atw - International Journal for Nuclear Power | 10.2020

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atw Vol. 65 (2020) | Issue 10 ı October 482 ENERGY POLICY, ECONOMY AND LAW Sustainable Finance Initiative of the EU and Taxonomy – How Green Is Nuclear? Nicolas Wendler For more than a year since June 2019 a struggle has been ongoing over the treatment of nuclear power in the context of the Sustainable Finance Initiative of the European Union and particularly in what is called taxonomy, a set of rules and categorizations to make sustainable finance implementable and operational. The debate of weather to include nuclear in the taxonomy as sustainable for its huge potential to mitigate climate change or to disregard it for alleged violation of the “Do no significant harm” (DNSH) principle with regard to other environmental policy objectives will probably continue till 2021, when the Joint Research Center of the European Union will give its evaluation on the issue and the European Commission will subsequently take its decision. Background In March 2018 the European Commission published the Commission action plan on financing sustainable growth in response to the recommendations of the High Level Expert Group Sustainable Finance. Next to aspects of financial market regulation and transparency, the elaboration of a classification system to rate the sustainability of financial products was a focus of its work. This classification system for economic activities that includes many sectors particularly of industry next to the energy sector was called taxonomy in the context of the sustainable finance initiative. The European Parliament agreed to the regulation initiative (action plan on financing sustainable growth) subsequently presented by the European Commission. Additional demands from the ranks of the parliament like a taxonomy of nonsustain able activities (so called brown- listing) were at this occasion rejected in the parliamentary committees. Nevertheless, the modified proposal of the parliament defined that investment in coal, gas and nuclear infrastructures cannot be considered sustainable. The birth of the taxonomy Parallel to the legislative/prelegislative process a Technical Expert Group on sustainable finance (TEG) appointed by the European Commission in June 2018 worked out a draft of a sustainability classification system. This Taxonomy Technical Report was published in June 2019 and was opened up for a public consultation by the responsible Directorates General of the Commission. In the report of the TEG which was made up primarily by financial experts and representatives of NGOs but hardly by scientific and technical experts of the concerned industries, it was decided on nuclear energy, that the group does not consider itself capable of a judgement if nuclear power does inflict significant harm to the environment. It was recommended to not include nuclear in the taxonomy despite the recognition that nuclear can make a substantial contribution to the mitigation of climate change. The rejection was justified particularly with regard to the issue of waste management and it was recommended to come back to the subject of nuclear power later for in-depth consideration in other expert groups. This classification was criticized markedly in the consultation among other by the German nuclear industry association Kerntechnik Deutschland and its European counterpart FORATOM. The report was criticized by many other industries too in the respective relevant parts. Why is taxonomy important? The problem with being excluded from the category „sustainable“ for all concerned industries and activities is that long term financing conditions might deteriorate. The sustainable finance initiative stipulates better conditions for „green“ investment e.g. lower equity requirements, institutional investors will develop their portfolios towards green investments more and more often and public institutions or business development banks will align their decisions on subsidies, guarantees or loans at reduced interest rate with the standards of the green finance regulation of the EU. So, it seems likely that the taxonomy will play an important role in the allocation of budgets in the context of the so-called Green Deal of the European Commission till 2030 or with regard to the funds mobilized for the green recovery program following the economic effects of the corona pandemic. It is possible too that with the future development of sustainability rules a negative taxonomy might be introduced. Further development 2019 The Council of the European Union decided its position on taxonomy in September 2019 and issued a mandate for the so called trialog negotiations, an informal conciliation pro cedure between the European Commission, the European Parliament and the Council. Here it was decided as council position and opposed to the parliamentary position, to not exclude nuclear projects from the taxonomy and thereby from the classification as sustainable investment. In the trialog negotiations the Finnish Council Presidency and the representatives of the parliament initially agreed 5 December 2019 on the introduction of a taxonomy that shall include such activities that are in a transition to sustainable production (transitional) and activities that can enable others to become sustain able (enabling) next to sustainable activities in the proper sense. Con trary to this agreement the Energy Policy, Economy and Law Sustainable Finance Initiative of the EU and Taxonomy – How Green Is Nuclear? ı Nicolas Wendler
