04 Jan 2022, 08:37
Julian Wettengel

German government split over EU plans to label gas as sustainable

Photo of fossil gas infrastructure in Brandenburg, Germany. Source: CLEW/Wettengel.
The taxonomy debate shows that there is considerable disagreement among EU states over the right path to climate neutrality. Photo: CLEW/Wettengel.

German ministers have criticised EU plans to label nuclear energy as a sustainable investment, but the government coalition is split on also including fossil gas in the taxonomy. Finance minister Christian Lindner of the pro-business Free Democrats (FDP) welcomed the European Commission’s proposal to include gas as a transitional fuel towards climate neutrality, while Green Party ministers criticised the decision as “greenwashing”. The government will now examine the proposal, and news agency Reuters reported the coalition partners agreed to abstain in a vote when EU leaders will have their final say at a summit later this year to avoid conflict at EU level. The German energy industry association BDEW welcomed the decision and said investments in hydrogen-ready gas power plants were “imperative” for the transition to a completely climate-neutral energy supply in the European Union. The debate among EU governments on the taxonomy also shows that there is considerable disagreement over the right path to climate neutrality. [Update adds Reuters report that Germany aims to avoid escalation; government spokesperson comments]

Germany’s new government has criticised a proposal by the European Commission to classify nuclear energy as a sustainable investment, but ministers from the different coalition partners are split on the inclusion of certain fossil gas projects.

Politicians from all three coalition partners – the Social Democrats (SPD), the Green Party and the FDP – have come out in opposition to plans to label nuclear as sustainable. Development minister Svenja Schulze (SPD) called the proposal “wrong at EU level” and “absurd” on the global scale. “Nuclear power is too risky, too expensive and too slow to help the world with climate action,” she said.

It is questionable whether this greenwashing will find acceptance on the financial market at all.

Robert Habeck, economy and climate minister

Economy and climate minister Robert Habeck said the proposal “dilutes the good label for sustainability” and said he did not see the German government agreeing to it. “To label nuclear energy as sustainable is wrong for this high-risk technology.” The Green Party leader added that “it is questionable whether this greenwashing will find acceptance on the financial market at all”. The government would now assess the proposal.

At the same time, Habeck said it was “questionable” whether fossil gas should be included in the taxonomy. He added that “at least” the Commission made clear that fossil gas would only be seen as a transitional fuel and that it must be replaced by green hydrogen.

Finance minister Christian Lindner from the pro-business FDP, however, fully welcomed the inclusion of fossil gas. “Realistically, Germany needs modern gas-fired power plants as a transitional technology because we are doing without coal and nuclear power,” Lindner told Süddeutsche Zeitung. “With a view to climate neutrality, the plants should later be able to be used with hydrogen.” For this reason, he said, the German government had pushed to make the relevant investments possible. “I am grateful that arguments have obviously been taken up by the Commission,” Lindner said, and called for “further improvements”, without providing details.

Government spokesperson Steffen Hebestreit also said investments in hydrogen-ready gas plants are necessary. "Therefore, the proposals of the EU Commission's delegated act with regard to gas are in line with the position of the German government, even if such an "act" would not have been needed from our point of view," he told reporters in Berlin. He added that the government would now assess the full text and find a "coordinated position".

News agency Reuters reported that leaders of the three coalition partners agreed to avoid a fight against the European Commission's compromise proposal and simply abstain in the vote when EU leaders will have their final say at a summit later this year, according to two people familiar with the decision.

The split among the coalition partners had become apparent even before the government was sworn in. Media had reported that the Greens had pushed for a sentence in the coalition treaty in opposition to labelling both nuclear and gas as sustainable. The final treaty does not mention the taxonomy. Leading SPD politicians had come out in favour of including fossil gas, while Green Party officials had opposed the move.

Decision “severely damages the credibility of the taxonomy” - NGO

The German energy industry has welcomed the planned inclusion of gas projects in the taxonomy. “Investments in hydrogen-capable gas-fired power plants are imperative for the transition to a completely climate-neutral energy supply in the European Union,” said Kerstin Andreae, head of industry association BDEW. In order to ensure security of supply, Europe would need natural gas for some time as a partner to renewable energy sources.

However, the German Renewable Energy Federation (BEE) - a vocal promoter of renewable energies and an umbrella organisation for several renewable energy associations - criticised the proposal. Neither natural gas nor nuclear power even came close to meeting the criteria of sustainability. "Natural gas must only be used to a limited extent so as not to burn taxpayers' money as a "stranded investment" in infrastructure and power plants in the foreseeable future," said BEE president Simone Peter.

German finance watchdog NGO Bürgerbewegung Finanzwende criticised the Commission’s draft as greenwashing. “By caving in to national interests, the Commission is doing a disservice to sustainable financial markets in Europe,” said Magdalena Senn, policy advisor for sustainable financial markets. The inclusion of nuclear and gas “severely damages the credibility of the taxonomy,” she added.

Think tank E3G also criticised the plans. To "keep the integrity and relevance of the taxonomy", a public consultation had to take place, a majority of the European Parliament has to reject the proposal, and a strong diplomatic push from member states "advocating for a truly green taxonomy," said sustainable finance advisor Johannes Schroeten. "Germany is a key player and has to voice clear opposition against gas and nuclear in the taxonomy."

