Habeck and Lemke reaffirm criticism of taxonomy rules on nuclear energy

On Friday night, the Federal Government submitted its statement on the EU taxonomy to Brussels. The taxonomy is an EU-wide system for classifying financial products. It is to provide guidance to investors and to channel capital into a green transformation of energy generation and the economy. Specifically, the debate centers on the second delegated act, which is to allow the European Commission to include nuclear energy and gas in the taxonomy. It had previously proposed a draft on the details of such a move.

Economic Affairs and Climate Minister Robert Habeck and Environment Minister Steffi Lemke commented: “As the Federal Government, we have once again made it abundantly clear that we reject the inclusion of nuclear energy. It is fraught with risks and expensive. Nor can new reactor designs such as mini reactors, which raise similar problems, be classified as sustainable.”

The Federal Government’s statement also points to a lack of safety requirements in the field of nuclear energy. Moreover, it raises doubts as to the compatibility of nuclear energy with the provisions of the Taxonomy Regulation, drawing attention to legal concerns in this regard.

As far as gas is concerned, the statement identifies needs for further specification. The Federal Government holds, for example, that separate threshold values are needed for district heating networks and for replacing old gas-fired power stations with new ones. Given that it will take a few years to ramp up hydrogen production and that green hydrogen will also be needed for the conversion to carbon-neutral industrial production, the conditions for the transition phase should still be adapted.

Habeck and Lemke insisted: “Should the delegated act remain unchanged and should the Commission disregard the critical opinions of countless Member States, including ours, we believe Germany should reject it.”

The Federal Government’s statement is available at
https://www.bmwi.de/Redaktion/DE/Downloads/S-T/stellungnahme-bundesregierung-taxonomie.html

Further information and next steps:

1. What is the taxonomy?
   The taxonomy is an EU-wide classification system for financial products. It is to provide guidance to investors and to channel capital into a green transformation of energy generation and the economy. The financial system plays a key role in the transition to a low-emission, resource-efficient economy. In June 2021, the European Commission therefore proposed a set of criteria which are to help channel more money into sustainable activities across the EU and make climate risks visible in corporate balance sheets.
2. How does the taxonomy work?
   The EU Taxonomy Regulation forms the legal basis for the system. It strengthens market transparency for private investments in environmentally sustainable economic activities. To this end, it establishes a classification system for financial markets for environmentally sustainable economic activities with a view to creating incentives for private investors to support the transition to a sustainable economy.
3. What does the first delegated act stipulate?
   The European Commission adopted a first delegated act in order to specify the Taxonomy Regulation. This act defines the technical criteria for the identification of such activities that make a major contribution to climate change mitigation or adaptation. The first delegated act covers economic activities of around 40% of listed companies in sectors which account for nearly 80% of direct greenhouse gas emissions in Europe. These sectors include energy, forestry, manufacturing, transport and buildings. Energy generation, however, is one of the sectors that are not covered by the first delegated act.
4. What is the point of a second, supplementary delegated act?
   The first delegated act sets out a set of accurate, appropriate and stringent criteria for classifying sustainable activities. In the view of the Federal Economic Affairs Ministry and the Federal Environment Ministry, there was actually no need for a second delegated act. Early in the process, however, the European Commission publicly committed to including nuclear energy and gas in a subsequent delegated act. This second delegated act entered the consultation phase on 31 December 2021. EU Member States and other stakeholders were invited to submit their opinions on the proposed act by 21 January 2022.
5. What will be the next steps?
   The European Commission will now evaluate the statements submitted by 21 January 2022 and finalise the supplementary delegated act. Subsequently, it will disseminate the act to EU Member States. Within a period of four months, which may be extended to six months, Member States will then be able to raise any objections to the delegated act. The act will be deemed approved if it is not opposed by a qualified majority – either in the Council or the European Parliament – of 20 out of 27 Member States representing at least 65% of the EU population. High hurdles indeed must be overcome for the act to be stopped.