KEF, Alm.del - 2021-22 - Bilag 152: Orientering om skriftlige kommentarer til EU-taksonomi for bæredygtige aktiviteter

Klima-, Energi- og Forsyningsudvalget 2021-22
KEF Alm.del Bilag 152
Offentligt

January 2022

Danish comments on the draft Delegated Regulation amending Dele-

gated Regulation (EU) 2021/2139 as regards economic activities in

certain energy sectors and Delegated Regulation (EU) 2021/2178 as

regards specific public disclosures for those economic activities

We thank the Commission for consulting the Member State Expert Group

on the Commission's draft Delegated Regulation on establishing technical

screening for economic activities in certain energy sectors as regards cli-

mate change mitigation and climate change adaptation supplementing Reg-

ulation (EU) 2020/852 on a framework to facilitate sustainable investment

(Taxonomy Regulation).

The Danish government strongly supports the Taxonomy Regulation on a

common classification system for sustainable economic activities adopted

by the Council and European Parliament. The taxonomy has the potential

to substantially increase sustainable investments by providing guidance to

private investors and therefore play a key role in delivering on the EU's

commitments towards climate neutrality by 2050 while avoiding signifi-

cant harm on the environment.

It is, however, crucial for the credibility and usability of the Taxonomy

Regulation that technical screening criteria are established in line with the

requirements in the Taxonomy Regulation. This implies that the taxonomy

should cover the economic activities with the highest potential for a signif-

icant contribution to the environmental objectives, following a science-

based and technology neutral approach, while avoiding significant harm to

other environmental objectives. Criteria for transitional activities should

not lead to a lock-in of carbon-intensive assets, hampering the deployment

of best performance alternatives in the energy sector.

We are therefore deeply concerned that natural gas and nuclear energy are

included in the circulated draft as we find that these technologies fall out-

side the scope of the Taxonomy Regulation.

KEF, Alm.del - 2021-22 - Bilag 152: Orientering om skriftlige kommentarer til EU-taksonomi for bæredygtige aktiviteter

2/8

Nuclear energy

Nuclear energy does not meet the legal criteria specified in article 10 of

the Taxonomy Regulation. It does not fall under the activities qualifying

as contributing substantially to climate change mitigation listed in article

10 (1), and it cannot qualify to be included as a transitional activity with

reference to article 10 (2) given that a transitional activity is defined as

one where there is no technologically and economically feasible low-car-

bon alternative. Finally, nuclear energy is not an enabling activity since it

does not contribute to promoting other activities listed in article 10 (1).

On the contrary, the proposal could lead to a lock-in of investments for

many decades to come.

Furthermore, nuclear energy is incompatible with the “do no significant

harm” principle. There is a proven risk of severe accidents in nuclear

power plants with potential catastrophic consequences for human health

and the environment. Safe and secure disposal of nuclear waste remains

unsolved. So far there is no operational sustainable solutions to handle

high-level radioactive waste and spent fuel.

This is also why the SCHEER experts found that further assessments and

evidence were needed when they were reviewing the JRC technical report

on nuclear energy. The experts emphasized that current regulation is not

sufficient to mitigate all relevant risks, including uncertainties about the

disposal of high-level nuclear waste and the impact of radiation on the en-

vironment.

It is noted that in particular in the area of radioactive waste management,

Member States have advanced slowly in implementing the provisions for

responsible and safe management of radioactive waste. This in particular

with respect to management of high level waste and spent fuel designated

as waste. The practical attainment of the goals defined for the EUR-

ATOM area therefore still require extensive and time consuming efforts

to be realised.

Natural gas

Natural gas is a fossil fuel with significant emissions. The Taxonomy

should not drive investments towards new fossil fuel based generation that

does not comply with the generally applied 100 g CO2e/kWh threshold for

electricity generation. Using the “do no significant harm” threshold of 270

g CO2/kWh as a criterion for substantial contribution in the case of natural

gas breaks with the principle of technology neutrality, and the threshold is

well above the recommendations by science institutions and agencies such

as the IPCC and IEA.

