European Commission President Ursula von der Leyen has taken charge of a soon-to-be-published list of sustainable investments amid controversy around the possible classification of fossil gas and nuclear energy as “green” or “transitional” activities under certain conditions, according to several sources familiar with the process.
The European Union is moving closer to integrating nuclear power and natural gas into the bloc’s sustainable finance taxonomy – a set of rules designed to provide investors with a common definition of what is green and what is not in order to channel more capital into sustainable businesses.
The list of activities that Europe considers “green” or “transitional” investments will be laid down in a so-called ‘delegated act’ adopted by the European Commission setting out detailed implementing rules under the EU’s sustainable finance taxonomy regulation, adopted in December 2019.
But after several failed attempts and mounting controversy over the role of gas and nuclear power in the energy transition, President von der Leyen has now taken matters into her own hands, several sources told EURACTIV.
“It is possible that the Delegated Act will be presented to the college [of commissioners] next week,” said Pascal Canfin, a leading lawmaker who chairs the European Parliament’s powerful environment committee.
“The matter is now in the hands of Ursula Von der Leyen,” he told EURACTIV.
Bas Eickhout, a Dutch EU lawmaker with the Greens party who is one of the architects of the taxonomy regulation, confirmed that the matter has now reached the highest level in the European Commission.
“This delegated act is now Chefsache in the Commission, which is also logical since this decision is becoming a very important test for the credibility of the Commission on its Green Deal priority,” he told EURACTIV.
On Wednesday evening, the EU passed the first part of its taxonomy rulebook, setting out environmental criteria for investments including renewable energy, shipping and car manufacturing that will apply as of January 2022.
But no decision has been taken yet on the most politically sensitive part of the taxonomy, dealing with gas and nuclear investments.
Von der Leyen’s personal handling of the dossier is testament to the intensity of the battle surrounding the potential classification of nuclear and gas as a “green” or “transitional” source of energy.
Legislative proposals tabled by the European Commission usually originate from one of the 27 commissioner before they are discussed in the College and validated by the president of the Commission.
“Here, it is the other way around: it is von der Leyen herself, through her cabinet, who will present the proposal to the college,” said an EU source with knowledge of the matter.
Contacted by EURACTIV, the European Commission did not confirm whether von der Leyen had taken charge. Most likely, the proposal will be presented to the College of Commissioners by Mairead McGuinness, the EU financial services commissioner, and Valdis Dombrovskis, the vice-president in charge of the economy, a spokesperson said.
Given internal procedures, a final proposal should be ready by Friday before it is submitted to the college for approval next week, according to an EU source.
European countries are deeply divided on the subject. While France is leading a group of twelve countries supporting the inclusion of nuclear energy in the taxonomy, five other EU countries expressed their opposition to the move, with Austria even warning it was ready to challenge the decision before the EU court of justice.
Central and eastern European countries are also pushing to include fossil gas as a “transitional” activity in the taxonomy, arguing that gas is needed as a stepping stone for them to exit coal, the most polluting of all fossil fuels.
But the United Nations Principles for Responsible Investment (PRI), a network of international investors, has advised the EU against allowing these energy sources a sustainable label.
The inclusion of gas-fired power “would seriously compromise” the taxonomy’s role as an independent and scientific tool in line with Europe’s climate goals, PRI warned in a briefing note.
And while a report from the European Commission’s Joint Research Centre (JRC) looked favourably at the inclusion of nuclear, it did “not sufficiently [address] risks related to the storage of nuclear waste, severe incidents and nuclear proliferation,” UNEP said.
The UN-supported initiative recommends that Europe explores alternatives, either by developing a proposal for sectors involved with the energy transition or extending the taxonomy “to recognise intermediate economic activities and transition pathways such as gas-fired power that operates below the ‘significant harm’ threshold of 270g CO2/kWh”.
Pascal Canfin, the chair of the Parliament’s environment committee, has suggested a compromise proposal whereby gas and nuclear power would be included in the taxonomy’s “transitional” category – but only under specific conditions and with strict disclosure rules.
“We need to have a very clear safeguard system in place” in order to preserve the scientific integrity of the taxonomy, Canfin told EURACTIV in an interview.
The cornerstone of Canfin’s proposal is a mandatory disclosure requirement for investors that would let them choose whether they want gas or nuclear included in their asset portfolio.
“It would be like an opt-in system where a financial market participant would say: ‘gas and/or nuclear may be included in my investment portfolio, and that’s not a problem for me’,” Canfin explained.
Investors like pension funds “would have to say precisely whether they are using all the taxonomy, the taxonomy without gas, the taxonomy without nuclear or the taxonomy without gas or nuclear – that makes four possible categories. You tick the box and you have the flexibility to say whether your investments include gas or nuclear. It gives the necessary flexibility.”
For gas specifically, the “transitional” label would apply only when new plants replace coal in power generation and if emissions are below the ‘Do no harm’ threshold. And a sunset clause would apply as of 2030 after which investments in new gas power plants would no longer qualify.