Regulation (EU) 2022/1214: Amendment to the EU Taxonomy for Sustainable Finance

Regulation (EU) 2022/1214 amends the EU taxonomy for sustainable finance, as regulated by Regulation (EU) 2020/852, introducing specific criteria to include, under certain strict conditions, economic activities related to nuclear energy and natural gas. The primary objective is to guide investments towards activities that contribute to the EU’s climate and environmental objectives, recognizing the transitional role of certain energy sources in achieving climate neutrality. This regulation is relevant to the European Economic Area (EEA).

1. Nuclear Energy as a Transitional Low-Carbon Activity:

The regulation recognizes that nuclear energy, although not renewable, can be considered a sustainable economic activity under specific conditions, given the lack of technologically and economically viable low-carbon alternatives on a sufficient scale to meet continuous and reliable energy demand. It aligns with several Member States’ plans that consider nuclear energy as part of their strategy to meet climate objectives. It is established that nuclear energy “facilitates the deployment of intermittent renewable sources and does not hinder their development.” The inclusion of nuclear energy is based on expert assessments confirming low greenhouse gas (GHG) emissions during the energy generation phase. It seeks to ensure that no significant harm is caused to other environmental objectives, particularly regarding radioactive waste management. Specific Technical Criteria: Technical selection criteria for nuclear-related activities are defined, referring to the “highest levels of nuclear safety, radiological protection, and radioactive waste management” based on the Euratom Treaty and derived legislation, particularly Directive 2009/71/Euratom. This includes significant improvements in the safety design of new reactors (“Generation III+”).

• The use of “accident-tolerant fuel” is required.
• Criteria for “Generation IV reactors” that minimize radioactive waste production are considered.

Nuclear Waste Management:

1. Emphasis is placed on ensuring that long-term storage of waste does not cause significant environmental damage.
2. Specific requirements are established for a radioactive waste management fund and a nuclear decommissioning fund.
3. “Operational facilities for the final disposal of all radioactive waste” are required, prohibiting the export of waste for final disposal in third countries.
4. Deep geological storage for high-activity waste and spent fuel is recognized as “the safest and most sustainable option for the final phase of managing high-activity radioactive waste and spent fuel considered as waste.”
5. Member States must have “national programs for the management of spent fuel and radioactive waste,” including “key performance indicators to monitor progress transparently.”

2. Natural Gas as a Transitional Fuel (under strict conditions):

While the document primarily focuses on nuclear energy, it also addresses natural gas as a transitional fuel, subject to compliance with strict criteria. For electricity generation from fossil gas, GHG emissions over the lifecycle must be below 100 g CO2e/kWh. More permissive but temporary criteria (until December 31, 2030) are established for cogeneration installations in efficient urban heating and cooling systems, requiring direct emissions below 270 g CO2e/kWh, that heat/cooling cannot be generated from viable renewable sources, and that substitution results in at least a 55% reduction in GHG emissions.

3. Verification by Independent Third Parties:

To enhance investor confidence, compliance with the technical selection criteria for fossil gas-related activities must be “verified by an independent third party.” The third party must be impartial, have the necessary experience, and be independent of the owner or financier.

4. Transparency and Disclosure:

Companies, both financial and non-financial, must disclose the amount and proportion of their economic activities that align with the taxonomy, including those related to nuclear energy and fossil gas. Article 8 specifies the requirements for information disclosure. Templates are created to facilitate information disclosure.

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Regulation (EU) 2023/2631: Harmonized Framework for Green Bonds

Regulation (EU) 2023/2631 establishes a harmonized framework for European green bonds (EuGB), aiming to enhance transparency, comparability, and credibility of these financial instruments

What is the primary purpose of Regulation (EU) 2022/1214?