KEF, Alm.del - 2021-22 - Bilag 152: Orientering om skriftlige kommentarer til EU-taksonomi for bæredygtige aktiviteter

3/8

Natural gas does not meet the requirements of 10 (2) for activities to be

classified as transitional under the Taxonomy Regulation. Technologically

and economically feasible low-carbon solutions exist, and a labelling of

natural gas as sustainable will hamper the development and deployment of

renewable energy.

It will also enhance the risk of carbon lock-in considering the economic

lifetime of natural gas-fired plants and the uncertainty of availability of

sufficient volumes of renewable energy and low-carbon gasses in the EU

to replace natural gas in electricity production towards 2035. Natural gas

does have a role in contributing to energy security in Europe in a transition

period, but the Taxonomy Climate Delegated Act is not the right file to

handle this role.

Concluding remarks

We fully acknowledge the prerogative of member states and investors to

decide on their own investment strategies and energy assets. But for the

taxonomy to be a credible guidance tool on sustainable investments, it has

to make clear that while renewable energy technologies are classified as

sustainable activities, investments in natural gas and nuclear power are not.

Regrettably, if the draft Delegated Regulation put forward by the Commis-

sion is adopted and enters into force, nuclear energy and natural gas will

attract investments that could have been made in renewable energy instead.

We therefore urge the Commission to uphold the taxonomy’s important

objective to facilitate green financing and take action to not adopt the cir-

culated draft Delegated Regulation on natural gas and nuclear energy.

In the attached Annex, we have included initial comments to the specific

economic activities. It should be noted, that our comments are preliminary

and do not anticipate the Danish Government's position during the formal

objection period initiated if the Commission adopts the circulated draft Del-

egated Regulation.

KEF, Alm.del - 2021-22 - Bilag 152: Orientering om skriftlige kommentarer til EU-taksonomi for bæredygtige aktiviteter

4/8

Danish comments on the annexes to the draft delegated regulation on

technical screening criteria for economic activities in certain energy

sectors

ANNEX I on climate change mitigation

4.26. Pre-commercial stages of advanced technologies with minimal waste

from the fuel cycle

The criteria suggested for the pre-commercial phase must be designed so

that investments only contribute to the development of so-called fourth-

generation facilities characterized i.a. by reducing 1) the amount and life-

time of nuclear waste, 2) the risk and severity of accidents and 3) the ap-

plicability of radioactive material for military purposes.

So far there are no operational disposal facilities for high-level radioactive

waste. According to the JRC “the necessary technologies are now availa-

ble” for safe isolation of high-level radioactive waste. If that is the case, it

should be uncontroversial to include high-level radioactive waste in the cri-

teria concerning requirements for disposal facilities. This would strongly

promote the actual establishment of disposal facilities which have long

been needed to reduce the risk associated with nuclear power significantly.

To be specific, the proposed criteria 1(f) stating that the relevant Member

States are only required to have a

“plan with detailed steps to have in op-

eration, by 2050, a disposal facility for high-level radioactive waste”

is far

from sufficient. The requirement of operational disposal facilities shall not

only apply to very low, low- and intermediate levels of radioactive waste,

but also apply to high-level waste. This must apply to both new and existing

plants.

It is therefore proposed that Annex I on climate change mitigation (section

4.26, page 14) be amended so that in 1 (e) after

"... intermediate-level"

added:

"as well as high-level".

As a consequence, it is proposed that 1 (f)

be deleted. As a further consequence it is suggested that section 3 (b) should

also be deleted and section 5 is updated accordingly.

It appears from 1 (c, d) that it must be possible to demonstrate that a project

at the end of estimated life has sufficient resources available to ensure the

management of radioactive waste and the decommissioning of power

plants. Since there are currently no sustainable solutions for management

of high-level radioactive waste, the following should be added in criteria

1(c, d):

“…including sufficient resources to establishment and manage-

ment of permanent disposal facilities for high-level radioactive waste.”

