EU plans to label natural gas and nuclear ‘green' ‘reflect Asia position’

Out-Law News | 11 Feb 2022 | 3:58 pm | 2 min. read

The EU executive arm the European Commission has presented a plan to classify some gas and nuclear power as “transitional” green investments.

Known as the EU Taxonomy Complementary Climate Delegated Act, the plan aims to define sustainable investment to guide spending on projects in line with EU’s climate goal to become climate neutral by 2050. The Commission said it would include certain gas and nuclear power activities as ‘transitional activities’.

Hong Kong-based climate change expert John Yeap of Pinsent Masons said: “The controversy around nuclear and gas fired power generation in the EU is not limited to that economic grouping. Here in Asia, the view on these sources of power generation will likely be a lot more sympathetic, particularly on the role of natural gas.”

"Many nations in Asia continue to see high single digit economic growth, requiring significant increase in baseload power generation. Intermittent power generation from renewable energy sources such as wind and solar are not likely to be able to play a meaningful role, even with storage. Apart from cost considerations, there are also issues around the grid system. Liquefied natural gas (LNG) to power projects in some of these nations will therefore likely play an important transitional role in the period leading up to net zero commitments of these nations," he said.

Yeap John

John Yeap

Consultant

Here in Asia, the view on these sources of power generation will likely be a lot more sympathetic, particularly on the role of natural gas

“Nuclear involves different considerations as its role in power generation in Asia has to date been and will likely continue to be limited. The small landmass of several nations as well as geological considerations of earthquake, volcanoes and tsunamis will likely inhibit the growth of nuclear in nations not currently deploying nuclear. Where nuclear is currently deployed in the region, its continued growth will continue to be influenced by policy, which remains generally negative to its continued use,” he said.

“China has the largest fleet of nuclear power plants in the region and with its advancing domestic technologies, may continue to champion nuclear power generation as part of its response to its net zero commitment,” Yeap said.

The Commission said gas and nuclear power activities cannot be immediately replaced by technically and economically feasible low-carbon alternatives, but they are helpful to climate change mitigation efforts and potentially “play an import role in the economic transition to climate neutrality”. Nuclear power must meet strict nuclear and environmental safety requirements, and natural gas must contribute to the transition from coal to renewables - investment must meet strict conditions and not squeeze out investment in renewables.

Nuclear-related activities classified as ‘sustainable’ under the Act include advanced technologies with closed fuel cycles; new nuclear power plant projects for energy generation, which will be using best-available existing technologies, will be recognised until the date of approval of construction permit in 2045; and modifications and upgrades of existing nuclear facilities for the purposes of lifetime extension will be recognised until the date of approval by competent authority in 2040.

‘Sustainable’ gas-related activities include electricity generation from fossil gas fuels, efficient heat or cooling co-generation and power generation from fossil gas fuels, and heat or cooling production from fossil gas fuels in an efficient district heating and cooling system.

The Act also introduces specific disclosure requirements for companies related to their activities in gas and nuclear energy sectors. Large listed non-financial and financial companies will be required to disclose the proportion of their activities related to gas and nuclear energy, which “should help investors to distinguish between the different activities they are investing in”, according to the Commission.

The College of Commissioners has reached political agreement on the text of the Act, which will be formally adopted once translations are available in all EU languages, a statement by the Commission said.