For the world to focus on environmentally sustainable economic activities and meet the European Union (EU)’s climate and energy targets for 2050, the EU has decided to label natural gas and nuclear energy as green investments. This decision is regulated by a classification system named the EU Taxonomy, which assists investors, companies, and policymakers in categorizing which investments and economic activities are considered environmentally justifiable. Considering the severity of climate change, it is of great public interest how this decision will support the EU economy in reaching its green deal objectives of making greener choices. Despite surrounding controversies, this evaluation is expected to become the world’s most ambitious green investment rulebook to fight climate change.

The EU Taxonomy, also known as the EU Green Taxonomy, was first published by the Official Journal of the EU in 2020. This detailed classification of sustainable economic activities established a framework that is intended to guide investors and businesses in making the right decisions toward more environmentally friendly projects. The regulation is supplemented by several delegated acts in energy, manufacturing, transportation, and agriculture that set down specific criteria to efficiently reduce greenhouse gas emissions and achieve carbon neutrality. In effect, the implemented EU Taxonomy is expected to play a vital role in effectively transitioning the world to a sustainable economy.

Working Towards a Green Classification

The classification system of the EU Taxonomy aligns with the EU’s Green Deal objectives, enabling the EU to become the first climate-neutral continent by 2050 if fulfilled successfully. As the Chief of the European Commission (EC) Ursula von der Leyen stated on her social media account that the EU Taxonomy would explicitly define economic activities that would best contribute to countering climate change, this system is anticipated to lead the EU to engage in more sustainable finance measures. By organizing environmentally sustainable economic activities through its system, the EU Taxonomy is bound to play a key role in climate change mitigation and guide the economy to work towards achieving a greener world.

Within a year of its initial publication, the EU Taxonomy has evoked split viewpoints within the EU on the decision to include gas and nuclear energy, and whether they should be considered sustainable. Regarding these matters, the EU Joint Research Center (JRC) conducted a technical assessment of nuclear energy in 2020, where it concluded that nuclear energy causes no significant harm. As a result, the EC published a new delegated act in February that proposed to include both natural gas and nuclear energy under the taxonomy, whereupon on July 6, the EU Parliament approved recognizing both as environmentally sustainable energy sources, a decision expected to come into force in the year 2023.

According to the EC, the EU Taxonomy must align with six main objectives: climate change mitigation, climate change adaptation, sustainable use and protection of water and marine resources, transition to a circular economy, pollution prevention and control, as well as the protection and restoration of biodiversity and ecosystems. These objectives help set clear standards for how sustainable economic activities should reach the criteria of contributing to environmental social goals. Such investments therefore must be able to contribute to at least one of the six environmental objectives and cause no substantial harm to any other objectives.

Following these intentions, the new decision to allow natural gas and nuclear energy to be labeled as green investments recognizes their role to be utilized as transitional energy sources. This would mean that new gas plants would be able to serve as a substituting factor for countries that need replacement from fossil fuels and become a low-carbon power source that generates large amounts of heat and electricity. These objectives drive the new EU Green Taxonomy to become a tool projected to navigate investors and companies to shift to a low-carbon, resilient and resource-efficient economy.

Controversies of the Decision

Despite the positive affirmations behind the decision, EU Taxonomy has ignited a fiery debate on whether nuclear power and natural gas should truly be considered sustainable. Although supporters of the decision claim that nuclear energy is a low-carbon power source that must be considered as a primary energy source to tackle climate change, opponents argue that nuclear power results in the unsustainable production of radioactive waste, therefore harming the possibility to transition into an environmentally friendly economy.

Moreover, several environmental organizations such as the World Wildlife Fund (WWF) and Greenpeace have rejected this proposal, claiming that this new law would inadequately label gas and nuclear as “green” despite their negative drawbacks. In fact, 278 members of the European Parliament (MEP) have voted against recognizing nuclear energy and gas as green labels—falling short of the 353 MEPs voting in favor. Professor Chung Bum-Jin (Nuclear Engineering, Kyung Hee University) also believes that the taxonomy should not have been determined by political correctness or by a majority vote for classifying environmental objectives. Overall, the different responses reveal how the decision will still be subject to continuous review.

In response, the EU has provided safety measures to minimize the potential harms of nuclear energy. For these to be considered sustainable, electricity production projects must have life-cycle releases below 100g CO2/kWh and must not exceed an average of 550 kg/kW annual emissions in 20 years. As the EU finalized its safety standards to incorporate nuclear power plants in the taxonomy, South Korea’s Ministry of Environment (MOE) decided to finalize its Korean-style green classification system called the K-Taxonomy which will come into effect in September. This would serve as a reference point for the financial sector in shifting investments from carbon-heavy industries toward more sustainable and green activities.

According to Professor Chung, since South Korea is a nuclear power plant exporting country, it would be necessary to consider establishing a system that defines what environmentally sustainable economic activities are and specifically classify which industries are eco-friendly. Nonetheless, one could see the paradigm shift by the EU to accelerate its transition away from the dependence on fossil fuels as a step in creating the change required for the world to transition to a more sustainable economy.