In all likelihood, the European Commission will table a proposal in the coming months to include nuclear energy in the EU’s green finance taxonomy, said Thomas Pellerin-Carlin, a researcher at the Jacques Delors Institute. But it is probably waiting for the outcome of the German elections before making a move, he suggested.
Thomas Pellerin-Carlin is a researcher at the Jacques Delors Institute where he is director of the Energy Centre. He spoke to EURACTIV’s Frédéric Simon.
- The inclusion of nuclear power in the EU’s green finance taxonomy is “the most likely” outcome in view of the latest expert reports, which concluded that nuclear does not pose a “significant harm” to the environment.
- A negative decision, on the other hand, would unleash a spate of anti-Brussels attacks in France and put Emmanuel Macron in a difficult position ahead of the 2022 presidential elections.
- A green label for nuclear, however, would also undermine the credibility of the taxonomy in the eyes of German, Austrian or Italian investors.
- Assuming the Commission already knows it is going to propose including nuclear in the taxonomy, it would be in its own interest to wait for the outcome of the German elections.
French Economy Minister Bruno Le Maire has underlined the importance of including nuclear power in the EU’s green finance taxonomy. What are the stakes for France?
There are two main issues, one economic and the other political.
From an economic point of view, nuclear power in France is closely linked to the EDF company, which is more than 80% state-owned. And EDF has big cash problems, with net debt of more than €40 billion and massive investments that must be made, partly in renewable energies and partly in nuclear.
On the nuclear side, there are two types of investment: first, the modernisation of historic power plants built in the 1980s, which must observe the requirements imposed by France’s Nuclear Safety Agency (ASN).
The other type of investment – and this is a choice EDF has made – is new nuclear build and the flagship Flamanville EPR project, which is a complete fiasco, an industrial debacle such as we have rarely seen in the history of energy.
To give you an order of magnitude, the Flamanville EPR was initially supposed to cost €3.5 billion, while today we have an estimate of between €12 billion according to EDF, and €19 billion according to the Court of Auditors.
And the construction is still not complete …
The project was born around 2001-2003, the plant was to be completed in 2012, so they are already at least ten years late! Beyond the delay, there is an enormous financial cost for EDF. And despite this, EDF wants to build six new plants of the same model in France.
Doing all that takes a lot of money. And EDF does not have enough, the company has missed the renewables turn and it is not generating enough cash there although it is trying to catch up.
On the nuclear side, EDF must therefore seek funding, public or private. And this is where the taxonomy comes in. If nuclear is considered green as part of the EU taxonomy, that will facilitate both private and public funding.
Now let’s be clear: nuclear power has a harmful impact on the environment. A nuclear power plant – like a wind farm for that matter – requires cement, steel, and artificialisation of soil. In addition, nuclear power plants can pose a problem for biodiversity and pollute the waters, for example in the event of nuclear incidents or poor management of nuclear waste.
For the taxonomy, the issue is to determine whether this damage to the environment is “significant” or not – this is the “Do No Significant Harm” principle.
The European Commission has requested three expert studies on the matter, all of which concluded that the radioactive waste problem was manageable. On this basis, the Commission must now make a proposal to include nuclear in the taxonomy, but it seems to hesitate. What would be the consequences at the industrial level if nuclear power were to be excluded? Would this be the beginning of the end for nuclear power in France?
No, I think it would rather throw some sand into the wheels, which would make nuclear financing more difficult and expensive. For an industry like nuclear where investment costs are extremely high, the interest rates at which companies can borrow is a fundamental factor of profitability.
A possible exclusion from the taxonomy would also make public funding more complicated, as nuclear would be recognised in European law as a technology that causes significant harm to the environment. This would make it harder to justify using taxpayer money to fund something that is recognised as being harmful to the environment.
One way out would be to seek funding outside Europe, especially in China. EDF already has a partnership with China, there is a first EPR in operation in Taishan. And there is the Hinkley Point C project in the United Kingdom that EDF is building with a Chinese partner.
Economically, it would be logical to continue on this path. But from a geopolitical and diplomatic point of view, it would pose a major problem in terms of sovereignty and potentially of security if the French nuclear power sector was to move under Chinese flag.
With the presidential elections in April, what would be the political impact in France if nuclear power were to be excluded from the green taxonomy?
