EU faces down critics over green investment label for gas and nuclear power

Brussels has stuck by a decision to classify nuclear power and some forms of natural gas as green energy, defying criticism from scientists and climate change experts over its landmark sustainable finance rules.

The European Commission on Wednesday published a largely unrevised final text of its “taxonomy for sustainable finance” which has come under fire from EU governments, environmental campaigners and the European Investment Bank for its acceptance of nuclear power and forms of carbon-emitting gas.

The EU’s taxonomy is a sweeping classification system for industries that produce about 80 per cent of the bloc’s emissions to guide private capital into environmentally sustainable activities.

But Brussels has come under fire for bowing to pressure from pro-nuclear and pro-gas member states to include the two technologies under the green label in an initial draft first reported by the Financial Times.

Mairead McGuinness, EU commissioner for financial services, on Wednesday told reporters the text “may be imperfect but it’s a real solution that moves us forward towards our ultimate goal of climate neutrality”.

“The taxonomy does not mandate investment in certain sectors. It does not prohibit investment in the sectors covered. It is a signpost towards the private investment market,” she said.

Brussels’ final version of the text keeps the classification of nuclear power — which produces little CO2 but has toxic byproducts that pose radiation risks — largely unchanged. New nuclear power stations will qualify for the green label for permits issued before 2045 if countries can provide plans for safe waste management and decommissioning. The inclusion has been supported by nuclear-reliant EU countries led by France.

Natural gas will also be given the green label if it is used to replace more polluting energy sources, such as coal, and if direct emissions from its use fall below 270g of CO2 per kilowatt/hour, or an average of less than 550kg a year over 20 years.

This decision has been criticised by governments in Spain, Austria, Denmark, Netherlands, Sweden and Luxembourg, which called for a threshold of 100g, in line with scientific advice provided by experts to the commission.

EU officials told the FT that EU commissioners from Portugal, Spain and Austria voted against the rules in an internal meeting of the college of commissioners — a rare show of dissent in meetings that are usually run on consensus.

The governments of Spain, Austria and Luxembourg have said they will reject the taxonomy outright, but their opposition will not be enough to create a majority of countries needed to block it. Members of the European parliament can also veto the text with a majority vote within the next six months.

Markus Ferber, a German conservative MEP, said the exercise “has failed” and warned the vote in the parliament was “by no means a sure-fire exercise”.

The commission’s taxonomy comes as the EU’s reliance on natural gas — with Russia Europe’s largest single provider — has come under fire as Moscow raised military tensions over Ukraine, helping to drive up European electricity prices.

Luca Bonaccorsi from Transport & Environment, a clean transport campaign group, said the labelling of gas would lead to a “wave of investments in gas, sabotaging the continent’s entire decarbonisation efforts. It is a gift to Putin at the very time we should be ditching gas.”

The EU carbon price closed at a record high of €95 on Wednesday, or three times what it was a year ago, on expectations of stricter climate policies, as well as a result of the gas crisis. 

The price of allowances traded under the bloc’s emissions trading system gives the buyer permission to emit one tonne of carbon.

Even with the elevated cost of polluting, it has continued to be more economical for power generators to switch from gas to coal, the most polluting fossil fuel. The carbon price would need to rise to around €200 to make the use of gas more profitable than coal, according to estimates by data provider Refinitiv. 

Additional reporting by Camilla Hodgson

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