Nuclear and gas in the EU taxonomy: what this means for the energy mix of tomorrow

Nuclear and gas in the EU taxonomy: what this means for the energy mix allianzgi.com of tomorrow November 2022 The energy crisis prompted by the war in Ukraine has led to a reappraisal of the energy transition and thrust two contentious sources of power – nuclear and gas – into the spotlight. Does their inclusion in the EU taxonomy of sustainable investments bring clarity to their future role in the energy mix? Key takeaways Jingying Han – N uclear and gas are now included under the EU taxonomy rules designed to bring clarity to Sustainability sustainable investments, having previously been excluded Analyst – A lready considered a green source of energy in other parts of the worlds, the use of nuclear power is expected to grow steadily over the coming decades – I n the absence of economic carbon capture solutions – which are crucial to its green credentials – gas is expected to be virtually phased out by 2050 Nuclear is already one of the largest non-fossil- What is the EU taxonomy? fuel single sources of energy globally (see Exhibit 1) and, under the International Energy Agency’s The EU taxonomy is a classification system (IEA) Net Zero by 2050 global roadmap its that sets out a list of environmentally proportion of the energy mix will rise over the sustainable economic activities, providing coming decades from 5% in 2020 to 11% by 2050. companies, investors and policymakers However, this is a scenario based on an ambitious with definitions of which economic plan rather than a forecast. activities can be considered environmentally sustainable. Gas, by contrast, looks set to play a reduced role. Unabated natural gas – that is, natural gas In July 2022, the European Parliament sourced from power stations that are not fitted rejected a motion opposing the inclusion with carbon capture, utilisation and storage of nuclear and natural gas as technology (CCUS) technology – would fall from environmentally sustainable activities. a current market share of 23% to 3% by 2050 under the IEA pathway. Similarly, natural gas with CCUS is expected not to constitute a significant proportion of the future energy market. Value. Shared.