Should natural gas and nuclear play a part in the energy transition?

Good morning. David Meyer here in Berlin, filling in for Alan.

The energy transition is inevitably going to be messy in most places, and Europe is providing an early example of that phenomenon.

Environmental campaigners and some countries are livid after the European Commission decided natural gas and nuclear power will have to play a role in the EU’s transition to renewable energy sources. The bureaucratic “EU Taxonomy” decision will have a big impact on banks, insurers and so on, because it provides a benchmark for judging what investments are or aren’t “green”.

The eagle-eyed among you will have spotted that natural gas, while not quite as filthy as coal, is nonetheless a fossil fuel whose extraction and use has significant environmental impacts. And nuclear power may not contribute much to global warming, but its waste products are extremely dangerous and difficult to store, and accidents at nuclear plants can clearly be catastrophic.

The idea of a common framework for what counts as “green” is certainly to be welcomed in principle, because it’s a pretty confusing scene out there, in which it’s still easy to get away with greenwashing. But now the Commission is itself being accused of doing just that.

“Nuclear power is neither ‘green’ nor sustainable. I cannot understand the EU’s decision,” said Austrian Chancellor Karl Nehammer, making it clear that he supports his government’s plans to sue the Commission, and pledging that Austria will “continue to focus on the expansion of renewable energy sources.”

Luxembourg will join the suit, as might Germany, which is notably anti-nuclear (ironically leaving it highly dependent on coal) and pro-gas. France, meanwhile, is all-in on nuclear and not a fan of gas (which it doesn’t really need, because of its 56 nuclear plants—as long as they’re working) because of energy-security reasons. In essence, France was behind nuclear’s inclusion on the list, and Germany was behind gas’s inclusion. Now no-one’s happy.

“Gas is a fossil fuel. I know this,” EU Financial Services Commissioner Mairead McGuinness told reporters yesterday. “There is no ‘get out of jail’ here for nuclear or gas. We are stating very clearly: these are instruments in transition to allow us get where we need to be, which is more and more renewables.”

To be sure, the rules would force gas plants getting the Commission’s “green” label to fully switch to renewables by 2035, while countries using nuclear would need to have “a detailed plan to have in operation, by 2050, a disposal facility for high-level radioactive waste.” They wouldn’t be able to ship the radioactive waste overseas, either. But, as environmentalists point out, the length of time it currently takes to build nuclear plants make it questionable how much of an impact they could have on the energy transition.

“This anti-science plan represents the biggest greenwashing exercise of all time,” said Greenpeace EU campaigner Ariadna Rodrigo in a statement. “It makes a mockery of the EU’s claims to global leadership on climate and the environment. The inclusion of gas and nuclear in the taxonomy is increasingly difficult to explain as anything other than a giveaway to two desperate industries with powerful political friends.”

This debate is only going to intensify, particularly as the Commission’s proposals go through the European Parliament and those legal challenges. Also bear in mind that the likes of BlackRock and Santander have already pushed back against gas’s inclusion on the list, arguing that “there is no remaining carbon budget for new investments in natural gas.” So even if the Commission does clear the hurdles before it, the big question is whether financial institutions will take heed, or avoid classifying nuclear and/or gas as green to meet investors’ expectations.

More news below.

David Meyer



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This edition of CEO Daily was edited by David Meyer.

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