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Welcome to the new edition of Publyon’s EU Energy and Climate Policy Update. In this weekly update, Publyon provides you with the latest insights on the ‘Fit for 55’ interinstitutional negotiations as well as updates on the energy transition, the energy crisis and the EU’s response, including other relevant news on the EU’s climate and emissions reduction policies.
Energy policy updates
POLITICAL AGREEMENT ON FUELEU MARITIME: In the early morning of 23 March, negotiators from the Council of the EU and the European Parliament reached a political agreement on FuelEU Maritime. The initiative was proposed as part of the ‘Fit for 55’ package and aims to stimulate the uptake of sustainable alternative fuels in shipping and ports. Negotiators among others agreed to cut greenhouse gas emissions from ships by 2% as of 2025 and by 80% as of 2050. This applies to ships with a gross tonnage above 5000. The Commission will have to review the legislation by 2028 to determine whether smaller ships will also have to be included. The political agreement will still have to be formally approved by the Council of the EU and the European Parliament; afterwards, the new Regulation will enter into force 20 days after its publication in the EU’s Official Journal.
SEVEN COUNTRIES REITERATE OPPOSITION TO NUCLEAR-MADE HYDROGEN IN RENEWABLE ENERGY DIRECTIVE: On 16 March, a group of seven Member States – Germany, Austria, Denmark, Ireland, Luxembourg, Portugal and Spain – published a joint Ministerial letter on the revision of the Renewable Energy Directive (RED III). They emphasized their unchanged position on the production and use of low-carbon hydrogen and renewable fuels of non-biological origin (RFNBOs). These types should not be incentivised in RED III as coupling low-carbon energy to renewable targets will reduce climate efforts and slow down renewable deployment while additional investments in renewable capacity is much needed. Moreover, the signatories stressed that RED III does not prevent or prohibit Member States from using other types of energy resources than renewables. They are aware that for some Member States (e.g., France) low-carbon hydrogen and low-carbon fuels may play a pivotal role in their national decarbonisation pathway and are open to discuss these in other regulatory frameworks such as the Gas Package.
EUROPEAN COMMISSION LAUNCHES KEY INITIATIVES TO ENHANCE COMPETITIVENESS: On 16 March, the European Commission presented several initiatives to help the EU and its net-zero sectors remain competitive among competition from countries such as China and the US. The first of these initiatives is the Net-Zero Industry Act (NZIA), which sets EU production targets for technologies deemed necessary to decarbonize the EU’s economy. The NZIA establishes a framework to strengthen the EU’s net-zero technology manufacturing base and thereby accelerate the pace of the green and digital transition and strengthen the strategic sovereignty of the EU. For more information about the NZIA and the impact that it would have on businesses, read Publyon’s blogpost here. Second, the Commission presented a Communication on the European Hydrogen Bank, which was initially foreseen for May 2023. The Communication aims to ensure that enough renewable hydrogen is available in the EU to respond to the needs of a net-zero economy. Third, the Commission published the Critical Raw Materials Act (CRMA), which aims to ensure the EU has access to raw materials needed to meet its target of moving to net-zero greenhouse gas emissions by 2050. For more information about the impact the CRMA may have on companies, read Publyon’s blogpost here. Finally, the Commission adopted the EU’s Long-Term Competitiveness Strategy, which aims to set the EU economy on a sustainable path, even further than 2030. The objective is to make the EU prosper through inclusive economic growth, economic security and fair competition.
EU energy crisis updates
EUROPEAN COMMISSION PROPOSES TO PROLONG GAS DEMAND REDUCTIONS FOR NEXT WINTER: On 20 March, the European Commission proposed to prolong the emergency legislation to reduce gas demand by 15% for an additional period of 12 months. The current measure, which has been agreed upon in July 2022, will expire at the end of March. Commissioner for Energy Kadri Simson stated that the EU’s collective effort on gas demand reduction have been pivotal to secure gas supplies but emphasised that global gas markets are expected to remain firm with several challenges such as weather conditions, global LNG demand and macroeconomic conditions. An analysis conducted by the Commission envisages that continuing gas reductions of 15% in April for one more year will be sufficient to achieve a 90% gas storing rate by November 2023. Since the introduction of this regulation in July 2022 the EU has been able to reduce its gas consumption by 19%. The proposal will be discussed during the meeting between energy ministers at the Energy Council on 28 March.