KEF, Alm.del - 2021-22 - Bilag 152: Orientering om skriftlige kommentarer til EU-taksonomi for bæredygtige aktiviteter

5/8

The suggested criteria for (4) transition to a circular economy are insuffi-

cient and too vague. Currently, the following is proposed:

“A plan for the

management of both non-radioactive and radioactive waste is in place and

ensures maximal reuse or recycling of such waste at end of life in accord-

ance with the waste hierarchy, including through contractual agreements

with waste management partners, the reflection in financial projections or

the official project documentation.”

The criteria on circular economy (4) should be revised in order to include

specific minimum levels of (for example) recycling for each type of waste,

reflecting best practice in waste management – including management of

spent fuels.

4.27. Construction and safe operation of new nuclear power plants, for the

generation of electricity or heat, including for hydrogen production, using

best-available technologies

The remarks in section 4.26 should also apply for section 4.27.

The criteria should be clarified so that it is clear to all stakeholders that new

nuclear power plants must be state-of-the-art IV generation power plants –

perhaps including III+ generation power plants, where spent fuel is recy-

cled and where radioactive waste and the risk of accidents are reduced sig-

nificantly. Construction of new II or III generation nuclear power plants

should under no circumstances be included since they represent outdated

technologies.

In addition the timeframe for investments in new nuclear power plants

should be shortened significantly. The current criteria includes construction

permits issued by 2045. Given the very long licensing process, construction

time (approx. 15-20 years) and lifespan (approx. 40 years) of nuclear power

plants, this will lead to a technological lock-in for many decades.

4.28. Electricity generation from nuclear energy in existing installations

Investments in existing nuclear plants cannot be considered neither sustain-

able nor in accordance with the do no significant harm principle. Therefore,

it is suggested that section 4.28 be deleted in the draft delegated act.

Criteria 1(f) is even more vague for existing installations, than for new in-

stallations, which cannot be justified by any scientific arguments.

In addition, the timeframe for investments in modification of existing nu-

clear installations (for the purpose of extension) should be shortened sig-

nificantly. The current criteria includes modifications authorized by 2040.

KEF, Alm.del - 2021-22 - Bilag 152: Orientering om skriftlige kommentarer til EU-taksonomi for bæredygtige aktiviteter

6/8

This will lead to a technological lock-in for many decades and prolong the

lifespan of outdated technology which does not live up to best practice for

safety and environmental impact.

4.29. Electricity generation from fossil gaseous fuels, 4.30. High-efficiency

co- generation of heat/cool and power from fossil gaseous fuels, 4.31. Pro-

duction of heat/cool from fossil gaseous fuels in an efficient district heating

and cooling system

Several of the criteria in 4.29-4.31 are not strict enough or insufficient to

ensure that natural gas investments labelled as sustainable will in practice

not lead to carbon lock-in, hamper the development of renewable energy

and deliver in time the envisioned transition to renewable energy or low-

carbon gasses.

Construction permit granted by 31 December 2030

The deadline for natural gas fuelled facilities that do not comply with the

100 g CO2e/kWh threshold goes far beyond the 2025 deadline set in the

Commission's first proposal to include certain natural gas activities (from

March 2021). If the proposal to include natural gas is maintained, the

deadline should as a minimum be advanced to 2025 as originally sug-

gested by the Commission.

If the construction permit only has to be granted by the end of 2030, it

will be possible to build new natural gas-fired facilities labelled as sus-

tainable activities even in the 2030s. This risks to jeopardise the possibili-

ties of achieving the EU’s own climate and energy targets, and keeping

global temperature rise below 1.5 degree. In addition, the 2030 deadline

for a natural gas facility to receive a construction permit does not seem to

correlate with the 2035 deadline for this very facility to be 100 pct.

fuelled by renewable energy or low carbon gasses.

In the case of electricity generation: the 550 kg CO2e/kW threshold

According to the Commission, natural gas-fired power plants labelled as

sustainable will provide peak load and not baseload. The threshold of an

annual average of 550 kg/kW over 20 years is meant to make sure that fa-

cilities with higher direct emissions than 270 g CO2e/kWh either limit the

number of operating hours or make a faster transition to renewable energy

to comply with the requirement. However, once the facility has been

built, it is likely to be switched on if the marginal costs are the lowest in

the situation. According to the draft, the Commission may address an

opinion to relevant operators if the thresholds are not met, but it is not

clear what the sanction may be in case of incompliance.

