A guide to the EU's 'green' taxonomy - and nuclear's place in it

10 February 2022

The European Union wants to encourage investment in "sustainable" activities to help it get to net-zero by 2050.

Mairead McGuinness, European Commissioner for Financial Services, Financial Stability, and Capital Markets Union, at the unveiling of the CDA last week (Image: EC)

What’s the story?

The European Union aims to be climate neutral by 2050. To help that process it has come up with a system to "facilitate sustainable investment". The Taxonomy Regulation provides investors with guidance on economic activities that can be considered environmentally sustainable. It also obliges European companies to report their level of taxonomy-aligned undertakings. Any activity excluded from the list faces being cut out of sustainable finance products and will find itself at odds with long-term EU policy objectives.

So has nuclear power been included?

There has been a split within the European Union over whether or not nuclear power - and natural gas - should be included as being "sustainable". Nuclear energy was left out of the initial Delegated Act pending further assessment. But this further assessment by the EU Joint Research Centre, reviewed by two further expert bodies, concluded that the technology is sustainable. As a result, the Commission has now taken steps to included nuclear energy as a transitional activity in the taxonomy by adopting a Complementary Delegated Act (CDA).

Why has it been controversial?

Supporters of nuclear power, including 12 EU member states who publicly backed its inclusion, say that nuclear is a low-carbon power source that must be part of any energy mix to tackle climate change, and does not cause more significant harm than other industries included in the taxonomy. They say that the science, and evidence-based policy support its inclusion. Opponents say that it should not be included because radioactive waste means it is not sustainable. For the European Union it has been one of the highest profile recent issues where France - which backs nuclear - is on the opposite side to Germany.

What areas does the taxonomy cover?

Sectors which are responsible for about 80% of the EU’s direct greenhouse gas emissions have been initially targeted, including:

  • Agriculture
  • Manufacturing
  • Electricity, gas, steam and air conditioning supply
  • Water, sewage, waste and remediation
  • Transport
  • Information and communication technologies
  • Buildings

In future the taxonomy is expected to be expanded to cover more economic sectors.

How does the EU judge if something is sustainable?

An economic activity must substantially contribute to at least one of six environmental objectives without causing significant harm to the others:

  • Climate change mitigation
  • Climate change adaptation
  • Sustainable use and protection of water and marine resources
  • Pollution prevention and control
  • Protection of healthy ecosystems
  • The transition to a circular economy

What has been proposed in the Complementary Climate Delegated Act?

The European Commission has included certain nuclear and gas activities in the "transitional" category of activities - ones that "cannot yet be replaced by technologically and economically feasible low-carbon alternatives, but do contribute to climate change mitigation and with the potential to play a major role in the transition to a climate-neutral economy, in line with EU climate goals and commitments, and subject to strict conditions, without crowding out investment in renewables."

What specific nuclear investment is included?

- Advanced technologies with closed fuel cycle ("Generation IV") to incentivise research and innovation into future technologies in terms of safety standards and minimising waste (there is no end date for this bit);

- New nuclear power plant projects for energy generation, which will be using best-available existing technologies ("Generation III+"), will be recognised until 2045 (date of approval of construction permit);

- Modifications and upgrades of existing nuclear installations for the purposes of lifetime extension, will be recognised until 2040 (date of approval by competent authority).

What other special conditions have been included for nuclear?

The CDA sets out many safety and waste-related requirements for nuclear activities to be considered sustainable, in addition to specific Do No Significant Harm criteria. Many of these are in line with existing EU regulation and expectations but some go beyond. In general the requirements are more restrictive than for other energy technologies already included in the first Delegated Act. The special requirements include:

- Accident Tolerant Fuel, which is not yet commercially available for all reactor types, must be used at all existing plants and Gen III new-build by the year 2025.

- The project has been notified to the Commission and the Commission has given its view whether all criteria have been satisfactorily addressed.

- A high-level waste repository to be operational by 2050, and for final disposal facilities for low and intermediate-level waste to be operational in the country where a given project is based.

- Nuclear fuel cycle activities are currently not included in the CDA as enabling activities and nuclear investments outside the EU remain excluded from the taxonomy.

What has been the reaction to the adoption of the Complementary Delegated Act?

The European College of commissioners backed the plan and among the pro-nuclear power countries there was a welcome that nuclear power was included in the taxonomy but the warmth of the welcome was tempered by some of the restrictions and conditions on what was included, as well as the expiry dates.

For those countries opposed to nuclear power there was disappointment at its inclusion. Austria’s energy and climate minister Leonore Gewessler called it "greenwashing" and is threatening to take legal action. WWF Europe called on the European Parliament to vote down the plan.

What has the nuclear industry said about it?

European nuclear trade body Foratom’s Director General Yves Desbazeille welcomed the CDA but said some of the criteria put forward for nuclear would "prove very challenging to attain" and "we remain disappointed that nuclear continues to be treated as a transitional technology … we firmly believe that it contributes to climate mitigation objectives and does not cause more harm than any other power-producing technology already considered as taxonomy compliant."

Sama Bilbao y León, director general of the World Nuclear Association, said: “The adoption of this CDA is a hugely important milestone that the international financial community cannot afford to ignore … the Commission has been right to reject political pressure to keep nuclear excluded from the taxonomy. But in seeking a politically acceptable compromise, it has produced some conditions that are not scientifically justified or applied consistently to other energy technologies. This will hinder the EU from achieving its energy and environmental goals.”

What are the wider implications of the EU’s decision?

The European Union’s decision to include nuclear in its "sustainable" list has been closely watched around the world. It will have implications for EU investors and businesses operating outside the union, as well as foreign investors into Europe. The EU's decision is also likely to set a precedent for countries around the world as they set their own sustainable investment frameworks and work out which technologies to prioritise for support in the path towards net-zero.

What happens next?

The European Parliament (whose members are elected by voters across the union every five years) and the European Council (which is made up of the governments of the 27 member states) have four months to scrutinise the Complementary Delegated Act. They can request an additional two months of scrutiny time if they need it.

To stop the CDA coming into force there needs to be a reinforced qualified majority opposing it in the European Council - so at least 20 member states representing at least 65% of the EU population would have to oppose it. Given the number of countries known to back it, this seems extremely unlikely to happen. The European Parliament because it can object if a majority of its members vote against it in plenary (i.e. at least 353 MEPs).

If the European Council and the European Parliament do not object to it, the Complementary Delegated Act will enter into force and apply as of 1 January 2023.

Researched and written by World Nuclear News