Climate policy updates
EUROPEAN COMMISSION PUBLISHES PROPOSAL ON GREEN CLAIMS DIRECTIVE: On 22 March, the European Commission published the proposal for the Green Claims Directive, introducing common criteria against misleading claims about the environmental impact of a company’s product, also known as greenwashing. The proposal is a part of the European Green Deal’s commitment towards a circular economy and aims to establish a level playing field when it comes to environmental performance of products and services in the EU. This will ensure that consumers, investor, businesses and stakeholders can understand if environmental claims are trustworthy and thus make better informed choices. The Green Claims proposal introduces criteria on how companies should prove their environmental claims and labels. These claims and labels are to be checked by independent and accredited verifiers. Member States will have to designate national authorities to monitor companies’ environmental claims and ensure they are based on methodologies backed by recognised scientific evidence and state of the art technical knowledge.
IPCC CALLS FOR MORE URGENT CLIMATE ACTION: On 20 March, the Intergovernmental Panel on Climate Change (IPCC) published its final report on climate change. The IPCC report warns that global CO2 emissions should reach net-zero by 2050 at the latest if governments are serious about global warming and averting its most significant effects. Scientists stress that this target is a worldwide one, meaning that wealthier countries, which have the adequate technology and financial resources, must in particular accelerate their decarbonization trajectories. In a reaction to the publication, European Commissioner for the European Green Deal Frans Timmermans stated that the report is “unequivocal” about the consequences of the climate crisis. The report should also be the basis for more ambition at the UN climate conference COP28, Timmermans argued.
MEMBER STATES DISCUSS CO2 EMISSION STANDARDS FOR HEAVY-DUTY VEHICLES: On 16 March, EU ministers of Environment discussed for the first time the proposal on CO2-emission standards for heavy-duty vehicles (HDVs). The European Environment Commissioner Virginijus Sinkevičius indicated that EU manufacturers of HDVs are currently world leaders and stated that the new standards would give a long-term regulatory signal to the EU industry to invest in innovative zero-emission technologies. Moreover, in the light of the rollout of charging and refuelling infrastructure, it will strengthen the industry’s global position. During the discussion, the environment Ministers of Italy, Greece, Estonia, Finland and the Czech Republic indicated that the technology neutrality principle should be safeguarded as much as possible. In addition, Finland and Estonia believes that biomethane should also be included and that this type of alternative should not be discarded. Besides, Italy expressed concerns about the high reduction targets and the lack of an incentive mechanism for renewable fuels. Finally, the Netherlands, Luxembourg, Belgium, Ireland and Denmark indicated that they consider the ambitions in the proposal too low and expect an agreement before the end of the current legislature. The CO2-standards for cars and vans, meanwhile, will be discussed during the European Council on 23 and 24 March, as final approval of the political agreement is still being blocked by a group of Member States led by Germany.
ENVIRONMENT MINISTERS DISCUSS CARBON REMOVALS CERTIFICATION: On 16 March, EU ministers of Environment discussed the EU framework for carbon removals certification, which was presented by the European Commission in November of last year. Most Member States stressed the need for the new rules to be transparent and based on a sound methodology to prevent greenwashing. The Netherlands welcomed the proposal and endorsed the need for a robust certification framework. The voluntary nature of the certification framework and the implications for national emissions bookkeeping should also be clarified. Germany indicated that many provisions in the framework need to be made more concrete. Quality criteria should be included in the Regulation itself and the definition of carbon removals should follow international standards. Greece and Denmark spoke out in favour of including permanent carbon removals in the EU Emissions Trading System. The Swedish Presidency indicated that it would continue technical discussions on the file and prioritize the set-up of the certification procedure.
COUNCIL OF THE EU ADOPTS POSITION ON INDUSTRIAL EMISSIONS DIRECTIVE: During the Environment Council of 16 March, the Council of the EU adopted its negotiating position on the revision of the Industrial Emissions directive (IED). The revision should ensure that public health and the environment are better protected by reducing harmful emissions into the air, water and through waste discharges from industrial plants and livestock farms. The Commission’s proposal defines businesses as “industrial” when they exceed the threshold of 150 “livestock units”. That is the point at which these businesses can be penalized under the revised IED. The Council of the EU agreed, however, to raise the threshold to 350 livestock units for pigs and cattle, and to 280 livestock units for poultry. The compromise also includes exemptions to the Directive’s requirements for extensive farming. Negotiations with the European Parliament can begin once Parliament has established its negotiating position, which is expected to happen by the end of Q2 or in Q3.
On 23 and 24 March, the European Council will convey once again to discuss concrete actions to deliver on the Green Deal Industrial Plan and the EU long-term competitiveness strategy.
On 27 March, the next round of negotiations on the Alternative Fuels Infrastructure Regulation (AFIR) is planned, the aim is to have a final agreement.
On 29 March, the next and presumably final Trilogue on the revision of the Renewable Energy Directive (RED III) is supposed to take place.
The Plenary vote on the Deforestation Regulation is provisionally planned on 17 April.