The debate over the European Commission’s proposal to assign the taxonomy of “green energy” to nuclear and gas divides Europe. While France is pushing for this rating change and announcing the construction of new nuclear power plants, Spain and Germany are drastically opposed. The Minister for the Ecological Transition and the Demographic Challenge, Teresa Ribera, has ruled that this modification “sends a wrong signal to the financial markets”, but what would be the real scope of this modification?

The European Green Deal obliges countries to invest in green investments and reforms “at least 37%” of the funding they receive from the Recovery and Resilience Mechanism of € 672.5 billion. In this sense, the green taxonomy seeks to guide companies and investors in their decarbonization plans, identifying activities and economic sectors that are environmentally sustainable and that contribute to mitigating climate change.

“Everything that is sustainable gets better financing in the market. The interest rates and the credits are cheaper ”, indicates Ignacio Araluce, president of Foro Nuclear, to CincoDías. Araluce warns that the European energy sector is still not capable of supplying itself only with renewable energies, and that is why the Commission raises nuclear as part of the transition, taking into account that it does not produce CO2 emissions. The expert adds that the European Union has not yet defined the type of investments that could be made in “transitional energies”.

Green finance

On the other hand, the inclusion of nuclear and gas in this taxonomy adds a layer of complexity to the regulation on green finance in Europe, and raises, for example, questions about the possibility that the institutions involved in nuclear projects or of Gas that meet European Union standards can issue green bonds, a market that grew by around 50% last year and is estimated to have $ 452.2 billion worth of bonds issued in 2021.

In October the Commission assured that it will seek to raise up to 30% of Next Generation EU funds, some 250,000 million euros, through the issuance of “Next Generation EU green bonds”. In this sense, the delimitation of the taxonomy could directly influence the amount of investments that these emissions will be able to capture and the sectors to which the investment will be directed. However, at the moment the community executive has not yet spoken on the matter.

The authorities have to clarify if they will change the criteria for green investments

According to the current standard of the European Commission, as a requirement, issuers must prove “alignment with the taxonomy”, in addition to offering transparency on the management of the bond income and receiving verification by the European Securities and Markets Authority (ESMA ) and external entities. In this sense, the authorities will have to clarify whether it is the ESMA who will have the last word on which investments in “transitional energies” are sustainable, or how these criteria would be reconfigured.

This modification could also imply changes in the European criterion on which fund managers have sustainable investments, since currently firms receive different ratings depending on whether they consider sustainability risks when making investment decisions.

For Alicia Cantero, biologist and head of Greenpeace’s political advocacy area, including nuclear power among green investments is nonsense. “This decision makes the taxonomy meaningless and turns it into a license for greenwashing. There is a danger that investment will drift towards nuclear and fall short of truly sustainable technologies. The European Commission is ignoring the no harm principle and the problems that waste will leave to future generations. It is a hoax ”.

Nuclear and gas would be considered ‘transition energies’

The Spanish system is still largely dependent on nuclear power. In fact, according to Red Eléctrica de España, this source represented around 20.8% of the total production of the Peninsula in 2021, while all renewables together represented around 46.6% and the rest of the non-renewable ones, including natural gas and coal, the remaining 32.6%.

On the other hand, in the context of the energy crisis that Europe has been going through since the end of June, the president of the European Commission has highlighted in recent months the importance of European “energy sovereignty”. This concept has been described by the authorities as protecting the autonomy of the region from the influence and pressure of its suppliers such as Russia.

In this context, Santiago Carbó, director of financial studies at the Funcas Foundation and consultant for the World Bank, affirms that nuclear energy offers an alternative to energy imports: “The debate on waste is difficult, it has a sale and a political cost high. The transition is going to take time and resources. Now we are lucky to have Algeria as an ally for gas supply, which allows us to maintain the energy system, but what if not? “