Nuclear power and gas test the credibility of the European model for sustainable investments

Underground CO₂ storage, biofuels or cement manufacturing.

These are some of the dozens of activities already approved by the European Union as sustainable when they meet a series of requirements, along with others such as wind energy, photovoltaics or forest management.

However, none has generated as much debate as the recent European Commission proposal to add

, under certain conditions, nuclear energy or gas. The unleashed storm makes it clear that right now there is no consensus in Europe on the impact of these two energy sources, but it also tests the credibility of this new European system to boost sustainable investments. The person in charge of the Sustainable Finance Platform - the group of experts created to advise the Commission on taxonomy -, Nathan Fabian, who is due to pronounce on 12 January on the inclusion of nuclear and gas, has told the

that sees risks in the proposal.

taxonomy

or classification of activities considered sustainable is an EU tool to guide private sector investments towards an economy in line with the objectives of combating climate change and four other environmental challenges (water, circular economy, prevention of pollution and biodiversity). As Garbiñe Manterola, also an expert from the Sustainable Finance Platform, on behalf of the Basque technology consortium BRTA (Basque Research and Technology Alliance) assures us, “if used well, this is a very powerful system to achieve a more sustainable Europe”.

When a bank launches a financial product with a

label - for example, bonds or a pension plan - it is assumed that the money raised will be used to finance projects that have a positive impact on the environment. However, the reality is that there is a lot of

(

washing ) with everything related to the concept of "sustainable", just what Brussels wants to cut back. Therefore, a first purpose of the European

taxonomy is to provide a clear and transparent guide of what is and is not sustainable —a classification of specific activities with the conditions that must be met— for those companies and financial institutions that want to use it in a voluntary.

This already represents a relevant change, but the scope of the taxonomy goes further. "Not everything is voluntary, large companies are obliged to communicate what percentage of their turnover is aligned with this

taxonomy ," says Manterola. "If a company declares that 5% of its turnover is linked to these sustainable activities, this means that the remaining 95% is not, it is not sustainable."

The idea is to help companies finance their own transition, in order to achieve climate neutrality in 2050. On the one hand, companies must communicate what percentage complies with the European taxonomy of their turnover and their

(investments to future). And, on the other hand, financial entities have to report their percentage of loans in sustainable activities. No one is forced to change, but it seeks to push financing in a very specific direction, with very marked guidelines.

In December, the European Union already approved a first list of sustainable activities, which is expected to evolve towards increasingly stringent parameters. However, the thunder box has now been opened with the Commission's proposal to add nuclear power and gas. With conditions: in the case of a new nuclear power plant, for example, it is required, among other measures, that the member country has a plan to have a permanent warehouse for high-level waste by 2050 and that the project use the best technology available, with accident-tolerant fuel — which should provide additional protection against damage to nuclear reactor systems or components. For gas plants, it is requested that until 2031,direct emissions are a maximum of 270 grams of CO₂ per kilowatt hour (the average in Spain is 370 grams) or that throughout the entire life of the installation the emissions are less than 100 grams of CO₂ per kilowatt hour, whatever which means that as the years go by, improvements must be incorporated or switched to less polluting fuels.

When it comes to nuclear, it is true that it can contribute to reducing the emissions that cause climate change, but the biggest discrepancies arise with the long-term management of its high-level radioactive waste. As for gas, it generates rejection because it is one of the fossil fuels that they just want to leave behind. In both cases, they are technologies that are currently absent from investment portfolios and credits with a

label .

In the financial world, all the sources consulted agree that investment in renewables - which for years have been competing from you to you without the need for public support - is not at risk regardless of the outcome of the European debate. But in the atmosphere there is also the fear that, if finally Ursula von der Leyen - who has assumed the taxonomy baton in the first person - carries out her proposal, the sustainability requirements of many banks and investment funds and pensions to the time to invest or lend end up being even stricter than community regulations. That the vaunted

label , in short, lose much of its value in the eyes of investors, shareholders or fund holders. “The possibility of private investors calling

to things that are not ”, synthesizes by telephone Peter Sweatman, CEO of the consultancy Climate Stretegy & Partners. "Some investors are prepared to even go ahead of regulation," adds Antoine Fabre, of the French fund manager La Financière de l'Echiquier.

In Spain, banks recognize the enormous uncertainty that this process has for their interests. Santander - whose president, Ana Botín, demanded "clear and coherent" regulatory frameworks and incentives and disincentives from governments last November - asks for patience, but admits that if the theses of the Community Executive prevail, they could change their line to follow. "The discussions on taxonomy will still take months," they warn while hinting that they will "review" their "framework for action" if the European guide goes ahead as proposed by Brussels. Today, the first Spanish entity does not include nuclear or gas in its own internal taxonomy, drawn up with environmental and social criteria. This, they add, “does not mean that we are not financing these types of assets,because they are important for the transition while advancing in the development of renewables, storage and distribution ”.

