Sustainability Blog

Tacks on Taxonomy – Gas and Nuclear Classified as Sustainable

By Apurva Gosalia - Jul 08, 2022

On Wednesday, the European Parliament cleared the way to classify investments in natural gas and nuclear power plants as sustainable under certain conditions. Specifically, they voted on a supplementary legal act to the EU Taxonomy Regulation.

The Taxonomy guides private investment in sustainable economic activities and thus supports the fight against climate change. It is relevant to lubricant companies because it could influence investors’ investment decisions and thus have an impact on project financing costs, for example. Investors should also be put in a position to avoid investing in sectors of the economy that are harmful to the climate.

In a first step, it was already decided last year to classify electricity production with solar panels, hydropower or wind power as climate-friendly. In addition, criteria were defined for numerous other economic sectors. They regulate, for example, that passenger and freight train traffic without direct CO2 exhaust emissions can be classified as climate friendly.

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Under pressure from some member states, the EU Commission additionally proposed at the end of 2021 that investments in gas and nuclear power plants should also be classified as climate-friendly under certain conditions. France, which sees nuclear power as a key technology for a CO2-free economy and is keen to continue exporting the technology to other countries, played a decisive role in this. In return, Germany advocated a green label for gas as a transitional technology. Both countries lobbied for their inclusion in the taxonomy, while their neighbors Austria and Luxembourg threatened legal action if the proposal went ahead.

A motion to block gas and nuclear from being classified as sustainable in the Taxonomy failed to pass in the plenary session in Strasbourg two days ago on July 6. Instead of the required 353 MEPs, only 278 voted against the legal act.

The implementation of the Commission’s proposal can still be prevented if at least 20 EU states representing at least 65% of the EU’s population join forces by next Monday, July 11. However, the possibility of a majority in the EU Council is thought to be impossible due to the interest of many states in the use of nuclear power.

Environmentalists had urged MEPs to vote against the new Taxonomy legislation before the vote. Among other things, critics point out that natural gas emits greenhouse gases when used to generate electricity. Nuclear power brings with it the problems of waste disposal and the risk of accidents. Most recently, opponents also argued that incentives to invest in the construction of new gas-fired power plants stand in stark contrast to the efforts to become independent of Russian gas.

On the other hand, proponents point to the need for transitional technologies. They argue that gas-fired power plants can use liquefied natural gas from the United States or hydrogen.

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