EU ESG Taxonomy – delay to Commission proposal on gas and nuclear

The European Commission’s plans to amend Level 2 measures under the Taxonomy Regulation to deal with gas and nuclear activities have hit a slight bump in the road.

On 10 December 2021, a Delegated Regulation (EU) 2021/2139 was published in the Official Journal of the EU (OJ).

Made under the EU’s Taxonomy Regulation, it specifies the criteria to be used to determine:

• which specific economic activities qualify as 'contributing substantially' to the environmental objectives of climate change adaptation and mitigation; and
• whether those economic activities cause significant harm to any of the other relevant environmental objectives.

The Delegated Regulation came into effect on 1 January 2022.

Introducing new measures for gas and nuclear activities

However, the Delegated Regulation does not cover gas or nuclear activities and the European Commission is now looking to introduce new legislation to amend it so investors can identify if economic activities under the Taxonomy Regulation include gas or nuclear activities and, if so, to what extent.

A Commission press release published on 1 January 2022 notes the Commission’s view that “there is a role for natural gas and nuclear as a means to facilitate the transition towards a predominantly renewable-based future”. This whole issue, though, is highly contentious - different stakeholders (and different Member States) hold widely divergent opinions on whether nuclear energy, in particular, should play a role in the context of green energy.

Furthermore, the Commission accepts that some Member States are “still heavily based on high carbon-emitting coal” but considers that the proposed amending Delegated Act would “accelerate the phase out of more harmful sources, such as coal, and in moving us towards a more low-carbon greener energy mix”.

What happens next? and what’s the timeline?

Before the Commission adopts a new delegated act under the Taxonomy Regulation, it must consult the Platform on Sustainable Finance (PSF) and the Member States Expert Group on Sustainable Finance (EGSF).

Originally, these bodies were given until 12 January 2022 to provide their comments to the Commission on a draft of its proposed new Delegated Regulation, with the Commission intending to analyse their feedback and then formally publish a proposed complementary Delegated Act by the end of the month.

However, following criticism from stakeholders, the Commission has now extended this deadline to 21 January 2022. It is unclear at the moment whether this will have a knock-on effect on the Commission publishing its formal proposal.

In any event, whenever the draft Delegated Act is published, it will then pass to the European Parliament and to the Council of the EU. These will have four months to scrutinise the document, and, if applicable, to object to it. Either institution can extend the scrutiny period by an additional two months.
When a final text is agreed, the new Delegated Act will be published in the OJ and will apply from a date to be confirmed.