From the second bank, BBVA, which has flagged its support for clean energies, they indicate that in order to define what investment is considered sustainable, “the bank has established an internal standard that is aligned with the European taxonomy, which will be adapted to their new developments ”. CaixaBank prefers not to comment until the new European criteria in this matter are specified. And the banking association AEB recalls that "it is the authorities who set the roadmap to follow and must have clear criteria to achieve the objectives." Again, the ghost of uncertainty.

BBVA recalls that nuclear energy and gas, in certain circumstances, may be "necessary to supply the energy demand in the short term until the demand cannot be met with renewable energy." That is also the line of argument followed by the Spanish Government, which welcomes the inclusion of both technologies in an “amber, intermediate” category, due to their role in the transition towards a decarbonized economy, “but not

, where other key energies for decarbonization and without risk or environmental damage ”.

There are far fewer doubts about investment in renewables, which has taken off in recent years and has to do even more in the following to avoid the worst climate scenario. Could the inclusion of nuclear and gas in the same

category take away funding? At BBVA they are very clear about it: “No; there is a lot of liquidity in the market ready to finance both renewable energies and transitional energies ”. Also the AEB, which emphasizes that whatever happens with the taxonomy "the interest in investing in these assets will continue to be very high in the future."

There are several experts in European

taxonomy who recognize that the credibility of the new model is at stake, but also consider that this is an opportunity to decide what to do once and for all with two of the thorniest issues in the ecological transition ( another is agriculture). Alicia Cantero, from the environmental organization Greenpeace, affirms that they support the European taxonomy “because it is a good instrument to give a signal to investors”, but also warns that their position “may change if nuclear or gas is included”. As it affects, "we know that this is a transition period and we understand that there are grays, but neither of these two technologies should enter this path".

Politically, one of the keys to knowing what will finally happen will be the position of the German government, or its degree of rejection. The Commission proposal reflects its position on gas, but the inclusion in the list of sustainable activities of nuclear energy collides with the historical position of Berlin and, above all, of the Greens, one of the three forces of the semaphore coalition and a party that has in the rejection of this energy source one of its founding principles.

However, the new government of Olaf Scholz has a hard time stopping the proposal, even with the absolute rejection of Austria and Luxembourg (who have warned of their intention to go to court) and the nuance of Spain. The Commission proposal is processed through what is called a delegated act in Brussels. This implies that to overthrow it in the Council of the EU, it must be counted on the rejection of at least 20 member states that add up to 65% of the population. And achieving those numbers is not going to be easy. France - the main country interested in seeing the proposal to sell its nuclear technology go ahead - will not vote against this definition of atomic energy. And in November, weeks before the Commission circulated its draft, it already had the support of nine other countries, to which we must add the Dutch position:yes partial to taxonomy by nuclear, not by gas. It remains to be seen whether the Commission decides to go ahead with its initiative if Germany, the most powerful country in the EU, rejects it.

Meanwhile, in Spain gas and nuclear power also divide political groups. Faced with the rejection of the Government, the opposition is with Brussels. PP and Ciudadanos criticize the reaction of the Executive and believe that the European Commission endorses the positions that both parties had been holding up to now. "In policies to mitigate climate change, a technology cannot be demonized," says Guillermo Mariscal, PP Energy parliamentary spokesman, who argues that the government's rejection of nuclear power is "ideological" and is not based on technical reasons. The deputy points out that the arguments of Brussels come to ratify his party when he questions the Executive's energy policy for turning his back, according to him, "to the concept of cost-benefit." For Mariscal,nuclear power must be part of the energy transition and the commitment to clean energy cannot sacrifice "the benefit of families and the competitiveness of companies." And he also criticizes that the Executive has not yet been able to create a central warehouse for high-level radioactive waste from nuclear power plants.

Citizens also accuse the Government of defending a position that is more ideological than technical. "Nuclear power is

from the point of view of CO₂ emission, Brussels is not saying anything crazy," argues Carmen Martínez Granados, spokesperson for her group on energy issues. The deputy understands that the government's policy forgets that "the energy transition is going to have its costs." Martínez Granados regrets that the Executive does not open "a serious debate" and recalls that his formation has been demanding for a long time that an Energy Board be created. Along the same lines, Mariscal complains that "in a strategic matter the Government has not even called the first opposition party."

The Executive's position is fully shared by its left allies. "From the creators of water that dries and fire that cools:

nuclear energy

," Íñigo Errejón, leader of Más País, wrote on Twitter, as soon as the Brussels document was known. The PNV wields the energy policy of the Basque Government, which "discarded nuclear power years ago" and maintains "a total commitment to renewables," commented a spokesperson for the formation. But there are also those who disagree with the usual parliamentary base of the Executive, such as the Catalan liberals of the PDeCAT. "The government's position seems dogmatic to us and in the face of the gallery," says its deputy Ferran Bel. "Nuclear power cannot be dispensed with if there is no alternative in the

energy

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