Green Taxonomy, Financing, and Bonds: Does Nuclear Have a Place?

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THE role of nuclear in the global transition to clean energy remains a controversial issue. In terms of finance, a fundamental question is whether the use of sustainable mechanisms like green bonds for nuclear projects is justified.

Obviously, the universal solution is impossible. While some governments exclude nuclear power from their national green taxonomies, others, have included nuclear projects into the green financing system.

“Recognizing that many sustainable investors have exclusionary criteria in place around nuclear energy, the UK government will not finance any nuclear energy-related expenditures under the Framework,” holds the UK government’s Green Financing Framework, enacted this July.

However, the document states that reaching net zero emissions will require all energy to be delivered to consumers in zero-carbon forms and be derived from low-carbon sources.

Thus, nuclear power is, and will continue to be, a key part of the UK’s low-carbon energy mix alongside solar and wind generation and carbon capture and storage technology.

According to S&P Global Ratings assessment, issuance in sustainable debt, including green, social and sustainability-linked bonds, rose up to more than 60% in 2020.

This year the total value of sustainable financing instruments, will exceed $ 700 billion.

This accounts for 9% of the global bond market, compared with 3.6% just three years ago.

No doubt that this share will increase further with the advance of the energy transition.

The procedure for offering green bonds is not much different from the usual one for many companies to raise borrowed funds using bond instruments.

But in addition to traditional description of the project for which funding is sought, it is necessary to assess its compliance with the green framework, or taxonomy, in the national or transnational level.

Further verification of the application is carried out by rating agencies, which provide a second party opinion, which gives a pass to the financial platform.

Does nuclear have a place there?

Europe still hesitates The Taxonomy Climate Delegated Act of the European Union—the world’s first “green list” of a kind—is intended to be “common language that investors can use when investing in projects and economic activities that have a substantial positive impact on the climate and the environment”.

But in the document unveiled by the European Commission (EC) this April the final decision on the nuclear was delayed.
Nuclear inclusion will be “subject to and consistent with the results of the specific review process underway in accordance with the EU Taxonomy Regulation,” the EC said.

Foratom, the European nuclear trade organization, hailed the EC’s move to include nuclear under a complementary act.

Notably, France with its’ fabulous nuclear capacity has said it will fight to make nuclear power a green technology in line with EU sustainable financing rules.

“This is a real political struggle,” said French Economy Minister Bruno Le Maire, emphasizing “France’s determination” to be labeled “green” investments for nuclear power according to taxonomy.

Some countries, for political reasons, make the inclusion of the atom impractical; however, many European scientists and experts recognize that the atom is an integral part of a carbon-free future.

Alternative Taxonomy is Real
China where green bond market was officially launched in 2015 gives another example of the inclusive green taxonomy.

The 2019 Guiding Catalogue for the Green Industry issued by the Chinese National Development and Reform Commission mentions the manufacture of nuclear power facilities as eligible under “clean energy Industry”.

New catalogue released in April 2021 scientifically and uniformly defines the areas and scope of green bond endorsed projects, unifies the scope of domestic green bond standards and gradually realizes the convergence of domestic and international standards and specifications.

In this new catalogue the requirements for hydroelectric power generation facilities and nuclear power plants are clearly defined as “without significant impact on the ecological environment”, “under the premise of safeguarding environmental safety”, and “under the premise of no serious damage to marine ecology and biodiversity”.

Moreover, the document added items in the category of green equipment manufacturing, including nuclear power equipment manufacturing and nuclear power plant construction and operation.