atw Vol. 65 (2020) | Issue 10 ı October representa tives of the UK, France, the Czech Republic, Hungary, Poland, Slovakia, Romania, Bulgaria and Slovenia have rejected the proposal in a meeting of the Permanent Representatives Com mittee (of member states) ( COREPER) on 11 December, because they feared that nuclear and natural gas projects would be excluded from sustainable financing despite the fact that they were not excluded explicitly in the text. On 14 December 2019 the Finnish Presidency presented a new compromise proposal which was agreed to by the representatives of member states on 16 December and representatives of the European Parliament on 17 December. In the compromise only solid fossil fuels are excluded from taxonomy by seeking to replace them with other technologies. Concerning the classification of other technologies, a technology-neutral approach is chosen in principle and the criterium of significant harm for environmental policy goals or the environment is specified as to consider concrete significant and long-term damages instead of targeting the mere risk of such damages. The position of the German government was to criticize the compromise proposal of the Finnish presidency, because it did not rule out that nuclear power could be classified as ecologically sustainable which the German government wanted to achieve but failed to do so in the Council as happened already in September. Legislative decisions and delegations In January 2020 the Committee on Economic and Monetary Affairs and the Committee on the Environment, Public Health and Food Safety of the European Parliament adopted the compromise on the Establishment of a framework to facilitate sustainable investment, the Council did so in April. The plenary of the European Parliament adopted the regulation „Framework to facilitate sustainable investment“ in June. The fate of nuclear as sustainable or significantly harmful to the environment though will now lie in the hands of the European Commission who will decide on taxonomy and cooperates with a new Platform on sustainable finance to be appointed by the Commission and will be supported by the Member States Expert Group on sustainable finance which advises the Commission regarding the work of the Platform on sustainable finance. The Commission decides on the classi fication, i.e. the content of taxonomy and its development by the way of technical screening criteria and technical standards through delegated acts on the basis of the regulation. The Commission has to finish this process for the aspects contribution to climate change mitigation and do no significant harm till 31 December 2020 in order for application of the rules from 1 January 2022. Stakeholder dialogue on sustainable finance Parallel to the legislative procedures the Commission organized a stakeholder dialogue on sustainable finance in March 2020 at the occasion of the publication of the final reports of the Technical Expert Group after the consultation in 2019, the Taxonomy Technical Report, the Technical Annex, the Usability guide for the EU green bond standard and the Handbook on Climate Benchmarks and benchmarks’ ESG disclosures. The stakeholder dialogue that took place as an online event due to the Covid-19 restrictions had 15.000 participants from all over the EU and beyond. The TEG kept up the classification of nuclear as not being included in the taxonomy in the final report with the same arguments as in the preliminary report. In the stakeholder dialogue it was recommended by the TEG that while no drastic changes are to be expected from the finalization of the taxonomy by the Commission – such as e.g. the 100g/kWh CO 2 threshold for electricity generation technologies | NPP Grohnde. Source: PreussenElektra GmbH – the taxonomy should be supplemented with criteria for the so called brown taxonomy, i.e. economic activities that might be harmful to the environment to a certain degree but still could contribute to achieving sustainability goals. Such criteria as well as social objectives could be added by the Commission on the occasion of the regular revisions of the taxonomy that are supposed to take place every five years. Also, activities now considered as sustainable could fall out of taxo nomy if they would no longer be relevant. Specifically, on nuclear, it was stated from the TEG represen tatives that it is clearly low carbon, but that the DNSH evaluation is very challenging so that no evaluation was possible, but eventually an evaluation could be elaborated in the next year. The conclusion was that the chapter on nuclear is not closed and the TEG basically asked the Commission to take over the issue. Other activities of the Commission and EU institutions From 23 March to 20 April 2020 the Commission had a public consultation “Sustainable finance – EU classification system for green investments” (Delegated Act) and on 18 June, the day after the regulation was adopted by parliament, the Commission called for applications for participation in the Platform on sustainable finance. The platform is supposed to start in September 2020. On the sidelines of the sustainable finance/taxonomy debate in other areas of the larger ENERGY POLICY, ECONOMY AND LAW 483 Energy Policy, Economy and Law Sustainable Finance Initiative of the EU and Taxonomy – How Green Is Nuclear? ı Nicolas Wendler
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atw - International Journal for Nuclear Power | 10.2020

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