Regulation (EU) 2022/1214 amends Regulation (EU) 2021/2139 and Regulation (EU) 2021/2178. Its primary objective is to establish technical selection criteria to determine under what conditions certain economic activities in the nuclear energy and natural gas sectors can contribute to the European Union’s objectives in climate change mitigation and adaptation. This regulation aims to guide investments towards sustainable activities, helping financial markets and investors recognize the activities necessary for the transition to climate neutrality.

Why is nuclear energy included in the EU taxonomy for sustainable investments?

Nuclear energy is included because it is considered a low-carbon activity that can significantly contribute to climate change mitigation. The report by the Technical Expert Group on Sustainable Finance (TEG) recognizes that nuclear energy has virtually zero greenhouse gas emissions during the energy generation phase. Additionally, several Member States include it in their energy plans to meet climate objectives, and it provides a stable energy supply that facilitates the implementation of intermittent renewable sources.

What selection criteria apply to nuclear-related economic activities to be considered sustainable?

The selection criteria for nuclear-related economic activities aim to ensure that they do not cause significant harm to other environmental objectives, particularly concerning the long-term storage and final disposal of nuclear waste. These criteria reflect the highest levels of nuclear safety, radiological protection, and radioactive waste management, based on the Euratom Treaty and derived legislation, including Directive 2009/71/Euratom. They also require the existence of a radioactive waste management fund and a nuclear decommissioning fund, and the planning and implementation of final disposal options.

How does the regulation ensure that nuclear activities do not significantly harm the environment (“Do No Significant Harm” or DNSH)?

The regulation establishes several DNSH criteria for nuclear activities, including adaptation to climate change, sustainable use and protection of water and marine resources, and protection and restoration of biodiversity and ecosystems. Specifically, the criteria related to the sustainable use and protection of water resources require determining and addressing environmental degradation risks related to water quality preservation and controlling thermal anomalies associated with residual heat discharge. Additionally, an environmental impact assessment is required before constructing a nuclear power plant, and necessary mitigation and compensation measures must be applied.

What requirements must Member States meet regarding radioactive waste management for their nuclear activities to be considered sustainable?

Member States must have fully transposed Directive 2009/71/Euratom and Directive 2011/70/Euratom. They must have a radioactive waste management fund and a nuclear decommissioning fund. Additionally, they must have operational facilities for the final disposal of all very low, low, and intermediate-level radioactive waste and a documented plan to implement, by 2050, a facility for the final disposal of high-activity radioactive waste. Radioactive waste must be finally disposed of in the Member State where it was generated, unless there is an agreement with another Member State that has adequate programs and a final disposal facility.

What role does the European Commission play in overseeing compliance with the technical criteria for nuclear energy?

The European Commission receives reports every five years from Member States on nuclear energy-related projects, including the adequacy of resources accumulated in radioactive waste management funds and progress in implementing the final disposal plan. Based on these reports, the Commission may issue an opinion to the relevant Member State. Starting in 2025, and at least every 10 years, the Commission will review the technical parameters based on the assessment of the European Nuclear Safety Regulators Group (ENSREG).

What criteria must gas-related activities meet to be considered sustainable under this regulation?

Gas-related activities can be considered sustainable if they meet specific criteria related to climate change mitigation and do not cause significant harm to other environmental objectives. For electricity generation, GHG emissions over the lifecycle must be below 100 g CO2e/kWh. Installations with construction permits granted until December 31, 2030, can meet alternative criteria, such as using thermal energy in an efficient urban heating and cooling system and having direct emissions below 270 g CO2e/kWh of the output energy, among other requirements. Additionally, the substitution must result in at least a 55% reduction in emissions compared to the alternative.

How is transparency and investor confidence ensured in the compliance with technical selection criteria, especially for gas-related activities?

To enhance investor confidence, compliance with the technical selection criteria for natural gas-related activities must be verified by an independent third party. This third party must have the necessary resources and experience to conduct such verification, be independent to avoid conflicts of interest with the owner or financier, and not participate in the development or management of gas-related activities.

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EU Regulation 2020/852: “EU Taxonomy”