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EU prepares to include nuclear and gas in green investment list

An EU decision on which types of investments count as sustainable will reverberate much further than the financial sector, which explains why European countries are arguing so fiercely about an EU Taxonomy for green investments.

By Dave Keating

An EU leaders’ summit in Brussels last month was thrust into the limelight as media waited to see if they would confront Poland over its rule of law violations, perhaps triggering a ‘Polexit’ from the EU. However, before they got to that high-profile issue, EU leaders spent many hours debating what might seem like an obscure policy detail: what should be on an EU list of financial investments deemed sustainable?

In the end, the leaders spent far longer talking about this ‘EU taxonomy‘ than the rule of law, leaving many reporters scratching their heads – what could be so important about some guidelines for private investors? In fact, this decision will have effects far beyond the financial sector, shaping European climate and energy policy for years to come. At last month’s summit, it was clear that a shift in thinking had occurred. It now appears that both gas and nuclear power will count as green investments in the EU, despite significant blocs of European countries opposing each until now.

Cooling towers of Saint-Laurent Nuclear Power Station on the Loire river at Saint-Laurent-Noaun, Loir-et-Cher, France

“We need more renewables. They are cheaper, carbon-free and home-grown,” European Commission President Ursula von der Leyen said after attending the summit. “We also need a stable source, nuclear, and during the transition, gas. This is why we will come forward with our taxonomy proposal.”

It was a significant statement given that EU countries have been arguing for three years about whether to include these types of energy in the taxonomy. In 2019, France, the UK and eastern European countries threatened to veto the EU taxonomy because nuclear was not explicitly included as a green investment. Then, in 2020, a group of ten pro-gas countries, mostly from the east and south, threatened a veto because it did not include natural gas as a transition fuel.

Von der Leyen tasked her in-house experts with examining the situation, and in July 2021, they recommended including nuclear but did not endorse gas. Nevertheless, it now appears that a nuclear-for-gas compromise may be the only way to get the taxonomy through a vote in the EU Council, the EU’s upper legislative chamber where votes are weighted based on each country’s population.

That von der Leyen was not only willing to be explicit about nuclear but also gas after the summit signals that member states have come to a new understanding that has unblocked the issue. Insiders expect the Commission to put forward a formal proposal later this month. “The Commission is under a lot of pressure now,” says Jessica Johnson from the Brussels-based nuclear industry association Foratom. “They took the decision to have their experts assess nuclear, which was the right decision. Those conclusions are that, overall, nuclear complies with the taxonomy. So the science is there, but it is a politically contentious issue.”

Changed green minds on nuclear

That it will be necessary to deem gas a green investment in order to recognise nuclear as a green investment is an indirect effect of Brexit. Following the UK’s departure from the EU in 2020, it became clear that nuclear no longer had majority support in the Council. Britain and France had been its loudest champions. Brexit meant the balance shifted toward anti-nuclear countries, of which Germany is the most significant. This, combined with the observable trend that nuclear power has been declining across Europe, caused some speculation that Brexit spelled the end of nuclear growth in Europe.

However, two things appear to have moved the needle in September: the EU’s energy price spike and the German election. Not only is Europe’s largest anti-nuclear voice currently distracted, it also appears Berlin is ready to do a deal: we will support nuclear if you will support gas. The “you” in this equation is first and foremost France.