The EU is struggling to strike a balance between energy sustainability and energy security. This ambiguity was laid bare when it decided to include natural gas and nuclear energy in a framework of sustainability in the form of the EU taxonomy, a list of  “green classification” systems clarifying sustainable economic activities. 

Following the Russian invasion of Ukraine, Europe is experiencing an unprecedented rise in energy bills. On September 8, Goldman Sachs warned that the bloc’s household electrical bills could surge by €2tn by next year amid a worsening energy crisis. 

On July 6, the EU parliament voted to include gas and nuclear energy in the sustainable finance taxonomy, saying that these can be transitional fuels with strict transparency requirements. Set to enter into force in January 2023, the Complimentary Delegated Act will allow nuclear and natural gas-fired power plants to be marketed as “green” investments in financial markets. 

However, experts agree that this standpoint shows “political compromise” and “energy security”. They also highlight that the new taxonomy can go against the EU sustainable development settings, including the Paris agreement and the European Green Deal.

“The nuclear and natural gas energy sources have been extremely controversial and have been under a separate discussion for a long time, culminating in the final political compromise, despite severe criticisms from civil society,” says Tsvetelina Kuzmanova, a policy analyst at think tank E3G.

EU taxonomy

The EU hopes that the taxonomy prevents greenwashing and clarifies what economic activities can be aligned with the European Green Deal. This is a significant part of the EU’s sustainable finance action to channel capital in investments toward green technologies. Companies can decide where to allocate their funds and include “green investments” in their portfolio accordingly.

The EU taxonomy seeks to categorise the definition of sustainable investments based on two criteria. An activity must contribute to at least one of six environmental objectives – (1) climate change mitigation, (2) climate change adaptation, (3) sustainable use and protection of water and marine resources, (4) transition to a circular economy, (5) pollution prevention and control, and (6) protection and restoration of biodiversity and ecosystems – and should “do no significant harm” to any of the six objectives.

Fossil gas

Experts say that fossil gas is not scientifically sustainable. “The gas plant has the same greenhouse gas footprint as other coal plants,” says Sean Kidney, CEO of the Climate Bond Initiative. He adds that the EU authority knew that gas is not sustainable, but the EU agreed to include it because of the political push and lobbying from the gas industry.

The gas has lower carbon emissions than other coal plants. According to the assessment published by the Intergovernmental Panel on Climate Change, coal power plants show a range of 710–950 gCO2eq/kWh, while natural gas combined-cycle plants have emissions in the range of 410–650 gCO2eq/kWh. However, it still creates huge amounts of carbon dioxide and is also a big emitter of the potent greenhouse gas methane, which is 86 times more harmful than carbon dioxide. Methane is emitted through the drilling and extraction of gas from wells and its transit through pipelines. 

Mr Kidney said there was lobbying by the gas industry and by eastern European states, including Germany.

Steffen Hebestreit, a spokesman for German chancellor Olaf Scholz, said in a statement in July that “it is clear that natural gas is an important bridging technology on the way to CO2 neutrality”.

Petr Fiala, the prime minister of the Czech Republic, also supported the new inclusion of nuclear energy and gas after the European Parliament’s vote in July.   

Germany was the largest European buyer of Russian oil, followed by the Netherlands and Poland, according to International Energy Agency data published in June.

In the EU taxonomy, new guidelines for new gas-fired plants are set out, clarifying that these projects should replace existing fossil fuel power plants without exceeding the pre-existing capacity by more than 15%. The European Commission says a new gas-fired plant should achieve certain targets in terms of emissions reductions, and fully switch to renewable or low-carbon gases by 2035.

Carlos Torres Diaz, head of the power team at Rystad Energy, tells fDi that “given that there is already a large fleet of operational gas plants these are likely to continue to be used in order to help meet demand and back up the intermittency of renewable sources in the long term”.

This narrative is “particularly dangerous” and “the very definition of greenwashing”, Ms Kuzmanova at E3G notes that calling gas investments as green, while needing to cut gas consumption significantly, goes against the same EU logic.

The IEA said no new fossil fuel projects should be approved if we are to reach global net zero, according to its analysis. 

“European policy-makers are aware that European countries cannot just run on nuclear, coal, and gas, and have an energy system only powered by solar and wind, which is not technically possible,” says Fabian Skarboe Rønningen, senior analyst at Rystad Energy. He adds that the deal was a “pragmatic compromise”. 

Nuclear energy 

Nuclear energy is low-carbon energy from a greenhouse gas emission standpoint. Rystad Energy, an energy consultancy, says the emissions generated from nuclear plants is 99.7% less than the European gas power plant, and 99.8% less than the European coal power plants.  

However, nuclear energy has been the subject of fiery debates when it comes to hazardous nuclear waste, which could be against the “do no significant harm” principle.

According to the US Environmental Protection Agency, radioactive waste is hazardous because of its radioactive particles, which if not properly managed can be a risk to human health and the environment. Nuclear scientists say that geological disposal is the best option. However, deep geological disposal of this type of radioactive waste has not yet been realised in any country, according to the International Atomic Energy Agency’s report. 

“France wanted to have nuclear energy included [in the EU taxonomy],” Mr Kidney says. WWF, an environmentalist group, said in February that the French government agreed to proactively support the inclusion of fossil gas in exchange for the support of other member states.

France derives about 70% of its electricity from nuclear energy, according to the world nuclear association data published in September. In 2021, France was the world's largest net exporter of electricity due to its very low cost of generation of nuclear power, and earns more than €3bn per year, the world nuclear association reported.

Mr Kidney believes that climate change has hampered the French nuclear output, halting production at almost 50% of its plants. “One of the big reasons for this [is that nuclear power depends] on large volumes of water, and there was drought in France.”   

France suffered a historic drought and the second hottest summer on record, according to the Météo-France report on August 5, the French national meteorological company.

A nuclear reactor consumes roughly 1514-2725 litres of water per megawatt-hour to cool down, according to a utility management company Monarch Partnership. As of September 16, 29 of its 56 nuclear reactors shut down, the nuclear reactor operator in the country, Électricité de France (EDF) confirmed while denying that drought was the main reason for the shutdown of reactors.

EU taxonomy expert Marta Toporek from ClientEarth, an environmental law charity, sums up one viewpoint of the framework, telling fDi: “This Complimentary Delegated Act is not even fit for purpose. It's more for energy security rather than sustainability.”

This article first appeared in the October/November 2022 print edition of fDi Intelligence.