First, it would fuel French political attacks on “Brussels”. It would also be a boost for the Greens, which is the only French party that has always had a very clear anti-nuclear position. There would probably be attacks from the historic left, especially from the Communist Party, which is very pro-nuclear and intertwined with the unions in this industry.
But the most virulent attacks would certainly come from the far-right and the conservative right – the Rassemblement National (RN) and Les Républicains (LR). With the exception of Michel Barnier, LR is today more ambiguous about Europe, while remaining very pro-nuclear. The candidates of this political family, for example, would probably denounce a technocratic and opaque decision by Europe which does not take into account French interests, etc.
This anti-Brussels criticism would put Emmanuel Macron in an awkward position because the French president has always positioned himself as a convinced pro-European, banging on Brussels has never been his business.
So a negative decision on nuclear at EU level could undermine his campaign by being interpreted as an example of France’s lack of political influence in Brussels. From January 2022, he intends to use the French presidency of the Council of the EU to show how much he has been able to move Europe, in line with the discourse “a strong France in a strong Europe”. And that message would suddenly become more difficult to convey.
Public opinion in France seems rather pro-nuclear to me. Is there not also a risk of stirring up anti-European sentiments among the wider population?
This risk is limited. For the vast majority of French people, the nuclear issue is not salient enough to spark protests or a change of vote.
What is at stake is rather the emotions that can be stirred by EDF’s fate as a public company symbolising the French public service. EDF is strongly associated with the power of the state, which is fundamental in the political vision of the French.
So unless there is a scenario around EDF’s bankruptcy, I don’t think the nuclear issue will be important enough to cause a real political problem among the French people.
It is also for this reason that Emmanuel Macron has decided to postpone discussions on EDF’s reform until after the election, as the issue was so eminently political.
The inclusion of nuclear power in the taxonomy and the future of EDF – are these two issues not related?
Yes, they are related. But, I don’t believe a negative decision by the Commission on nuclear power could have massive impacts on EDF in the months to come. The impact would of course be significant, but it will be deferred over time, with access to financing that will become more difficult.
For now, with high electricity prices, EDF has less of a cash flow problem. They don’t have short-term financial problems. And by April 2022, I don’t think there would be a big impact on EDF.
From a political point of view, however, the debate on nuclear power and the taxonomy risks raising questions about Emmanuel Macron’s European record and Europe’s place in France.
After the 2022 election, any new government will have to tackle the issue of EDF’s future. And there is a real political risk there if EDF were to be split or privatised.
For a large part of public opinion and the French political class, this would be interpreted as a symbol of what is perceived as a decline of the state, a “decline of France”.
Germany is among the countries most strongly opposed to the inclusion of nuclear in the taxonomy. In your opinion, have the German and French positions become irreconcilable?
I think you have to differentiate between political rhetoric and the actual agreements that are found behind closed doors.
In Germany, the anti-nuclear movement is deeply rooted and radical. The demonstrations of the 1970s and 1980s were sometimes violent, with hundreds of people injured, demonstrators armed with Molotov cocktails. It is a level of violence that is more reminiscent of the Yellow Vests than the peaceful demonstrations of the Fridays for Future movement. For the German government, the anti-nuclear position is therefore deeply rooted in society.
Now, there are compromises that are found between diplomats on this subject as well as others. And the key role here is played by the European Commission, which has exclusive powers at EU level to make a legislative proposal. And from this point of view, there is an important role played by Thierry Breton, the EU’s Internal Market Commissioner.
The Commission proposal, whatever it may be, has a good chance of being adopted in the end because it is difficult to constitute a majority to overturn its proposal.
There are rumours of a possible compromise between Paris and Berlin, where France would back Germany on gas in exchange for German support on nuclear. Does such a compromise seem possible to you?
The inclusion of gas would be the end of the taxonomy. For investors, the taxonomy must be credible and the scientific debate on gas is settled: fossil gas is not green, it cannot enter the taxonomy because of the related polluting emissions of CO2 and methane. It would be the end of the taxonomy and a blow to the Green Deal because it would send the message that this is all one big greenwashing exercise.
A green label for nuclear power, on the other hand, would harm the credibility of the taxonomy in the eyes of German, Austrian or Italian investors.
Conversely, from the point of view of an American investor, there is no debate: nuclear is green. And it would be the same in the eyes of Chinese, Indian, Australian or Canadian investors. in fact outside of Europe, I don’t know of any country that has decided to quit nuclear power.
