New EU Rules Spark Fight Over What Is ‘Green’ Energy - The Wall Street Journal

The European Union has proposed treating nuclear energy and natural-gas investments as similar to renewables over coming years in pursuit of a carbon-neutral economy, but the approach faces criticism from some of the bloc's governments.

The draft recommendation, which needs approval from EU governments and the European Parliament, underlines the political controversy already stirred up by environmental policies in Europe, despite broad public support for action to prevent climate change.

The proposal from the European Commission, the EU's executive arm, spells out changes to what counts as investment in environmentally sustainable energy. Known as the "green taxonomy," it is being closely watched by investors and industries including power generation, transportation and manufacturing.

Europe needs massive investment to meet its 2050 target for a carbon-neutral economy. In 2019, the Commission estimated it would need between 175 billion euros to 250 billion euros—equivalent to $199.02 billion to $284.31 billion—in additional annual investment in coming decades to achieve the goal. Most of that will need to come from the private sector.

An AdBlue tanker in Lubmin, Germany. The country strongly opposes the use of nuclear energy. Photo: Krisztian Bocsi/Bloomberg News

The EU hopes that by clearly classifying what counts as green investment and setting out stricter rules for what is required to achieve that, it will encourage investment in green projects, potentially lowering their funding costs relative to other energy plans.

Under EU law, each country can use its own energy mix. The taxonomy rules don't affect that or the use of public finances for different energy sources.

The rules require energy companies to transition away from carbon-emitting energy sources and require firms that sell financial products to disclose in detail the impact of their investments on environmentally sustainable products, including what proportion of their investments go to green projects.

The Commission's changes come amid growing questions about the bloc's climate ambitions, prompted by surging electricity prices. Europe has committed to slashing its carbon emissions by 55% by 2030.

In recent months, France has led a push to include nuclear energy, its main electricity source, on the green investment list, despite strong opposition to its use in Germany, the EU's other heavyweight economy.

A number of countries in eastern and southern Europe have pushed the Commission to not discourage investment in natural gas supplies. The EU imports three quarters of its natural gas, an energy source that emits less carbon than coal.

Under the proposals, investments in nuclear plants can be classified as green until 2045, while investments to extend the life of existing nuclear plants can count as sustainable until 2040. Conditions apply. Nuclear plants will have to show they and their governments have plans to handle toxic nuclear waste and for the cost of decommissioning plants in future.

More on Europe's Energy Needs

Natural gas investments can be counted as green until at least 2030 if their carbon emissions are under a fixed threshold, which is estimated to mean it will produce no significant environmental harm. Even then, electricity firms must show that they are generating a growing percentage of their energy from renewable sources in coming years.

Germany's vice chancellor and economy and climate minister, Robert Habeck, said he expected the Commission proposal to be rejected.

"It's questionable anyway if this greenwashing will find any kind of acceptance in financial markets," he said.

Germany set out plans to shift away from nuclear energy in the wake of Japan's Fukushima plant disaster in 2011. Mr. Habeck's Green Party has strongly opposed nuclear energy, which doesn't emit greenhouse gasses.

Austria's climate minister Leonore Gewessler said the government would seek a legal opinion on suing the Commission if it implemented its proposal as recommended.

The Commission's proposal will be subject to government feedback in coming days, which could lead to changes. Once approved by the Commission, EU governments and the European Parliament will have four months to approve it.

The green energy classification is only one of several elements of the Commission's climate plans to come under political fire from EU capitals.

Hungary's Viktor Orban has criticized the Commission and promised opposition to Brussels' plans to extend its emission-trading system to the transport and housing sectors. There have also been calls for the Commission to intervene in the carbon emissions-credit market to prevent what critics call speculation.

Supporters of EU climate plans say the rapid scale-up of renewable, clean energy resources wouldn't only battle climate change but could lower costs for consumers and increase the EU's geopolitical independence, by making the bloc less dependent on energy exporters including Russia.

Money is a sticking point in climate-change negotiations around the world. As economists warn that limiting global warming to 1.5 degrees Celsius will cost many more trillions than anticipated, WSJ looks at how the funds could be spent, and who would pay. Illustration: Preston Jessee/WSJ

Write to Laurence Norman at laurence.norman@wsj.com

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