objectives, has emerged as an increasingly complex and politically fraught framework despite what should be a science-based approach to climate change mitigation.

The biggest controversy surrounds the question of whether nuclear energy and natural gas should be included in the Taxonomy and thus classified as sustainable. With respect to nuclear specifically, while a number of EU members see nuclear energy as a key tool in meeting their decarbonisation objects, others remain opposed to granting nuclear the green label on general political grounds, frequently citing concerns surrounding the permanent disposal of used nuclear fuel. In recent years, this has seen the EU split into two camps, with pro-nuclear countries like France, Hungary, and Poland locking horns with the likes of anti-nuclear Austria and Germany.

The central difficulty is that at present, the EU Taxonomy Regulation does not address whether nuclear power should be considered a sustainable economic activity across the whole lifecycle of a nuclear plant. Whilst a prior report from an EU Technical Expert Group (TEG) previously confirmed nuclear energy to be a “climate neutral energy”, the report concluded that further research was necessary to determine whether nuclear met the EU's 'do no significant harm' (DNSH) criteria when considering the lifecycle as a whole - which includes the safe disposal of spent fuel and radioactive waste.

Calling in the cavalry

Failure by the TEG to produce a conclusive answer to the question on nuclear energy's overall sustainability spurred much debate amongst EU members. Had nuclear energy been found to cause 'significant harm' to the environment under EU guidelines, allowances for governmental support of nuclear energy plants would likely have dropped drastically under EU funding rules and the global nuclear industry would have taken a serious reputation hit.

In response, and in a much-needed return to decisions informed by science over politics, the EU Commission recently appointed its in-house science body, the Joint Research Council (JRC) to settle the fallout from the TEG finding. Its primary objective was to produce a technical report specifically regarding the DNSH aspects surrounding nuclear energy, and to assess in greater detail whether it should be classified as 'sustainable' or a 'transition' technology.

The report was released in March 2021 and confirmed that nuclear falls under the DNSH guidelines. It found no evidence that nuclear does more harm to either human health or the environment than other technologies already included in the Taxonomy Regulation.

With regards to nuclear waste specifically, the JRC revealed a broad scientific consensus that the EU's current disposal strategy, which places high-level, long-lived radioactive waste inside deep geologic formations is considered an appropriately safe means of isolating radioactive waste from the biosphere long-term. The report drew comparisons to the sequestration of carbon in carbon capture technology, which also uses long-term disposal of waste in geological facilities.

While the JRC report has received a warm welcome from the nuclear industry and the environmental advocates who view nuclear as a key carbon-free energy source, further administrative hurdles lie ahead before nuclear energy is accepted as sustainable under the EU Taxonomy Regulation.

Before any recommendations in the report can be put into effect, it must be reviewed by experts on radiation and protection and waste management (to comply with under Article 31 of the Euratom Treaty) and the EU's Scientific Committee on Health, Environmental and Emerging Risks (SCHEER).

Despite the fact that the reports from both of these bodies are expected by end of June 2021, the EU Commission made the decision last month to proceed with the Taxonomy on a piecemeal basis while the nuclear question is addressed.  On 21 April, just in time for Earth Day, the Commission published the first EU Taxonomy Delegated Act, classifying a certain subset of economic activities in the energy section such as solar, wind, tidal, hydro and geothermal as sustainable and leaving others, including nuclear, to be covered by a complementary Delegated Act to be issued by summer of 2021.

The statement in the Commission's 21 April communication that nuclear energy will be addressed in a separate Delegated Act on its face looks favourable for nuclear supporters. The statement appears to suggest that nuclear will be included in the Taxonomy. Further, the Taxonomy only includes activities either deemed as sustainable (i.e., inherently low carbon) or transitional (i.e., economically feasible low-carbon alternatives that need to be decarbonised as part of the energy transition).

It is difficult to see a scenario where nuclear energy would be labelled a transitional activity because it is inherently low carbon. However, given the thorny politics surrounding nuclear energy in the EU, that optimism has to be met with some caution. Reviews by the Euratom Article 31 and SCHEER experts are still outstanding, and any negative conclusions by those bodies could change the course of the inclusion of nuclear in the Taxonomy. Further, it is unclear how nuclear energy will be described in the separate Delegated Act and whether any limitations or conditions for labelling nuclear as sustainable will be applied.

While the review process continues, nuclear proponents - whether governments, private sector or NGOs - would benefit from continuing to strongly urge for a transparent and science-based approach for the continued development of the Taxonomy.

Effects on the ground

The conclusion of a well-respected scientific body like the JRC that nuclear is just as sustainable as renewables is undoubtedly a very positive development for nuclear supporters.  If the JRC’s conclusion leads to the inclusion of nuclear in the EU taxonomy, this will represent a hugely significant moment in the EU's decarbonisation efforts - a rejection of politically charged debate on sustainability and a return to scientific-based decision making.

The inclusion of nuclear in the EU Taxonomy will facilitate ongoing government support to new nuclear projects in Europe, as EU funding rules evolve to favour projects using sustainable technology. Poland, the Czech Republic and Bulgaria all have plans to build new nuclear reactors to decrease their reliance on coal and meet the EU's climate goals, whilst Finland and Hungary have already executed contracts for new nuclear units and secured siting permits for the facilities. It will also support private investment into nuclear technologies and projects, given the Taxonomy's goals to stimulate investor and financial services interests to invest in projects and activities with a positive environmental impact.

If nuclear is determined by the EU to be sustainable, the effect will not just be limited to the EU, as other stakeholders across the world refer to the EU's findings in respect of nuclear energy for guidance. Indeed, the EU Taxonomy Directive is regarded as influential on the global stage as a helpful standardisation exercise, and no doubt the findings on nuclear energy will be equally influential.

Finally, the impact will likely also be felt beyond the nuclear industry. The unveiling last year of the EU Hydrogen Strategy - which seeks to create a green hydrogen market to support decarbonisation in the electricity, transportation, and buildings sectors across the EU - has largely focused on the production of hydrogen through renewables so far. However, due to nuclear energy's ability to produce heat as well as electricity whilst maintaining a small geographic footprint, there is an immense opportunity to produce nuclear fuelled hydrogen at large-scales in an efficient and low-cost manner. It would appear, then, that hydrogen produced with nuclear energy can now be termed “green hydrogen”, representing a positive step for the hydrogen economy.

Positive signs for the future

In order to successfully find a viable solution to the climate change challenge, all technologies at mankind's disposal must be properly utilised and leveraged. With around 40% of the EU's low carbon electricity coming from nuclear, and now official recognition that it does no more harm to human health or the environment than other sustainable power-producing technology, nuclear should be set to continue to be an essential energy source moving forward, both for the EU and globally.

The road ahead is paved with scepticism, and likely further disagreement. However, it seems our path forwards will be increasingly informed more by science than by politics, and this in itself is cause for celebration."

Date: Friday, 07 May 2021
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