EU taxonomy: Green stamp – but subject to conditions

What an EU state generates electricity from is its business. But the EU Commission stipulates which energy sources the money should flow into – and makes clear specifications in its taxonomy for gas and nuclear power.

The EU Commission is sticking to it: Despite the resistance of some member states, it recommends investments in nuclear power and natural gas as sustainable under certain conditions. The Brussels authority has hardly changed the heavily disputed draft for the so-called taxonomy that was presented on New Year’s Eve. However, that was not to be expected. After all, experts from the Commission had held extensive discussions with all 27 governments in advance. In addition, Brussels cannot please everyone anyway: Some member states reject a green seal for investments in nuclear energy and natural gas. Others are demanding exactly that in order to get away from coal-fired power generation, which is even more harmful to the climate.

The result is a typical Brussels compromise that primarily takes into account the interests of the two largest and most important member states: France, which generates 70 percent of its electricity from nuclear power and absolutely wanted to include this technology – and Germany, which does not consider nuclear energy to be sustainable, But natural gas is temporary.

Private capital for the green transition

Coal, nuclear, gas, wind and sun: from which sources an EU country obtains its energy is and remains its own affair. The EU Commission has nothing to say about that. When it comes to rules for the financial markets, yes. Brussels’ so-called taxonomy is therefore an instrument of financial and not energy policy.

The aim is to raise more private capital for Europe’s sustainable transformation. According to estimates by the Commission, this will cost around 350 billion euros a year. In its rulebook, the authority recommends financial products that protect the environment and resources. This also includes investments in nuclear power and natural gas – at least until all of Europe’s electricity comes from the sun, wind and water.

Requirements for nuclear and gas power plants

There are conditions for this: Nuclear power plants must get the building permit for the eco-seal before 2045, for the period from 2050 a plan for the final disposal of the radioactive waste is required. The Commission sees Finland, Sweden and France on the right track here. According to the legal act, retrofitting old reactors by 2040 is also sustainable.

The following applies to gas-fired power plants: They must not exceed certain CO2 limits, replace even more climate-damaging coal-fired power plants and the operators must switch to more climate-friendly energy sources by 2035, such as green hydrogen or biogas. In the New Year’s draft, the Commission had prescribed intermediate steps before this changeover – such as the addition of more climate-friendly energy sources as early as 2026. This passage was deleted. The federal government had demanded that the criteria for gas be loosened up. Power plants can therefore possibly burn comparatively harmful natural gas for longer.

Protest from EU member states

France and Finland are satisfied with the Brussels initiative. Eastern European countries are also relying on nuclear power and gas in order to phase out coal combustion in the medium term. But Denmark, Sweden and the Netherlands do not consider natural gas to be sustainable. Austria and Luxembourg have announced lawsuits against the legal act. According to experts, however, the chances of success are slim.

Environmental groups and MEPs from the SPD, Greens and CSU have sharply criticized the decision. But the Commission has the upper hand. The EU Parliament and member states are given up to six months to study the legal act, and they can hardly smash it. 20 of the 27 EU governments would have to vote against it, or an absolute majority of MPs – both are unlikely.

German fund providers cautious

The opinion of the Germans on this is clear: in surveys, a majority classifies sustainability when investing money as important and nuclear energy as unsustainable. It is therefore at least an open question whether investors in Germany will put more money into nuclear power after the Brussels recommendation.

Fund providers are reluctant: Some initially assess the importance of the Brussels initiative for the financial markets as very low and do not want to readjust their criteria for sustainability. But that could change if the Commission expands its taxonomy, they say.

Some criticize that the already confusing market for green funds is now becoming even more complicated. And they doubt that the Commission’s decision will increase confidence in eco-financial products. The Brussels initiative may therefore do less harm than its critics fear, but also less good than its supporters hope.