KEF, Alm.del - 2021-22 - Bilag 152: Orientering om skriftlige kommentarer til EU-taksonomi for bæredygtige aktiviteter

7/8

The power/heat generated by the activity may not yet efficiently be re-

placed by renewable energy.

This criteria is very vaguely formulated. It has to be clearly stipulated that

investments in a natural gas activity can only be categorized as sustaina-

ble if it has been demonstrated that no technically or economically feasi-

ble renewable energy alternative exists. It also has to be specified how

this should be established – by whom and by which kind of assessment.

The facility replaces an existing high emitting generation facility

It will be important to make sure that the replacement condition contrib-

utes to accelerated solid or liquid fossil fuel phase out, and thus that the

facility being replaced is not already planned to close.

In addition, for a natural gas activity to be classified as sustainable, it

should be required that, in parallel, the country or the investor commit to

substantially increase the investments in renewable energy capacity in at

least the same order of magnitude. This will be a prerequisite for ensuring

that investments in natural gas do not direct investments away from re-

newable energy.

The facility demonstrates compatibility with co-firing of low carbon gase-

ous fuels

It is very important that, as suggested by the Commission, natural gas-

fired facilities need to demonstrate compatibility with a clear and ambi-

tious pathway towards renewable and low carbon gasses in order to limit

the risk of carbon lock-in.

However, it is quite uncertain today whether there will be enough renewa-

ble and low carbon gasses available at European and global level for re-

placing natural gas generation by such gasses, since these gasses will also

be key in the decarbonisation of the industry and transport sectors. The cri-

teria therefore need to specify more clearly whom is going to assess and

approve that a new facility will be able to meet the required pathway, and

which measures will be taken in case of non-compliance, i.e. if the fuel

switch does not take place as foreseen.

ANNEX II on climate change adaptation

4.26. Pre-commercial stages of advanced technologies with minimal waste

from the fuel cycle

In general, the technical screening criteria are too vague and insufficient in

order to avoid the risk of significant harmful consequences.

KEF, Alm.del - 2021-22 - Bilag 152: Orientering om skriftlige kommentarer til EU-taksonomi for bæredygtige aktiviteter

8/8

This is for example the case for criteria 1:

“The economic activity has im-

plemented physical and non-physical solutions (‘adaptation solutions’)

that substantially reduce the most important physical climate risks that are

material to that activity.”

This criteria should be revised in order to include

detailed and specific actions and safeguards in different circumstances.

Similarly, the technical screening criteria regarding circular economy (4)

are insufficient and too vague. The following is proposed:

“A plan for the

management of both non-radioactive and radioactive waste is in place and

ensures maximal reuse or recycling of such waste at end of life in accord-

ance with the waste hierarchy, including through contractual agreements

with waste management partners, the reflection in financial projections or

the official project documentation.”

The criteria on circular economy (4) should be revised in order to include

specific minimum levels of (for example) recycling for each type of waste,

reflecting best practice in waste management – including handling of spent

fuels.

4.27. Construction and safe operation of new nuclear power plants, for the

generation of electricity and/or heat, including for hydrogen production,

using best-available technologies

The remarks in section 4.26 should also apply for section 4.27.

In addition, the timeframe for investments in new nuclear installations

should be shortened significantly. The current criteria includes construction

permits issued by 2045. Given the very long construction time (approx. 15-

20 years) and lifespan (approx. 40 years) of nuclear energy facilities, this

will lead to a technological lock-in for many decades.

4.28. Electricity generation from nuclear energy in existing installations

The remarks in section 4.26 should also apply for section 4.28.

In addition, the timeframe for investments in modification of existing nu-

clear installations (for the purpose of extension) should be shortened sig-

nificantly. The current criteria includes modifications authorized by 2040.

This will lead to a technological lock-in for many decades and prolong the

lifespan of outdated technology which does not live up to best practice for

safety and environmental impact.