UN nuclear watchdog head urges development banks to fund new projects

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The head of the UN’s nuclear watchdog has called on global development banks and their government shareholders to fund new projects, warning that a failure to do so could delay the energy transition.

Rafael Grossi, director-general of the International Atomic Energy Agency, told the Financial Times that a lack of funding for emissions-free nuclear energy by multilateral lenders such as the World Bank and Asian Development Bank was “out of step” with the wishes of most of their shareholders.

He said there had been a “sea-change” in attitudes to nuclear power due to the climate crisis and the Russia-Ukraine war, which propelled energy security to the top of policymakers’ priority lists.

World leaders will attend a first-of-its-kind nuclear energy summit in Brussels later this month where they are expected to discuss how to overcome opposition from a small number of nations such as Germany to using development banks to fund nuclear projects, said Grossi.

“I am very respectful of their own political circumstances, and I don’t want to meddle in internal politics, but we need to have this discussion . . . it goes to the core of the European economy, European jobs, European competitiveness,” he said.

“All these development banks or international finance institutions are out of date, out of step with what is happening. This is a . . . post-Chernobyl sort of mantra, which does not correspond any more to the policy indication from countries and the ideas and projects we are seeing.”

German Chancellor Olaf Scholz has called the debate over nuclear power a “dead horse”. The country has been staunchly against nuclear energy since Japan’s Fukushima disaster in 2011 and turned off its last nuclear power station in April.

Berlin also argues that classifying nuclear power as a green energy will lead to urgently needed capital being redirected from investments in emerging technologies such as green hydrogen.

The IAEA push to change the lending practices of development banks follows a successful campaign by big EU nuclear producers such as France to persuade the European Investment Bank to open the door to funding atomic energy projects.

Nadia Calvino, who took over the EIB presidency in January from German national Werner Hoyer, told the FT the bank needed to ensure it did not fall “behind the curve” on new reactor technologies such as small modular reactors.

The EIB, which has a balance sheet of more than €500bn, is not banned from investing in atomic power, but it has shunned new nuclear generation projects since 1987 partly in the face of opposition from countries including Germany.

Similarly, the World Bank has not backed a nuclear project since 1959, due both to opposition from Berlin and to concerns from some shareholders over the spread of nuclear technology that could be used to make nuclear weapons.

The bank said in a statement that any decision to build its “internal capacity” in nuclear power would require broad shareholder support from the World Bank’s Board of Executive Directors, with board decisions taken based on consensus.

The Asian Development Bank does not finance investment in nuclear energy, citing barriers to deployment including low public acceptance, risks related to nuclear proliferation, safety issues and high investment costs, according to a 2021 review.  

Advocates of nuclear energy say the support of global development banks is critical if it is to deliver on a goal set in December by more than 20 countries on the fringes of the COP28 climate summit in Dubai to triple global nuclear capacity by 2050.

A UK government spokesman said it was supportive of multilateral development banks encouraging the inclusion of nuclear energy in their energy lending policies.

Prominent US legislators are also pushing to extend World Bank financing to nuclear energy, arguing it would enable US companies to compete more aggressively with state-owned nuclear giants in Russia and China that have begun building plants overseas. Patrick McHenry, chair of the House Financial Services Committee, told the FT that US financing of nuclear energy was “critical” for this reason.

The IAEA estimates annual nuclear investment will need to more than double to $100bn by 2030, up from almost $50bn in 2022, to meet the Paris Agreement target of net zero carbon emissions by 2050.

Grossi warned that while the US, UK, France and other big countries were funding nuclear projects, other nations would lag behind without support and might not be able to deploy a new wave of reactors. He downplayed concerns about nuclear proliferation, saying all new entrants considering building reactors are in “good standing” with the IAEA and working with the agency on procedures and safeguards.

William Magwood, head of the OECD’s Nuclear Energy Agency, a 34-member body which tries to develop co-operation in the sector, said it was also lobbying to get development banks on board. 

He said that one idea being discussed was creating a separate nuclear development bank to finance projects. But he believes that creating specific nuclear divisions at multilateral lenders is the more likely outcome. “I think we’re going to end up in the end using the current institutions,” he said.

This story was amended after first publication to correct the IAEA figure for nuclear investment in 2022 to $50bn.

Additional reporting by Rachel Millard in London, Paola Tamma in Brussels and Sam Jones in Berlin