Brussels faces legal challenge over labelling gas and nuclear ‘green’

The European Commission is facing legal challenges from two environmental organisations over its labelling of gas and nuclear as “green” under a system designed to direct investment into climate-friendly projects.

Greenpeace, the campaign group, and a separate alliance of environmental bodies, including Client Earth and the World Wildlife Fund, said they had requested a legal review of the decision that had applied “fake green” labels that were incompatible with EU climate laws.

The classifications in the so-called EU taxonomy were established in 2020 to help push the bloc towards its goal of reaching net zero emissions by 2050.

But the commission did not include gas and nuclear in its original legislation to set up the financial classification system, and decided to add them in January after consultations.

The challenge from the group including Client Earth takes issue only with the green label for gas, “a potent fossil fuel that threatens European energy security and has led to sky-high energy prices across Europe”.

The risks associated with nuclear energy were cited by Greenpeace for opposition to its inclusion. “Gas is a leading cause of climate and economic chaos, while there is still no solution to the problem of nuclear radioactive waste and the risk of nuclear accidents is far too significant to ignore,” said Ariadna Rodrigo, Greenpeace EU’s sustainable finance campaigner.

Both group have requested the commission formally reconsider its decision, for which it has between 16 and 22 weeks. If it does not agree to, they have said they will elevate the case to the European Court of Justice.

Legal arguments have been put forward on the basis that the commission did not take account of the expert advice it was given, which gave a negative opinion of the proposal, and that the law does not follow fundamental climate science.

Brussels has said that gas and nuclear-related activities may only be considered “green” if they meet certain criteria. They must only be used as a means of transitioning away from dirtier fossil fuels such as coal and oil, and that gas projects should only operate with limited emissions and the potential to convert to renewable power by 2035.

Nuclear power may only be funded if it adheres to certain standards for the disposal of radioactive waste, it ruled.

The debate has become more heated during the energy crisis prompted by Russia’s manipulation of gas exports to retaliate for the EU’s support for Ukraine. National governments across the EU have pumped billions of euros into finding other fuel supplies, opening up liquefied natural gas terminals and, in some cases, elongating the life of nuclear plants.

Lawmakers in the European Parliament had the final say on gas and nuclear’s inclusion in the taxonomy in July but failed to prevent it by a margin of 75 votes.

Green and leftwing MEPs are also pushing for the parliament to take legal action but the process is likely to be more difficult as it would need approval by a parliamentary majority, which is unlikely given the previous shortfall.

Austria and Luxembourg are also preparing legal action to challenge the inclusion of nuclear investments in the taxonomy. That action is being led by Austria, which has a history of scepticism about nuclear power. That case should be presented in early October, according to those with knowledge of the process.

The controversy over the environmental classification has pushed the commission to delay a planned “social taxonomy”, which would aim to push investments towards “socially beneficial” ventures.

It also prompted experts from five environmental and consumer groups to leave the EU’s technical advisory group on sustainable finance this week, according to a letter sent to Mairead McGuinness, the EU’s financial commissioner, seen by the Financial Times.

The commission said that it had received the requests for formal reviews of the taxonomy decision and that it would respond “in due course”. It added it “recognises the work” of the members of the advisory group and “take[s] note that some . . . have decided to step down”.