A thread on the EU Sustainable Finance Taxonomy and why it's important that nuclear is included, and also some reasons why it isn’t. These are my thoughts only. I speak to financing and European policy experts but that doesn’t necessarily make me one. Here goes...
First off, what is it supposed to achieve? Basically, it’s all about unlocking private sector investments to help tackle climate change @Kaikenhuippu sums it up here ftalphaville.ft.com/2019/12/02/157…
It is meant to provide" the financing sector with an easy go-to place for defining activities that both significantly aid us with environmental goals, such as mitigating climate change, and which do no significant harm to other sustainability criteria.”
If you think about this hard for a second it’s actually a little surprising. Doesn’t the investment community already have oodles of eco-friendly investment products to choose from?
Well yes, but it turns out that there’s no consistency with labelling and European policy-makers are concerned about green-washing – where what they consider to be environmentally damaging activities get bundled up into the green investment products.
The taxonomy is the attempt to bring order to this chaos. Criteria were developed which loosely map to a life-cycle assessment. To qualify as ‘sustainable’ an activity has to clearly benefit one sustainability ‘objective’, but do no significant harm to any of the others 
An ‘Expert Group’ then used this to rigorously classify a whole bunch of technologies. Well, Sort of. Questions have been raised about just how consistently they applied this methodology to different activities.
Regarding nuclear energy, one sub-group noted the technology’s clear potential to help mitigate climate change but another – the do no significant harm group – sought to exclude nuclear from ‘sustainable’. Finally they put it into the too-hard basket ec.europa.eu/info/sites/inf…
Some of us think this decision was, well, pretty appalling frankly and reflected a serious bias in the DNSH group. You can judge for yourself. Here is @FORATOM_nuclear's response foratom.org/downloads/sust…
And here is an incredibly detailed critique produced by independent researchers energyforhumanity.org/wp-content/upl…
This bring me to the primary reason of why this initiative is important to nuclear. NUCLEAR ENERGY IS SUSTAINABLE. This needs to be acknowledged by EU policy makers. Attempts to exclude nuclear from the definition simply do not reflect the best available evidence/science.
At a societal level, this is really important. If we don’t have evidence based policy then we're in trouble. For climate action it is very clear that including nuclear energy makes achieving decarbonisation quicker, cheaper and easier
Also, there are reams of existing regulation at both the national and EU level which ensures that nuclear energy is carried out in a safe and sustainable manner. See for example ec.europa.eu/energy/en/topi… Excluding nuclear from the taxonomy makes a mockery of all this.
So the taxonomy is first and foremost a matter of principle, but (and here’s the controversial bit) there are some who believe that sustainable finance is not actually that important to nuclear projects. Get ready for a dive into nuclear financing realities
Nuclear power plant projects in deregulated markets face a very significant financing challenge. For evidence one need look no further than the UK and recent project suspensions world-nuclear-news.org/Articles/UK-un…
Nuclear projects are classifiable as pieces of national infrastructure. They are big business. The construction price tag for a two unit plant will be north of €10 billion. At that level the wisdom is that states will have to get involved somehow to provide needed security
Add to this that nuclear energy is also heavily regulated, vulnerable to policy risks, has a bad recent construction track record in Europe and is probably something of a black box to investors… the need for government to facilitate nuclear investment is clear as day
I.e., private and institutional investors are probably not going to be any more likely to invest in European nuclear projects - even if it’s labelled as green and bundled into a ‘sustainable’ (EU tm) product. Sorry for the sucker punch, but the truth hurts.
The rich people I know tell me that there’s plenty of money out there. Nothing about the taxonomy prevent investors from investing in non-‘sustainable’ (EU tm) projects. If govs do manage to make nuclear projects bankable, it doesn’t have to be green money that rushes in.
So having nuclear labelled as ‘sustainable’ (EU tm) would not solve the European nuclear financing challenge. Excluding it from a sustainable label does not prevent it from accessing private investment. But of course there are caveats and wider implications
The >€10 billion figure quoted above and accompanying logic applies to conventional gigawatt scale nuclear plants, but what about SMRs which are now on the cusp of commercialization? One of their main attractions is smaller financing requirements and less need for gov
What about the other parts of the nuclear fuel cycle? It seems to me that private investors should be able to invest in uranium mines, transport activities, maybe fabrication with the additional benefit of it being recognized as sustainable.
It’s clear that ‘sustainable’ (EU tm) investments are going to be facilitated by EU policy and receive incentives. I don’t know what that support looks like at this stage. Maybe tax breaks? If you do then please chime in.
But what about future policy developments? What will European policy makers dream up when they have the uber list of what’s ‘sustainable’ (EU tm) and not. The current direction policy is headed is pretty plain to see.
And what about international agencies which are looking for a steer on what’s sustainable or not? I can see the World Bank and certain other development banks plonking the taxonomy straight into their lending criteria. Can imagine certain UN agencies doing the same
Make no mistake, nuclear energy’s inclusion in the sustainable finance taxonomy matters, just not so much when it comes to financing new nuclear plants in Europe today. Beyond that though, yes it matters a lot.
I’ll end this thread by saying that I’m not sure yet how the most recent developments in the taxonomy affect this. One thing’s for sure, the saga isn’t over yet.
For the real experts out there, please let me know if I’ve screwed any of this up and I’ll add corrections. Thread ends.
