Is nuclear power clean or dirty, green or not green, sustainable or not sustainable? These distinctions matter in the European Union which has developed an elaborate system of categorization they call the “EU Taxonomy for Sustainable Activities.”
The Encyclopedia Britannica defines taxonomy as the “the science of classification.” In Aristotle’s time earth, air, fire, and water was all the classification civilization needed. It’s more complicated now.
This matters because activities that wind up in the “approved” categories will likely face fewer legal/environmental challenges, get cheaper financing and become part of the official pathway towards EU decarbonization. Foreign Policy Magazine thinks it matters too and published an article yesterday (January 3, 2022) by Jason Bordoff, “3 Reasons Nuclear Power Has Returned to the Energy Debate.”
We wrote an Insights post in October on France’s plan to reach zero carbon primarily via the use of nuclear power, which—for all its other perceived or real faults and risks—emits no carbon. The juxtaposition of this announcement with the COP26 Climate Summit in Glasgow triggered a Jets and Sharks standoff between the pro- and anti-nuclear factions. France leads a group of seven “pro-nuclear” countries who are actively lobbying the powers within the taxonomy bureaucracy. This, of course, provoked a resounding “nein” declaration by Germany, where recently rising coal use could spike further as its nuclear plants retire. Germany is joined by four other countries in its opposition.
While perhaps unprecedented in modern history, the French seem to be winning this battle with Germany. It probably doesn’t hurt that this fight broke out as skyrocketing European gas prices are causing real economic pain for the average voter. Worse, there are only two readily available sources of new natural gas supply in the short term: One is Russia via a new pipeline called Nord Stream 2. This natural gas pipeline is built and ready to go but faces opposition because it would allow the Russians to cut off the old pipeline that runs through – you guessed it – Ukraine. The other option is waterborne liquified natural gas (LNG) primarily sailing from the US Gulf Coast. So, the solution to Europe’s energy crisis emerges as a three-headed hydra of Russian pipeline gas, fracked (mon dieu) LNG, or nuclear power. Evidently Germans hate nuclear power more than they hate the Russians.
We think this is yet another sign that the unstoppable force of decarbonization is colliding with the immovable object that is the need for reliable and affordable energy. As someone once described the energy transition, it is like rebuilding an airplane while it is flying. We also think this is another reason why sentiment for conventional energy sources that can be made more green are experiencing rising investor sentiment while unprofitable clean energy sources lacking reliability are seeing investor sentiment fall. See our Year-End Note here.
This is not to diminish the exercise of classification. Humans need to divide an infinitely complex world into manageable categories that have similar attributes so we can go about doing the work of the world. But just for fun we thought we would predict the next items for EU classification: puppies are designated as “cute”, bugs are designated as “icky” and in another Franco-German battle that probably results in a compromise; wine and beer are both designated as “delicious.”
The above is Energy Income Partner LLC’s (EIP) opinion, and such opinions may change without notice or duty to update. The information is based on data obtained from third party publicly available sources that EIP believes to be reliable, but EIP has not independently verified and cannot warrant the accuracy of such information. The information provided above is not an offer to purchase or sell or a solicitation to purchase or sell a particular security or groups of securities.