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Green Nuclear Power

By allowing the European Central Bank to intervene directly and deeply in capital markets, the EU's approach to climate change is violating basic principles of sound economic policymaking. Fortunately, its embrace of a once-maligned clean energy source shows that it hasn't abandoned common sense altogether.

MUNICH – With its 2020 “taxonomy for sustainable activities,” the European Union found a way to use the European Central Bank to steer capital markets by directly subsidizing interest expenses for “green” investment projects. Many European politicians, especially those from Green parties in German-speaking countries, have applauded this approach. But now, they are dismayed to find that the European Commission, under pressure from France, will classify nuclear power as a type of green energy.

Having emerged from the anti-nuclear movement, today’s European Greens never dreamed that this ostracized source of power would not only regain respectability but even be associated with their own brand. Their humiliation couldn’t be greater.

But whether nuclear power is a form of green energy isn’t just a question of ideology. Huge sums of money are at stake, because the ECB will be offering banks particularly attractive refinancing conditions if they use EU-classified green bonds as collateral. The ECB also has made clear that it is more willing to buy up a disproportionate share of green bonds, thereby creating a new interest-rate structure within capital markets. Now that environmentally friendly investment goals are increasingly benefiting from lower interest rates, significant portions of Europeans’ savings – accumulated over generations – are being diverted from other parts of the economy into projects classified as green.

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