Baker McKenzie Study: Inclusion of Nuclear Energy in the EU Green Taxonomy

A new study by Baker McKenzie underscores the fact that excluding Nuclear Power Production (NPP) from the EU Green Taxonomy would infringe EU law principles and the very provisions of the Taxonomy Regulation.

Regulation (EU) 2020/852 of 18 June 2020 on the establishment of a framework to facilitate sustainable investment and amending Regulation (EU) 2019/2088 (the “Taxonomy Regulation”) provides for a classification system, establishing a list of environmentally sustainable economic activities (the “Taxonomy”).

In the context of the European Green Deal and to meet the EU’s climate change mitigation and energy mix targets, this EU-wide classification aims to channel private investments to sustainable activities.

The Taxonomy Regulation entrusts the European Commission with the power to adopt delegated acts laying down the technical screening criteria for each environmental objective listed in this regulation. On 4 June 2021, the Commission adopted the delegated act establishing the technical screening criteria for determining the conditions under which an economic activity qualifies as contributing substantially to climate change mitigation or climate change adaptation, and for determining whether the economic activity causes no significant harm to any of the other environmental objectives (the “Taxonomy Climate Delegated Act”). The Taxonomy Climate Delegated Act, which will enter into force once it is published in the Official Journal of the European Union, covers a range of energy sources. However, it has not been decided yet whether to include nuclear energy in the EU Taxonomy. The Commission is currently assessing the potential contribution of nuclear energy to climate change mitigation. The Commission will follow up once this assessment is complete by amending the Taxonomy Climate Delegated Act, either to include nuclear energy in the EU Taxonomy, or exclude it.

As announced in the Commission’ Strategy for Financing the Transition to a Sustainable Economy, the Commission “will adopt a complementary Taxonomy Climate Delegated Act covering activities not covered by the first Taxonomy Climate Delegated Act as soon as possible after the end of the specific review process in summer 2021, which will cover nuclear energy activities.”

 

Redeker Sellner Dahs memorandum: NPP shall not be considered as an environmentally sustainable activity

On 20 August 2021, the Federal Ministry for Climate, Action, Environment, Energy, Mobility, Innovation and Technology of the Republic of Austria sent a letter to the Commission, whereby it argues that nuclear energy should be excluded from the Taxonomy. Attached to this letter was a memorandum of 2 July 2021 from the law firm Redeker Sellner Dahs, which highlights that nuclear power production (NPP) shall not be considered as an environmentally sustainable activity within the meaning of the Taxonomy Regulation.

This memorandum assesses whether NPP shall qualify as an environmentally sustainable activity within the meaning of the Taxonomy Regulation. After highlighting the applicable legal framework, the memorandum first assesses whether NPP contributes substantially to climate change mitigation. Whether NPP complies with the “do no significant harm” criterion is then assessed. The memorandum also assesses the additional arguments in favour of the inclusion of NPP in the Taxonomy and the arguments that could contradict this idea on the basis of EU primary law. Finally, the memorandum addresses the procedural issues that could be raised by potential claimants.

 

Baker McKenzie Study conclusions

Pursuant to Article 3 of the Taxonomy Regulation, three criteria shall be met for an economic activity to qualify as environmentally sustainable.

• First, it must contribute substantially to one or more of the environmental objectives, set out in the Taxonomy Regulation.
• Second, it must not significantly harm any of those environmental objectives.
• Third, it must be carried in compliance with minimum safeguards mentioned by the Taxonomy Regulation.

From a legal standpoint, Nuclear Power Production meets the criterion of substantial contribution to climate change mitigation. It should therefore be included in the Taxonomy.

NPP qualifies as a “green activity”. It is widely acknowledged that nuclear energy has near to zero greenhouse gas emissions in the energy generation phase and is a contributor to climate mitigation objectives. In particular, there are strong arguments to consider that NPP qualifies as a green activity insofar as it improves energy efficiency and increases clean or climate-neutral mobility.

Alternatively, NPP qualifies as an “enabling activity”. The assumption whereby power generation is exhaustively regulated by Article 10(1)(a) of the Taxonomy Regulation is not based on any serious evidence. In addition, NPP does not lead to a lock-in of assets. On the contrary, it may be argued that NPP is a baseload power source complementing intermittent renewable energy. In addition, NPP has a “substantial positive environmental impact, on the basis of life-cycle considerations”, insofar as NPP does not contribute to direct GHG emissions. It may thus be argued that NPP is a baseload power source complementing renewable energy. NPP also enables clean/climate-neutral mobility and carbon capture to make a substantial contribution to climate change mitigation.

Finally, it may be argued that NPP qualifies as a transitional activity within the meaning of the Taxonomy Regulation.

After reviewing all the environmental objectives set out in the Taxonomy Regulation in light of the JRC Report, it clearly appears that NPP meets the DNSH criterion.

Regarding the EU primary law principles, there are strong arguments in favour of the inclusion of NPP in the Taxonomy.

NPP shall indeed be included in the Taxonomy in order to comply with equality of treatment and the Member States’ choice between different energy sources. Finally, it remains to be explained how the EU could ensure security of energy supply without keeping NPP in its energy mix.

No argument based on EU primary law can justify the exclusion of NPP from the Taxonomy. As no provision of the Euratom Treaty is capable of constituting the legal basis of the measure to be enacted by the Commission, one may not argue that such measure should be adopted on the basis of the Euratom Treaty. The precautionary principle does not prevent the Commission from including NPP in the Taxonomy as all measures have been implemented to ensure the safety of NPP and this principle also requires prompt action in the battle against climate change.

 

Bottom line

As a general conclusion, NPP should be included in the Taxonomy as the conditions are met for this decision to be adopted. Moreover, excluding NPP from the Taxonomy would infringe EU law principles and the very provisions of the Taxonomy Regulation.