Insights

European Taxonomy Regulation Extended to Natural Gas and Nuclear Energy

On July 15, 2022, the European Union Official Journal published Commission Delegated Regulation (EU) of March 9, 2022. The new regulation implements European Regulation (EU) 2020/852 of June 18, 2020 (the "Taxonomy Regulation") and amends both Commission Delegated Regulation 2021/2139 of June 4, 2021 (the "Climate Delegated Act") and Commission Delegated Regulation 2021/2178 of July 6, 2021 (the "Disclosures Delegated Act"), which specifies the content and presentation of information to be disclosed by certain undertakings subject to the taxonomy.

As indicated in a previous edition of the Climate Report, the European taxonomy is designed to determine when an economic activity qualifies as "environmentally sustainable" in order to establish the degree to which an investment in that activity is "environmentally sustainable." It also includes disclosure requirements.

The purpose of the new Commission Delegated Regulation (EU) of March 9, 2022 is to include certain energy activities related to the use of natural gas and nuclear energy among the economic activities "eligible" under the taxonomy and to provide for technical criteria to make such activities "aligned" with the taxonomy. 

This decision is grounded on Article 10(2) of the Taxonomy Regulation, which provides that economic activities for which there are no technologically and economically feasible low-carbon alternatives may qualify as contributing substantially to climate change mitigation where they support the transition to a climate-neutral economy. Based on a number of consultations and scientific advice, the European Commission reached the conclusion that natural gas and nuclear activities may qualify as "transition" energy under certain technical criteria, as defined by Commission Delegated Regulation (EU) of March 9, 2022. By way of illustration, the extension of an existing nuclear power plant may be eligible under the taxonomy until 2040 and the construction of new plants until 2045. 

Stringent technical criteria are defined by the new Commission Delegated Regulation. With respect to the use of natural gas, the life-cycle greenhouse gas emissions from the generation of electricity using fossil gaseous fuels must be lower than 100 g CO2e/kWh, as calculated using Recommendation 2013/179/EU or, alternatively, using ISO 14067:2018 or ISO 14064-1:20180. These criteria will be updated in the future. For instance, the Commission indicates that, starting in 2025 and every 10 years thereafter, it will revise and revisit the technical criteria applicable to nuclear power plants.

Furthermore, some criteria imposed by the new Commission Delegated Regulation are not related directly to the operation of the facilities themselves, but the implementation of policies at the Member State level. In particular, Member States will have to provide a documented plan to organize the disposal of high-level radioactive waste by 2050 in order for nuclear power plants located on their territories to be eligible under the taxonomy. Similarly, with respect to the use of natural gas, if the activity takes place on the territory of a Member State in which coal is used for energy generation, that Member State must have committed to phase out the use of energy generation from coal.

This new regulation is likely to create new opportunities for natural gas and nuclear energy in the European Union in the midst of the current energy crisis, though it may not deter nongovernmental organizations from continuing to challenge fossil fuel or nuclear activities.

— Armelle Sandrin-Deforge (+33.1.56.59.39.47, asandrindeforge@jonesday.com)

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