In a communication on 21 April, the European Commission (EC) effectively made a number of amendments to the EU Taxonomy Regulation, which entered into force in July 2020, signalling the inclusion in the taxonomy of nuclear energy. This followed significant pressure from the nuclear industry and NGOs as well as a report from the EC’s Joint Research Centre (JRC) which found no evidence that nuclear energy does more harm to human health or to the environment than other electricity production technologies already included in the Taxonomy.
The 12-page communication, “EU Taxonomy, Corporate Sustainability Reporting, Sustainability Preferences and Fiduciary Duties: Directing finance towards the European Green Deal”, was addressed to the European Parliament, the Council, the European Economic & Social Committee and the Committee of the Regions.
It says the European Green Deal “is Europe’s growth strategy that will improve the well-being and health of citizens, make Europe climate-neutral by 2050 and protect, conserve and enhance the EU’s natural capital and biodiversity”. It adds: “To achieve these goals, the European financial system needs to become more sustainable.”
The communication says the EC “is putting forward the EU Taxonomy Climate Delegated Act, a proposal for a Corporate Sustainability Reporting Directive (CSRD), revising the Non-Financial Reporting Directive, and amendments to delegated acts to better reflect sustainability”. It describes the EU Taxonomy as “a robust, science-based transparency tool for companies and investors”.
Through the Act, the economic activities of roughly 40% of listed companies, in sectors which are responsible for almost 80% of direct greenhouse gas emissions in Europe, are already covered, with more activities to be added in the future. “Through this scope, the EU Taxonomy can significantly increase the potential that green financing offers to support transition, in particular for carbon-intensive sectors where change is urgently needed.”
The EU Taxonomy Climate Delegated Act is subject to scrutiny by the European Parliament and the Council and “delivers the first set of technical criteria for defining those activities that contribute substantially to climate change mitigation and adaptation”. These criteria were developed based on recommendations by the Technical Expert Group (TEG) “and following public feedback and advice by the Platform on Sustainable Finance”.
The EC says the feedback “revealed several concerns, including “the implications of an activity qualifying as ‘environmentally sustainable’ or not”. Some stakeholders “were concerned that an activity not qualifying as green under the EU Taxonomy Climate Delegated Act risks being perceived as unsustainable, with possible consequences in terms of access to finance for those activities”.
According to the EC, the Taxonomy framework will increase access to sustainable financing “beyond currently existing market-based green finance tools” and “includes more economic activities and more environmental objectives than have been used so far in market-based green financing frameworks”.
The Taxonomy “recognises as sustainable those activities that make a substantial, rather than a marginal, contribution to reaching EU environmental objectives” It “sets the criteria for substantial contribution and no significant harm based on the level of ambition of the goals of the European Green Deal including the EU climate neutrality objective”.
The EC says: “Based on careful examination of the feedback received, modifications have been made, compared to the draft delegated act published for public feedback”. The current scope of the criteria outlined in the EU Taxonomy Climate Delegated Act will expand in the future. “The criteria are dynamic and will be subject to regular review. This ensures that new sectors and activities, including transitional and enabling activities, may be added to the scope over time by amending this Delegated Act. “The EU Taxonomy is a living document that will be added to over time and updated as necessary”.
Section III of the document – “Next steps in developing the EU Taxonomy” says: “In line with the legal framework and our past commitments, the Commission will adopt a complementary Delegated act of the EU Taxonomy Regulation covering activities not yet covered in the EU Taxonomy Climate Delegated Act such as agriculture, certain energy sectors and certain manufacturing activities. This complementary Delegated Act will cover nuclear energy subject to and consistent with the results of the specific review process underway in accordance with the EU Taxonomy Regulation.”
This process is based on the March 2021 report of the JRC. “A review of this report is ongoing through two groups of experts, Euratom Article 31 experts group and the Scientific Committee on Health, Environmental and Emerging Risks (SCHEER), to complete the scientific evaluation and it will be finalised in June 2021.” The Commission “will adopt this complementary Delegated Act as soon as possible after the end of the specific review process expected in summer 2021”.
The European nuclear trade association, Foratom, noted the Commission’s plans to include nuclear under a complementary Delegated Act (DA) consistent with the conclusions of the JRC report.
“We are of course delighted to finally have some clarity on what the Commission is going to do with the outcomes of the JRC report”, said Foratom Director General Yves Desbazeille. “It shows that the Commission is willing to recognise that its taxonomy needs to be based on the science if it is to be credible and successful.”
However, Foratom points out that “no indication is given as to when such a complimentary Delegated Act will be made available, even if the Commission did suggest it could be before the end of the year during the press conference”. Desbazeille added: “To ensure that taxonomy does not lead to market distortions the Commission must publish this complimentary DA as quickly as possible once the expert opinions become available. We believe that this could already be done in September 2021 and thus enable nuclear to be added to the second set of DA’s – relating to the Do No Significant Harm criteria – due at the end of this year.”