Is it legal for the EU to label gas and nuclear as ‘environmentally sustainable’? Experts doubt it

By Mathilde Crêpy

At 10 PM on New Year’s Eve, the European Commission sent a message to experts working within the Platform on Sustainable Finance, the official expert group advising the Commission on green finance. It did not wish them a happy 2022, however. They were requesting Platform members to provide our opinion on a draft Complementary Delegated Act (CDA) that would officially label fossil gas and nuclear energy as ‘green’ investments.

This week, we have published our answer. In a detailed report explaining the science behind our reasoning, the Platform (including ECOS) openly questions whether the CDA on the table is legal at all.

Additionally, we propose that the Commission develops an additional list of non-sustainable investments (an ‘extended Taxonomy’), instead of bending the rules to accommodate for every economic activity in the EU Taxonomy. It would contain an ‘amber list’ of activities that are neither green nor environmentally harmful and a list of environmentally damaging ones.  

Our message could not be clearer: power and heat generation from fossil gas and nuclear energy cannot be considered ‘environmentally sustainable’.

In breach of the Taxonomy Regulation – this is why

It is a matter of science, but not only. Including gas and nuclear in the official list of sustainable activities would be against the EU law. In this week’s report, the Platform experts explain that the draft CDA differs ‘in fundamental ways to the Technical Screening Criteria in the already in force Climate Delegated Act and are not consistent with the provisions of the Taxonomy Regulation, specifically Article 10.2 and the provisions of Article 19. The effect is that the draft CDA activities could not be considered sustainable within the meaning of the Taxonomy Regulation’.

Specifically, the Commission proposes applying the definition of ‘transitional activities’ laid down in the Taxonomy Regulation to nuclear and gas. However, according to the law, there can only be transitional activities where no low-carbon alternatives exist. In the case of power and heat generation, there are plenty of decarbonised competitive options: renewables make about 80% of investments into new power generation already today. In its CDA, the Commission wrongly applies Article 10(2) of the Taxonomy Regulation in order to include fossil gas and nuclear energy.

In addition, Article 19 of the Taxonomy Regulation insists on the need for the list to be ‘science-based’ and to assess the environmental performance of activities through a ‘life-cycle’ perspective. The Commission, however, overlooks neglects both. Its proposal uses metrics and thresholds which have nothing to do with environmental science (such as load factors for gas-fired power plants), it does not rely on any impact assessments, and only looks at the direct emissions of plants (thus overlooking an important part of the carbon footprint of gas plants, such as methane leakage).

Our report insists that electricity and heat production – regardless of its source – must be below the science-based life-cycle threshold of 100gCO2/kWh to be considered. This rules out any form of unabated fossil gas production.

The Platform warns that the current proposal from the Commission would label as green activities that cause significant harm to the environment, as shown by the below diagram.

Green represents activities aligned with the already in force climate delegated act. Red represents any performance above the ‘Do No Significant Harm’ (DNSH) level. Assumptions are made on the basis of most efficient gas power plants.

Finally, our report goes on to explain that the construction of a new nuclear plant cannot be considered as making a substantial contribution to climate change mitigation in the timeframe proposed by the Commission. The CDA suggests that new facilities start operating around 2050, or even later. However, if we want to meet our climate commitments under the Paris Agreement, already as of 2035 the EU should rely only on electricity from decarbonised sources. Not only that, building new nuclear plants and operating the existing ones following the criteria proposed by the Commission does not ensure that significant harm to the environment is avoided.

Why greenwash? Busting the misconceptions

Industry lobbies and EU member states undermining the environmental ambition of the Taxonomy wrongly argue that activities not included in the Taxonomy will cease to exist. It will not be the case. Quite the contrary: activities not included in the Taxonomy are still legal and can continue receiving investments. They simply are not environmentally sustainable (in the terms defined by the Taxonomy Regulation) and therefore cannot be labelled as such.

Likewise, the Taxonomy was never meant to be an energy policy tool designed to address aspects of energy security, or peak demand management, as the Commission is now proposing. It was devised as an instrument to assess the environmental performance of specific, individual, economic activities rather than a whole system. Energy security and peak demand should be managed through other types of policies. The Taxonomy is not the tool to do that.

A big step in the fight against institutional greenwashing

The Platform’s report sends a strong signal to the European Commission that it should not attempt to label harmful energy sources as green. The draft CDA is no less that institutional greenwashing and would have dramatic consequences if adopted.

There is no place for fossil fuels in the Taxonomy. Not only would it channel money into the wrong kinds of investments, but it would also undermine the environmental credibility of the entire Taxonomy, setting a precedent for other dirty activities, such as waste incineration, to be labelled green.

It is not just activists speaking – it is science.