EU Moves Ahead with Plan to Include Gas, Nuclear Energy in EU Taxonomy

The European Commission has taken a major step towards including investments in gas and nuclear-based energy in the list of sustainable activities under the new EU taxonomy classification system, with the Taxonomy Complementary Climate Delegated Act proposing criteria and disclosure rules for their inclusion.

By way of background, the EU Taxonomy is part of the EU Action Plan on Sustainable Finance, and is a classification system enabling the categorization of economic activities that play key roles in contributing to at least one of six defined environmental objectives, starting with climate change mitigation and climate change adaptation, and no significant harm done to the other objectives. The EU Taxonomy regulation came into effect at the beginning of this year, following the approval of the EU Taxonomy Climate Delegated Act (CDA), starting with the first two objectives, climate change mitigation, climate change adaptation, although the assessment of gas and nuclear energy as eligible areas for green investment remained ongoing.

While gas and nuclear energy are often viewed as transition energy sources that will be required to facilitate the shift from fossil-based power to a greener energy system, their proposed inclusion has met significant resistance from some member states, such as Germany and Austria, along with sustainable investment groups who have warned of challenges to investors as they aim to channel capital towards environmentally sustainable activities.The proposal has even met opposition from the EU Platform on Sustainable Finance, an expert group of the European Commission tasked with advising it on the development of sustainable finance policies, who warned recently that including nuclear and gas would risk undermining the sustainable Taxonomy framework, and would include criteria for activities not aligned with Europe’s environmental goals.

Accompanying today's proposals, the Commission said that it has considered the feedback and adjusted the criteria and disclosure and verification requirements rules for nuclear and gas in the Taxonomy. For example, new nuclear power plant projects will only be recognized until 2045, and gas-related activities will be required to have lifecycle emissions below 100gCO2e/kWh. The proposal also introduces disclosure obligations on companies and financial market participants to report on the degree to which gas and nuclear energy activities are included in their KPIs.

The proposals will now move on to the European Parliament and Council.