The European Union’s top court has upheld the European Commission’s decision to label investments in natural gas and nuclear power as sustainable finance. This ruling comes after Austria challenged the decision, citing safety concerns and uncertainty over nuclear waste disposal. The European Commission had argued that both gas and nuclear power have a role to play in the transition to a net-zero carbon future.
In 2022, the European Commission defied protests from environmental campaigners and internal dissent to give a sustainable finance label to investments in both gas and nuclear power. The commission’s taxonomy, which is a classification system for environmentally friendly economic activities, includes natural gas and nuclear power as part of its strategy to reduce carbon emissions.
Austria, which has been fiercely anti-nuclear since a 1978 vote prevented its only nuclear plant from starting operations, had challenged the decision in court. The Austrian government highlighted safety concerns and uncertainty over how to deal with nuclear waste, but the Court of Justice of the European Union (CJEU) found that the commission did not exceed its power and was entitled to its view.
The CJEU stated that economic activities in the nuclear energy and fossil gas sectors can, under certain conditions, contribute substantially to climate change mitigation and climate change adaptation. This ruling has been met with disappointment from Austria’s climate minister, Norbert Totschnig, who described the decision as “very regrettable.”
Environmental groups have also challenged the European Commission’s definition of natural gas and nuclear as “green” energy sources. The commission’s decision has sparked debate about the role of these energy sources in the transition to a low-carbon economy. The EU’s goal of achieving net-zero carbon emissions by 2050 will require significant investment in clean energy technologies, and the commission’s taxonomy is intended to guide investors towards sustainable investments.
The CJEU’s ruling reinforces the European Commission’s approach to sustainable finance and provides clarity for investors. However, the debate over the role of natural gas and nuclear power in the energy transition is likely to continue. As the EU moves forward with its climate goals, the commission’s taxonomy will play a crucial role in shaping the direction of sustainable investment.
