Geopolitical Models before the Decision on the EU Taxonomy

Abstract

The French Presidency (January-June, 2022) inherits some unresolved and contentious issues within the EU. Among them is energy transition. The paper examines the EU’s ambitions to become a leader in climate neutrality by analysing if the necessary natural resources could be provided in scale to meet end consumption without any economic shock. What is further analysed is the scientific opinion on why there is a political dispute between the leading economies in the EU over the so-called taxonomy – the classification of energy sources as climate neutral. As a leader in nuclear energy, the role of France during its presidency of the EU is to persuade the European Commission to include nuclear energy in the taxonomy. The lack of a clear-cut solution to the issue is sending mixed signals to investors and undermining confidence in the European Green Deal. As the EU’s most powerful nuclear lobbyist, France will also have to protect the interests of CEE countries where nuclear plants date back to the Soviet era. Outlined are the arguments on the key importance of nuclear power plant countries for energy security. In parallel with nuclear energy, there are discussions on recognizing natural gas as ‘green’. Given that Russia is the EU’s main supplier of raw materials, the question is whether its recognition will reduce investors’ risk and Europe’s dependence on Russian influence amid geopolitical tensions between Russia and NATO of which the EU is a major member. Being a low-emission energy source, natural gas is key to the successful green transition of member states on the path to climate neutrality within the 2050 deadline. Two leading hypotheses emerge: only one of the sources to be included in the taxonomy. Nuclear energy would provide EU countries more autonomy in planning and investing in the energy transition. Natural gas as an imported raw material, subject to market mechanisms and influenced by geopolitics, would jeopardize the energy transition and the security of the European energy system.

JEL: 052, Q4, Q3