European Commission: Nuclear and gas projects sustainable investments “under clear and tight conditions”

The EU taxonomy is a classification system that defines and ranks environmentally sustainable economic activities as a framework for markets to decide what is truly green. It is meant to channel billions of euros of investments to support the EU’s Green Deal – its sustainable growth strategy.

The European Commission on 31 December sent out its proposal to allow some fossil gas and nuclear projects to be labelled sustainable investments under the EU taxonomy “under clear and tight conditions”. The Commission wants to give a temporary green label to gas projects that replace coal and emit no more than 270 grams of carbon dioxide equivalent per kilowatt-hour, according to the draft regulation, reported Bloomberg. Nuclear energy could be classified as sustainable as long as new plants that are granted construction permits by 2045 meet a set of criteria to avoid significant harm to the environment and water resources.

The proposal will now be scrutinised by the Platform on Sustainable Finance and the Member States Expert Group on Sustainable Finance, before the Commission adopts a final delegated act in January. It will then be sent for review to the European Parliament and the member states. They have four months to object to the document. However, only a large majority can prevent it, which is seen as unlikely. The European Council of member state governments will have the right to object to it by “reverse reinforced qualified majority” (which means that at least 72 percent of member states, i.e. at least 20, representing at least 65 percent of the EU population are needed to object to the delegated act), and the European Parliament by simple majority (i.e. at least 353 MEPs in plenary).

The Commission’s proposal did not come as a surprise. President Ursula von der Leyen and several of her commissioners had hinted over the past weeks that both nuclear and natural gas would be labelled as sustainable. The German government was involved in recent deliberations as well. Officials, including Chancellor Olaf Scholz, have said that there have been “intensive” talks with partners like France and the Commission over the proposal since mid-December.

Joint front of some member states against inclusion of nuclear

Each member state of the European Union determines its own energy mix, but energy markets in Europe are becoming more and more integrated and interdependent physically, economically, and from a regulatory perspective. The taxonomy debate shows that there is considerable disagreement over the right path to climate neutrality 2050 – a key goal of the Green Deal.

The question of whether to include gas and nuclear in the taxonomy has divided the EU for some time, with France and other nations pushing for the inclusion of nuclear, a technology which causes very little greenhouse gas emissions. Countries like Germany have said that fossil gas should receive a sustainability label as a transitional fuel, arguing that it is a less carbon-intensive alternative to coal in the medium run. Even if the Commission had decided not to include the two technologies, this would not have forbid investors from putting money into nuclear and gas projects.

Austria and Luxembourg are also among the countries that have criticised plans to include nuclear in the taxonomy. Austria’s minister for climate and energy, Leonore Gewessler, said both nuclear and fossil gas should be excluded and her country would sue if the proposal was enacted as planned. “Nuclear power is dangerous and no solution in the fight against the climate crisis,” she wrote in a message on Twitter. Luxembourg’s energy minister, Claude Turmes, said he would examine the proposal in detail and talk about the next steps with both Austria’s and Germany’s governments.

The taxonomy debate foreshadows heated discussions on other parts of the EU Green Deal in the coming months. The EU is knee-deep in the legislative process to overhaul all major climate and energy laws. The Commission has proposed drafts with its “Fit for 55 package”, which are now being debated in the European Parliament and the Council.

Nuclear power “bridge to nowhere” – German media reactions

Most media comments in German newspapers are rather critical of the EU’s proposal. The Frankfurter Rundschau criticised it would put natural gas plants and nuclear reactors on a sustainability level with wind and solar power. “Danger of radiation? Nuclear waste that needs to be stored safely for a million years? Massive environmental damage due to uranium mining? All of this apparently doesn’t seem to concern the EU Commission (…) It couldn’t be more absurd.”

The Tagesspiegel from Berlin commented that the EU proposal is merely “an expression of a rigid pursuit of interests by French President Emmanuel Macron.” While Germany plans to shutter its three remaining nuclear plants at the end of the year, France wants to invest a billion euros throughout the decade into mini-reactors, writes Tagesspiegel. “If the EU Commission’s plan is accepted, and this seems to be the case, Macron can expect to receive more money for a technology that really doesn’t deserve the label “green”,” the newspaper said, concluding that EU Commission leader Ursula von der Leyen “has been caught napping” by the French President.

The Süddeutsche Zeitung said it is “telling that there is no final repository decades after the first reactors started operation.” Even if nuclear power is considered as a bridge technology, “this would be a bridge to nowhere.” Building new nuclear plants takes many years, meaning the technology does not help with respect to short-term emissions reduction targets, the newspaper writes. Moreover, cost increases for the technology, as it was the case with British plant Hinkley Point, are likely to make nuclear increasingly unattractive for investors “despite Brussel’s green label.”

The Frankfurter Allgemeine Zeitung struck a more conciliatory note: “Nuclear power is CO2-free. This is why the climate movement is split over the question whether nuclear power can contribute to climate action,” the newspaper said. A country that exits the technology therefore needs to answer many unpleasant questions, for example why it prefers to invest in gas plants instead and still misses its climate targets even though solutions for achieving them exist.

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