LAST UPDATE | 2 Feb 2022

THE EUROPEAN COMMISSION HAS announced that it backs giving a sustainable finance label to both nuclear power and natural gas to encourage investments it hopes will speed the transition to a greener economy.

“Renewables are already included in the taxonomy following the adoption of the first delegated acts, so today, we’re setting out how gas and nuclear could make a contribution in the difficult transition to climate neutrality,” Irish MEP and EU commissioner Mairead McGuinness said.

The fight over the EU’s classification of power sources is the latest dust-up in discussions between the 27 member states on how to achieve a net zero-carbon economy by 2050.

Brussels had high hopes that the EU’s so-called “energy taxonomy” would help set a global standard on determining sustainable projects and direct big flows of Wall Street money towards saving the planet.

But it is now mired in controversy because of the inclusion of gas and nuclear projects as suitable investments, with opponents of each warning the European Commission that the label lacks credibility.

At least five Irish MEPs said last month that they plan to oppose the contentious proposal.  

The plan will now be scrutinised over the next four months. 

Valdis Dombrovskis, Executive Vice-President for Commission group the ‘Economy that Works for People’ said the act is “about accompanying the EU economy in the energy transition, a just transition, as a bridge towards a green energy system based on renewable energy sources”. 

Irish MEP and commissioner in charge of Financial Services Mairead McGuinness said the EU needs to “use all the tools at our disposal” to reach net-zero emissions by 2050. 

“Stepping up private investment in the transition is key to reaching our climate goals,” McGuinness said in a statement. 

“Today we are setting out strict conditions to help mobilise finance to support this transition, away from more harmful energy sources like coal.”

EU member states often have widely differing energy mixes, with France, for example, reliant on nuclear power for its electricity needs.

Germany, meanwhile, is highly dependent on natural gas piped in from Russia and leads a small group of nations that passionately believe nuclear energy is unsafe while gas could help coal-hungry economies like Poland’s to turn the page.

Berlin and Paris were adamant that their chosen energy industries are fit to receive the Green label and the commission – the EU executive – was handed the politically poisonous task of reconciling the positions.

Under Ireland’s Climate Action Plan, 80% of electricity will be generated by renewables by 2030. 

‘Gold standard’

Four more EU member states yesterday came out firmly against the inclusion of gas projects, arguing that the taxonomy’s promise to become a “gold standard” for investors was compromised.

Even with conditions, calling gas sustainable “is largely incompatible” with the goals of the Paris climate agreement, said a letter to the commission from Denmark, Sweden, Austria and the Netherlands.

Opponents of nuclear energy have been just as vocal. In a rare move, Austria’s representative to the commission threatened to vote against his colleagues when the label comes for approval.

That proposal will then be subject to a possible veto by a super majority of member states or by the European Parliament, though insiders believe this is unlikely. At least 20 member states need to reject the plan for it to be blocked. 

Meanwhile, the head of the European Investment Bank, an EU institution, last month said his bank may sidestep the bloc’s taxonomy given the widespread opposition to gas and nuclear amongst Green investors.

“If we lose the trust of the investors by selling something as a green project, which turns out to be the opposite, then we cut the feet on which we are standing when it comes to financing the activities of the bank,” said EIB President Werner Hoyer.

In January, the Institutional Investors Group on Climate Change, which includes the investment arms of JPMorgan and Goldman Sachs, said the inclusion of gas would “undermine the EU’s ambitions to set the international benchmark for credible, science-based standards for classifying sustainable economic activities.”

Internationally, other so-called taxonomy proposals have faced similar battles. In South Korea, the government last month faced pushback for including gas in its green label; nuclear energy was not included but will remain under review, according to the Bloomberg news agency.

 © AFP 2022 and additional reporting by Orla Dwyer.