The European Parliament recently endorsed labeling some natural gas and nuclear energy projects as “green,” allowing them access to investment loans and state subsidies as a pragmatic and necessary approach to their planned transition to renewable energy. The measure gained urgency as the European Union responded to Russia’s invasion of Ukraine by banning or phasing out Russian energy sources, including most coal and oil. Because Europe is heavily dependent on Russian natural gas, that transition is harder to make. The Parliament’s endorsement signals Europe’s intention to continue its reliance on natural gas. The amendment was part of a broader EU effort to give banks and other organizations tools to evaluate projects for loans and funds on the basis of being “environmentally friendly.” The Parliament’s vote paves the way for the EU proposal to pass into law, unless 20 of the bloc’s 27 member states decide to oppose it.  The measure largely succeeded due to strong backing from Germany and France, Europe’s two leading economies.

In the aftermath of the 2011 Fukushima nuclear accident in Japan, Germany moved away from nuclear power, pledging to shift to renewable energy sources. In the meantime, it has remained reliant on Russian natural gas as a “bridge” and on the use of coal during shortfalls. France, however, gets 70 percent of its energy from nuclear power, which has been plagued by problems and shutdowns in recent years. France recently announced a plan budgeted at 51.7 billion euros (over $53 billion) to build up to 14 next-generation nuclear reactors by 2035.

Some would prefer to double down on intermittent renewable sources like wind and solar. However, low wind resources were originally responsible for more use of natural gas for electricity generation and those winds remain low during heat waves. Europe also needs additional transmission lines to get the power from areas of good sun and wind to demand centers. In the case of the U.K., those lines need to come by cable from offshore wind units. And intermittent renewables need back-up. If natural gas or coal cannot fit the bill because of Paris Climate commitments, then nuclear or expensive batteries that are competing with electric vehicle batteries in the “green” economy must provide the backup. Germany, however, is shuttering its last three nuclear reactors by the end of this year, which will eliminate a source that provides 6 percent of Germany’s electricity.

The EU Taxonomy

The EU rules classify three types of “green” investments. First are those investments that substantially contribute to green goals, for example, wind power or solar PV farms. Second are those investments that enable other green activities, for example, facilities that can store renewable electricity (e.g. batteries) or hydrogen. These are costly at present, and of limited practicality. Third are transitional activities that cannot be made fully sustainable, but which have emissions below industry average and do not crowd out greener alternatives. Gas and nuclear power plants are classed as transitional activities.

Under the Commission proposal, for a gas-fired power plant to be labeled “green”, it must emit no more than 270 grams of carbon dioxide equivalent per kilowatt hour, or have average emissions of 550 grams carbon dioxide equivalent per kilowatt hour over 20 years. It must also commit to switch to low-carbon gases by 2035.

According to the EU, the taxonomy aims to make truly “green” activities more visible and attractive to investors. The taxonomy does not ban investments in activities not labeled “green”, but it limits which ones companies and investors can claim are “climate friendly”. For the EU to eliminate its carbon emissions by 2050 (i.e., reach net zero), huge investments, much of it from private funding, will be required. Providers of financial products – including pension providers – must disclose which investments comply with the taxonomy’s climate criteria. For each investment, fund, or portfolio, they must disclose what share of underlying investments comply with the rules. Large companies and listed firms must also disclose what share of their turnover and capital expenditure complies.

TVA Wants to Build a Gas Plant to Replace a Coal Plant; EPA Disagrees

In comparison, natural gas is having a harder time continuing as a bridge fuel in the United States. The Environmental Protection Agency told the Tennessee Valley Authority (TVA) recently to reconsider an initial decision to replace its largest coal plant with a natural gas plant, telling the agency to choose “cheaper and cleaner” options.

TVA is preparing to close the Cumberland Fossil Plant, which is near the Tennessee-Kentucky border. The agency proposed a range of options to meet 1,450 megawatts of generation that Cumberland produces when the plant closes no later than 2030. TVA wants to build a natural gas combined-cycle plant instead of renewables and storage because baseload generation would be more reliable and help support its planned solar expansion. TVA, however, must follow the National Environmental Policy Act, which requires the federal government to analyze environmental impacts of major decisions, particularly regarding infrastructure. The agency issued its preliminary decision on replacement fuels for the Cumberland Fossil Plant in a draft environmental impact statement, the public comment period for which is now closed. TVA plans to make a final decision later this year.

TVA is an independent federal agency that sells wholesale power to electric cooperatives and municipalities across a seven-state territory in the Southeast. Created during the Depression to bring electricity and flood control to the hard-hit Tennessee River Valley area, it is the nation’s largest public utility. TVA announced a 2050 net-zero carbon goal in May 2021 – shortly after the Biden administration came to power – as well as plans to add 10,000 megawatts of solar by 2035—24 times the amount it had on the grid at that time. To reach net zero by 2050, TVA set a goal to reduce carbon dioxide emissions 80 percent by 2035. It is also planning to build a small modular reactor that could be part of a future fleet of advanced nuclear reactors.

In sharply worded comments filed June 30, however, EPA indicated that TVA overlooked options to help the United States meet carbon-reduction goals, “as backed by science and to be implemented through the Paris Agreement.” Picking natural gas exposes TVA to potential price volatility and likely the cost of a stranded asset if it decided to close the plant in a couple of decades. EPA wants TVA to modify its decision and consider federal greenhouse gas reduction policies, climate resilience, air quality, environmental justice, and water resource issues.  These are all political goals of the Biden administration.

TVA indicated that to achieve more aggressive carbon dioxide reduction goals, it would need more aid from the federal government in the form of money and bringing emerging clean energy technologies to scale quickly. To TVA, reducing carbon emissions across the economy must be a shared priority, and as Europe has found out, the costs to transition to renewable energy are very high.


The EU Parliament has voted to make certain natural gas and nuclear “green” fuels so financial institutions can consider them “environmentally friendly.” If the Bloc approves the taxonomy, which was pushed by Germany and France, natural gas and nuclear will be considered transitional fuels. In the United States, TVA wants to replace a large coal plant with a natural gas combined cycle plant, which can provide back-up to its solar units as it moves forward to Biden’s net-zero carbon goal by 2050. EPA, however, is against that approach and alleges in a letter to TVA that cheaper and cleaner alternatives exist. Natural gas is much less expensive in the United States than it is in Europe, where the Parliament voted to allow its use to supplement renewable energy.  Given the many actions taken by the Biden administration to limit fossil fuel production in the United States, the administration, through its EPA, may be signaling its expectations of more expensive natural gas in the years to come.

Unfortunately, EPA’s accounting when it looks at wind and solar as cheaper and cleaner is tainted because EPA is not considering the cost of expensive batteries as back up to the wind and solar units when the wind is not blowing and the sun is not shining. Also, EPA is not considering the issues with dismantling the wind and solar units and recapitalizing their construction when their 20 to 25 year lifetime is over. Wind blades are so large that special facilities are needed to dispose of them and solar units contain toxic substances that need to be handled carefully. And, the lifetime of wind and solar units is only half that of gas, coal and nuclear plants. According to TVA, “Financial and system analysis indicate a [combined-cycle] gas plant is the best overall solution to serve low-cost, reliable, and cleaner energy to the TVA power system.”

Print Friendly, PDF & Email