The European Commission in 2022 defied protests from green campaigners and dissent in its own ranks to give a sustainable finance label to investments in both gas and nuclear power.
The EU argued that both have a role to play as cleaner power sources during the transition to a net-zero carbon future.
But fiercely anti-nuclear Austria challenged the decision in court, with its government highlighting safety concerns and uncertainty over how to deal with nuclear waste.
The Court of Justice of the European Union (CJEU) found that the commission did "not exceed" its power and "was entitled" to the view in its so-called "taxonomy".
The court "endorses the view that economic activities in the nuclear energy and fossil gas sectors can, under certain conditions, contribute substantially to climate change mitigation and climate change adaptation," it said in a statement.
Austrian climate minister Norbert Totschnig said in a statement sent to AFP that the court's decision was "very regrettable".
Austria has been fiercely anti-nuclear since an unprecedented vote by its population in 1978 prevented its only nuclear plant -- meant to be the first of several -- from starting operations in the Alpine nation of nine million people.
Environmental groups have also challenged the European Commission's definition of natural gas and nuclear as "green" energy sources.
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