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Green finance row splits Berlin

The EU is in the final stages of honing its green finance rules and a leaked draft proposing that nuclear and gas should receive the label for the transition has prompted complaints from Berlin. But positions differ even inside the new German coalition government

The EU sustainable finance taxonomy is a long, detailed list of economic activities and environmental criteria they must meet to be labelled as green investments.

By restricting the “green” label to truly climate-friendly projects, the scheme aims to make those investments more attractive to private capital and stop overstating projects’ environmental credentials.

But the potential inclusion of nuclear and gas in the taxonomy has split political opinion in Germany, a country in the process of phasing out nuclear power completely.

“The proposal by the European Commission dilutes the good label for sustainability,” commented the green super-minister and vice-chancellor Robert Habeck, stressing that the German government would not agree to the proposal.

The Greens are the second-largest party in the new “traffic light” government, alongside the social democrat SPD and the business-friendly liberal FDP. Even though the parties are united in rejecting nuclear energy, the Greens stand alone in their opposition to gas.

There are also doubts as to which extent Chancellor Olaf Scholz will protest against including nuclear. The row was a “heated disagreement”, he said on 14 December, adding that ultimately the taxonomy was a mere financial framework.

Germany is one of Europe’s anti-nuclear stalwarts, with the country’s own nuclear exit well underway and slated to be completed in 2022.

Yet, some top-level politicians who sat at the table as the government was formed told EURACTIV that there was a certain hesitancy to hurt French nuclear interests, as well as the need to maintain good relations with the EU’s second-largest country.

The tenuous shared position on nuclear, however, breaks down when it comes to gas, where the FDP and the SPD oppose the Greens.

“Realistically, Germany needs modern gas-fired power plants as a transitional technology because we are doing without coal and nuclear power,” finance minister and FDP chief Christian Lindner told SZ.

“If we cannot finance gas, then coal will be prolonged,” the leading SPD politician and development minister Svenja Schulze explained at COP26, as reported by CLEW.

Including gas as sustainable conditionally was “in line with the position of the federal government,” Chancellor Scholz’s spokesperson clarified on Monday (3 January).

Yet Vice-Chancellor Habeck stated that “it is questionable to include fossil gas in the taxonomy”. However, he noted as positive the Commission’s proposed criteria to have them ready to run on alternate “green” gases.

Sven Giegold, state-secretary at Habeck’s economy and climate ministry, told EURACTIV when he was still chief of the German EP Greens that “we accept that there will be some investment in – on an interim basis – fossil gas plants in order to help the coal phase-out. However, gas must not be included in the taxonomy”.

“A taxonomy including nuclear and fossil gas will turn the effort of making Europe the leading market for green finance into a Europe as the leading joke instead.”

Finance minister’s business?

The EU’s efforts to formalise a framework for its green investing label officially began in 2018. One man in Berlin who has had all the time in the world to shape the EU’s green finance rules has thus far been relatively quiet: Olaf Sholz, the former finance minister turned chancellor.

Unlike the economy ministry, formerly headed by the conservative Peter Altmaier, which had spoken out in favour of gas receiving a green label, the finance ministry had not positioned itself during the initial shaping of the rules, a source closely involved in the process told EURACTIV.

German ministries struggling to adopt a position on various issues in Brussels reflect the lack of ministerial independence in the German system, as all decisions taken by a minister must be cleared with the entire government and may be overturned.

Because of the potentially explosive nature of the role given to nuclear and gas in a sustainable finance framework, the issue was left to a so-called delegated act that comes into force automatically if not blocked.

To block the delegated act, Scholz would have to gather 72% of votes in the Council representing at least 65% of the EU population, while the European Parliament can stop the act with a simple majority.

Most observers agree that Scholz may be content to offer half-hearted opposition to the taxonomy, alongside the Greens, and to sit this one out.

Germany may not even join Austria’s threatened lawsuit at the European Court of Justice against the inclusion of nuclear. “The Commission appears to be on safe grounds, legally speaking,” said Steffen Hebestreit, Scholz’s spokesperson.