From this point of view, there is no good choice on nuclear – whether the Commission decides to include it or not in the taxonomy, there are only bad options. But at some point, it will have to decide.
You just said it, there is no good choice on nuclear. How can the European Commission break the impasse?
I don’t see how it could do it. With the taxonomy, either you’re in or you’re out.
Well, the taxonomy recognises so-called “transition” technologies. And on gas, the Commission found a creative solution by saying it would make a separate legislative proposal on the role of gas in the energy transition. Could a similar solution be considered for nuclear?
Yes, but that would distort the taxonomy. The objective of the taxonomy is to define thresholds beyond which an investment is considered green or not.
In fact, a credible taxonomy can only cover 1, 2 or 3% of current GDP. Other than wind turbines, batteries, or a few other investments, the vast majority of the economy today is completely out of line with the goals of the taxonomy, or the Paris Agreement. That’s the added value of the taxonomy: identifying those few sectors that are really green in order to help investors, companies and project promoters understand what goals they must achieve in order to become green. Including sectors in the taxonomy which, like fossil gas, are not compatible with climate neutrality, would be greenwashing.
All the lobbying that has been done over the past two years, both on nuclear and gas or “transition activities”, tends to discredit the taxonomy in the eyes of investors. There is a breaking point at some stage.
The Commission was due to make a proposal by the end of the summer to include nuclear in the taxonomy, but it seems to be playing for time. Do you think the German elections in September have an influence on this delay?
I don’t know for sure. But the current dynamics lead me to think that the Commission will make a proposal in this direction by recognising nuclear power as a “green” technology under the taxonomy. According to expert reports that have been issued, there is not enough evidence that waste is a problem that causes “significant” harm to the environment.
Assuming that the Commission already knows it is going to propose including nuclear in the taxonomy, it would indeed be in its own interest to wait for the outcome of the German elections.
Following the expert reports, the Commission should therefore logically propose including nuclear in the taxonomy and recognise it as a “green” technology?
Yes, that would be consistent with the dynamics of the past few months. It is very complicated today to scientifically demonstrate that nuclear waste poses a “significant” environmental problem that cannot be overcome.
It may also be one of the novelties of European policymaking these days: comparing the current Commission with previous ones, there is now a clear priority given to climate in the hierarchy of environmental and energy objectives. The climate is clearly the number one priority.
In the short term, shutting down a one-gigawatt nuclear reactor – the average size of a reactor – almost automatically adds two to three million tonnes of CO2 emissions per year, depending on whether the replacement electricity comes from renewable sources or existing coal and gas power plants.
From that perspective, there is a necessary role for nuclear power in Europe in the 2020s and probably beyond. And in countries where nuclear power stations are being closed – in Germany, Belgium, and even France with Fessenheim – it is above all the reflection of a legitimate political choice, which in Germany is the result of deep democratic support for phasing out nuclear power.
Moreover, within the Commission, President Ursula von der Leyen is not known for taking anti-nuclear positions, unlike many German politicians. As for Frans Timmermans, the Executive Vice-President, he is cautious and is not fiercely opposed to nuclear power, a subject that his chief of staff, Diederik Samsom, knows very well – he has a degree in nuclear physics.
More widely, there are also shifting positions among the environmental movement in France. In the Green EELV party, there is an emerging split between a young generation for whom climate change is the top priority, and for whom the nuclear exit is a laudable but secondary objective, and a generation which became politicised in the 80s and 90s, who have experienced Chernobyl, and who are very attached to a rapid nuclear exit.
For those who have joined the Green movement more recently – the Fridays for Future for example – clearly the climate is the number one priority. There are people today at EELV who tell you privately that they don’t want to shut down nuclear plants until 2035. And that’s new, even though it’s still a minority position.
And then within the Commission there is Thierry Breton, who is a key figure on this subject, and who somewhat exceeds his prerogatives as Internal Market Commissioner by campaigning publicly in favour of nuclear power.
In fact, looking at the College of Commissioners, I don’t see anyone who is fiercely anti-nuclear. While you have a majority of Commissioners who are clearly pro-climate and who have accepted nuclear power as a transitional energy source, and in any case as a necessary evil while waiting for the end of coal. And you also have a few Commissioners, including Thierry Breton, who are fiercely pro-nuclear.
So in view of all this, what seems to me the most likely indeed is that the Commission will make a proposal in favour of the integration of nuclear energy within the framework of the taxonomy.
[Edited by Zoran Radosavljevic]
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