New EU rules agreed on 'green' investments

The European Commission launched its Action Plan on Financing Sustainable Growth in March 2018, and adopted a package of measures two months later. Then, in July, a Technical Experts Group (TEG) on sustainable finance set up by the Commission began assisting it in developing a unified classification system for sustainable economic activities. The TEG published its Taxonomy Technical Report in June this year. Nuclear energy was excluded from the list of sustainable economic activities. However, in September the European Council decided to remain technology neutral in its strategy on financing sustainable growth and the transition to a low-carbon, resource-efficient economy.

On 16 December, the European Union agreed on a unified classification system to encourage private investment in sustainable growth and contribute to a climate neutral economy.

The taxonomy stipulates that the following environmental objectives should be considered when evaluating how sustainable an economic activity is: climate change mitigation and adaptation; sustainable use and protection of water and marine resources; transition to a circular economy; pollution prevention and control; and, protection and restoration of biodiversity and ecosystems. Economic activities must comply with four requirements in order to qualify. These are: it must provide a substantial contribution to a least one of the environmental objectives; it does 'no significant harm' to any of the objectives; it complies with robust and science-based technical screening criteria; and it complies with minimum social and governance safeguards.

The European Commission will be tasked with establishing the actual classification by defining technical screening criteria, in the form of delegated acts, for each relevant environmental objective and sector respectively. The Commission will be assisted by a technical expert group - referred to as the 'platform on sustainable finance' - which will be mandated to provide advice for developing and revising the technical screening criteria.

The European Council said the taxonomy for climate change mitigation and adaptation should be established by the end of 2020, in order to ensure its full application by the end of 2021. For the other environmental objectives, the taxonomy should be established by the end of 2021 for application by the end of 2022.

"This piece of legislation will be a game-changer in terms of tackling climate change, because it will enable billions in green investments to flow," said Valdis Dombrovskis, European Commission executive vice-president. "Thanks to this green list, or taxonomy, investors and industry will for the first time have a definition of what is 'green', which will give a real boost to sustainable investments. That will be crucial for the European Green Deal to become a reality."

Sirpa Pietikainen, lead negotiator of the European Parliament's environment committee, said the taxonomy was "probably the most important development for finance since accounting". She added, "I am satisfied that we have reached a balanced agreement with Council, but this is only the beginning. Greening the financial sector is a first step to make investments flow in the right direction, so it serves the transition to a carbon neutral economy."

The text of the regulation does not preclude or blacklist any specific technologies or sectors from the economic activities, except for solid fossil fuels, such as coal or lignite. Nuclear energy, together with gas, are not explicitly excluded from the regulation. These activities, the European Parliament noted, "can potentially be labelled as an enabling or transitional activity in full respect of the 'does no significant harm' principle."

European nuclear trade body Foratom welcomed the compromise agreement and nuclear's inclusion in the regulation. However, it said the 'do no harm' assessment of nuclear should be undertaken by experts with a strong knowledge of the nuclear fuel cycle.

"Foratom is confident that such a thorough and fact-based approach, which will evaluate selected energy sources on the basis of objective criteria (including CO2 emissions, volume and  traceability of waste, raw material consumption and land use impacts), will lead to the recognition of nuclear energy as a sustainable source of energy that contributes significantly to climate change mitigation. Furthermore, in order to ensure a level-playing field, Foratom believes that the same criteria should be applied equally to all power producing technologies."

The 128 nuclear power reactors (with a combined capacity of 119 GWe) operating in 14 of the 28 EU member states account for over one-quarter of the electricity generated in the whole of the EU. Nuclear accounts for 53% of the EU's carbon-free electricity.