EU cash floodgates open for nuclear and gas

There is no environmental, climate or economic reason to include nuclear and fossil gas in the EU investment taxonomy.

At the turn of the year a European Commission proposal was leaked which would label two polluting energy sources, nuclear and fossil gas, as ‘environmentally sustainable’ in the European Union’s investments ‘taxonomy’. This despite two years of high rhetoric on climate and decarbonisation since the adoption of the European Green Deal and the commitment to make Europe the first carbon-neutral continent by 2050.

The proposed Complementary Delegated Act to the EU Taxonomy for climate mitigation would classify certain gas and nuclear activities as green investments, on the grounds that these are ‘transitional’ energies which might support the changeover from the most CO₂-intensive energy source (coal) to renewables. The document envisages a construction-permits deadline for application of the green label, of 2030 for gas-fired power plants and 2045 for nuclear.

Any new investment in fossil-gas and nuclear-power infrastructure is however far from temporary or harmless. Further gas plants will tie the EU’s economy to highly carbon-intensive fossil fuels, with their climate impacts, for decades. As for nuclear energy, we need to broaden the panorama to the whole life-cycle of power generation, from the mining of the uranium to radioactive-waste disposal—not to mention leaks and possible accidents.

Despite lobbyists’ efforts to portray gas and nuclear as a ‘low-impact’ transitional solution, it is obvious both technologies raise serious environmental concerns and will delay the transition to a clean energy system and make it more costly for EU citizens. More importantly, if nuclear and gas are deemed green in the EU taxonomy, hundreds of millions of euro necessary for the energy transition will be diverted from much-needed solutions—energy-efficiency measures, buildings renovation, renewables and heat pumps—to fossil-fuel infrastructure and everlasting nuclear waste.

Necessary step?

Over the past three years, some member states, strongly pushed by the gas industrial lobby, have embraced the narrative of fossil gas as a necessary intermediate step towards compliance with EU climate ambition, prior to the introduction of renewables on a larger scale. These member states have a clear element in common—their significant dependence on coal to power their economies. They argue that gas is needed to replace coal, as a bridge or backup source to the uptake of renewables (mostly wind and solar).

The European Environmental Bureau’s energy scenario for compatibility with the Paris Agreement has however shown that a direct switch from coal-based power to large-scale renewables is technically feasible and the only way to try to limit global temperature rise to 1.5C above pre-industrial levels by the middle of this century.

A further argument made by proponents of gas as a transitional source is that it is associated with lower greenhouse-gas emissions than coal. But this plant-by-plant comparison overlooks methane leaks during the gas supply chain. Methane matters because its impact on climate change is 84 times greater than CO₂ and if leaks total more than 3 per cent of gas content gas-fired power generation may be even worse for the climate than coal.

The economic argument does not hold either. In its recent report Net Zero by 2050: a Roadmap for the Energy Sector, the International Energy Agency shows that renewables are already the most competitive energy source in the EU—considering again all the building, maintenance and generation costs of a power plant—and that their comparative advantage vis-à-vis fossil-fuel-based counterparts will only increase in the coming decades. The same investments in efficiency and renewables will deliver decarbonisation earlier and more cost-effectively, while doing no harm or at least less harm than investing in gas and nuclear.

There is also a geopolitical cost arising from increasing EU dependence on gas. In the context of soaring energy bills, further investing in gas will only result in greater dependence on fossil fuel imported from non-EU countries—with Russia at the forefront—whose price has proved extraordinarily volatile amid global speculation and political shocks.

Large risks

The defenders of nuclear power argue it provides a stable energy supply which does not generate CO₂. If we however take into account the large risks associated with the operation and maintenance of reactors and the unsolved issue of radioactive waste—with its management challenges and associated costs for future generations—nuclear power cannot, by any stretch of the imagination, be considered a sustainable investment. Through its vice-president Frans Timmermans, responsible for the European Green Deal, the commission has itself publicly recognised that nuclear cannot be classed as green.

Worldwide, not a single technology-neutral tender has been won by nuclear energy. Most have been won by renewable alternatives, which have proved much cheaper.

In supporting nuclear power as a transitional source, the commission keeps applying de facto a perverse logic: instead of steering available resources into energy-saving investments and/or non-polluting energy sources, it allows finance to be consumed paying for the costs of pollution (nuclear decommissioning and radioactive-waste management). EU taxpayers will have to foot the bill—as they already do in many member states which rely on nuclear power or are in the process of decommissioning old plants. Taxpayers’ money could therefore end up being diverted from truly sustainable solutions towards non-cost-effective measures which create additional risks and responsibilities.

‘Greenwashing’ precedent

With the inclusion of nuclear and gas as environmentally sustainable investments, the commission would set a very dangerous ‘greenwashing’ precedent, threatening the very purpose of its sustainable-finance agenda and its Green Deal.

The taxonomy was promised to be a tool to help investors recognise and label environmentally sustainable economic activities, promote a transition to a zero-carbon future and guide funding towards the solutions society needs. If gas and nuclear are however included, investors will not be able to rely on a common, robust and science-based classification of sustainable economic activities, diluting the main goal of the regulation and its contribution to delivering the Green Deal.

In a domino effect this could jeopardise the commitment by the European Investment Bank to stop investing in gas. It would also facilitate state-aid decisions and regulatory approaches supporting national investment in nuclear and gas, and potentially affect EU funding and priorities.

Secondary legislation

The commission is proposing this legal act as secondary legislation. This is not the regular co-decision process, empowering the Council of the EU and the European Parliament to amend the legislative proposal until a final political agreement is reached (which may take two or three years).

Secondary legislation generally applies only to technical regulations. The two other EU institutions can then only approve or reject the proposal ‘as a whole’, within a very short timeframe. To reject the commission’s decision, the parliament would need to assemble a contrary majority in four months.

A decision with such potential long-term environmental, economic, financial and social impacts should be open to a fully-fledged democratic process, whereby EU citizens are well-informed and can express their views. Without such democratic scrutiny, the commission would send a very bad political signal, representing a big blow to the credibility of the European Green Deal and the European institutions themselves.