By: Elena Bascone & Riccardo Bosticco
2020 was a historical year in many aspects, most of them not positives. However, 2020 was a turning point in Europe when it comes to environmental policies: last year, the EU Commission introduced, for the first time, a classification of economically sustainable activities. Also known as EU taxonomy, this tool is essential in providing clarity in a still heterogeneous legal framework concerning sustainability. Indeed, the taxonomy establishes four conditions that an activity needs to meet to be classified as sustainable:
- Contributing substantially to one of the environmental objectives established by the Commission - examples include climate change mitigation and adaptation, transition to circular economy, prevention of pollution, and so on;
- Complying with the environmental law principle of “do no significant harm”;
- Complying with minimum social safeguards;
- Complying with the technical screening criteria.
However, the establishment of the framework has sparked a debate in the business sector and concerning nuclear energy, whose inclusion remains disputed.
The impact on businesses
The taxonomy will foster sustainable corporate governance in three ways: first, reducing “greenwashing” by setting strict standards; second, providing preferences when marketing the products; third, driving sustainable investors to compete to finance like-minded businesses in terms of sustainability. The second aspect, however, deserves particular attention. Indeed, we need to make distinctions between different industries.
According to data, the positive impact of the classification will vary according to the businesses concerned: in 2019, the Joint Research Center (JRC) published a technical report on the financial impact of the taxonomy, which highlights how the green transition is more prominent in two specific industries - energy-intensive sector and transports. Moreover, the JRC’s report indicates that the adoption of this scheme will lead to a significant increase in the issuance of green bonds and loans. Nonetheless, this increase can be estimated around 4.9% in the energy intensive sector and around 6% in the transport sector.
In addition to this, some industrial sectors can hardly be framed as “green” or not green with mathematical confidence; in fact, substantial criticalities concerning de-carbonizing policies deal with measurement, reporting, and verification (MRV). These activities, paramount to a sustainable economy, do not apply equally in all sectors.
Still, by the inclusion or exclusion of particular products rather than others, the EU taxonomy fosters investments in some sectors rather than others, thus enlightening debates moved by concerns of losing competitiveness and seeing interests hampered. Such arguments apply to the case of the inclusion of nuclear energy into EU taxonomy.
Hot knots: Nuclear Energy
In the EU there are 106 nuclear power reactors, which operate on the soil of 13 out of 27 Member States and are responsible for one-quarter of the electricity generated in the Union. The production of more than half of the total consumption locates in France, which, consequently, has a keen interest in fostering nuclear energy as a driver for renewable energy production.
On October 22, European Commission President Von der Layen announced the intention to include the nuclear into EU taxonomy, giving new impetus to a debate that can hardly find its synthesis. Already in 2019, a coalition formed by France, Britain and some Eastern European Countries threatened to play the veto card on the advancement of the taxonomy regulation in case it excluded nuclear energy. Although the Joint Research Centre (JRC) argued that there was no evidence showing atomic energy was a significant cause of harm to human and environmental health compared to other technologies, the issue sparked a debate that needed a political solution rather than experts’ consultation. Hence, a compromise was required.
If the matter followed parallel lines in the first stage, focusing on the alternative options of ‘inclusion – non-inclusion’, today it has assumed a narrower shape. What is at stake is how to introduce nuclear energy into the taxonomy in a way that would advance green transition. Among the proposed solutions, Mairead McGuinness suggested to add to the actual outline of the taxonomy one category that would identify not completely green activities that are nonetheless helpful for the transition. Specifically, the section named “Amber” would complement the existing framework composed by the labels “Green”, “Enabling”, and “Transition”.
Despite similar attempts, however, frictions remain. On top of the UN Cop26 held in Glasgow, Germany, Denmark, Luxembourg, Austria, and Portugal jointly expressed concerns relative to the inclusion of nuclear energy in the taxonomy, since its “too risky, too expensive” character would undermine the policy’s “integrity, credibility and therefore its usefulness”. According to those countries, the controversial nature of nuclear energy would thus hamper the objective of the taxonomy. Evidently, however, positions about the inclusion of nuclear energy in the taxonomy reflect the different strategic importance that countries assign to it.
One should not dismiss that often one single policy synthesizes an ampler network of interests and concerns. In general, the estimated positive impact of the taxonomy on businesses, whether it will include nuclear energy or not, is sizable. Therefore, statements in favour and against atomic energy need a critical assessment to provide a sounder understanding of what is at stake; indeed, where is the boundary between sustainable policies and (energy) security concerns?