It is not an over-reaction to state that we are in the midst of a planetary emergency. We face the combined threats of climate, nature loss, and human health pandemics. Of the nine planetary boundaries that keep Earth in a relatively stable state, four are under enormous pressure from humanity and showing signs of extreme stress. We have no choice but to come back to a safe operating space within our planetary boundaries. We must redesign our economic and financial systems in service of people, prosperity, and planet.

Unleashing a rapid and swift shift to a sustainable and fair society cannot occur without finance. In addition to “financing change”—redirecting and mobilising investments to create positive change within the current system—we have to “change finance.” This means redefining the values and behaviours of the system as a whole.

In Europe, the focus has been on exploring mechanisms for financing change and avoiding increased greenwashing. The European Union (EU) Taxonomy was designed as a classification system to provide companies, investors, and policymakers with appropriate definitions for which economic activities can be considered environmentally sustainable. The methodology used by the European Commission (EC) to define which economic activities should be labelled as green said that they should contribute to meeting Europe’s goals of climate neutrality by 2050 and reducing greenhouse gas emissions by 55% by 2030.

For the last two and a half years, the actual “green” list of environmentally sustainable activities has been in development with extensive input from experts from across industry, the financial sector, scientific community, and civil society, the so-called Technical Expert Group on Sustainable Finance (now called the Platform on Sustainable Finance). On Dec. 31, 2021, after months of deliberation and intensive lobbying, the EC sent a draft for consultation to the Platform, proposing to include energy generation from fossil gas or nuclear power as “green” investments.

Based on the overall remit given by the EC and the above methodology, it is clear that neither gas or nuclear can be classified as substantially contributing to the EU’s climate goals. In addition, in both instances the activities actually cause significant harm to environmental objectives.

Unabated fossil gaseous fuels do not reach the performance threshold (100 g CO2 e/kWh) required today to align with these targets. Yet, the EC has proposed several huge exemptions so unabated natural gas activities can be classified as green. The main exemptions are the inclusion of an additional direct emissions threshold of 270 g CO2 e/kWh and capacity threshold of 550 g CO2 e/kWh average over 20 years. Both thresholds are inconsistent with the existing thresholds for energy generation, creating an unfair playing field for true low-carbon activities, and exclude lifecycle considerations such as other significant emissions stemming from methane leakage and importantly emissions from manufacture of the “low-carbon” fuels proposed for blending. When blending with low-carbon fuels, direct emissions will continue to cause significant harm over the economic life of the activity even with the use of 100% low-carbon gases from 2036 onwards. Not only will these proposals completely undermine the taxonomy framework, but they also risk diverting capital away from future renewable investments.

Regarding nuclear power, the performance threshold to substantially contribute to the EU’s 2030 and 2050 climate goals can be met. However, the extensive time it takes to bring new nuclear power generation facilities online risks that they will not be present in time to substantially contribute. There is also no empirical evidence that demonstrates the management of high-level waste without causing significant harm to the environment.

The EU Taxonomy is important for financing activities that truly make a positive change; yet, it cannot solve energy sector transition policy beyond environmental performance, which should be determined by other policy mechanisms. Nuclear energy and natural gas both have roles to play in the energy transition, but they cannot be defined as “green” in the taxonomy framework. They could however be labelled as “amber,” recognising intermediate performance as a transition to substantial contribution, which could be a useful tool to accelerate investment and improve emissions performance. The International Organization for Standardization, an international standard-setting body, is developing a similar taxonomy framework, and it will exclude nuclear and unabated gas completely.

Taxonomies should not be compliance tools for current practices or cater to particular national energy markets; they must set the trajectory to align finance flows with a pathway toward low greenhouse gas emissions and climate-resilient development. The European Investment Bank, the largest multilateral financial institution in the world, has taken steps to align with a 1.5C average global temperature scenario by heeding the Platform’s advice and following the International Energy Agency’s call for no new oil and gas exploration projects from today.

The interconnected nature of our global financial system means that these decisions are crucial for the transformation of our economies, particularly with the urgency required in the midst of a planetary emergency. Governments across the globe must now support the mobilisation of capital away from stranded assets into truly sustainable and low-carbon economic alternatives. Science-based policy making must prevail if we are to make the shift to a sustainable future. Tough decisions, moving beyond the status quo, must be taken today. These steps are only the beginning of moving from financing change to fundamentally changing finance, and therefore, further delay or worse, deception, must be avoided.

Sandrine Dixson-Declève is co-president of the Club of Rome and a member of the European Commission’s Platform on Sustainable Finance. Tom Jess is program manager for the Rethinking Finance Impact Hub at the Club of Rome.