EU Energy & Climate Policy Update | No. 29

Dear reader,

Welcome to the new edition of Publyon’s EU Energy and Climate Policy Update. In this bi-weekly update, Publyon provides you with the latest insights on the ‘Fit for 55’ 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.

The spotlight

Turn off the lights: the EU gets ready for energy reduction

The EU prioritized energy efficiency after Russian invasion in Ukraine disrupted energy supply chains and led to significant price spikes for European households and businesses. To tackle the crisis, the EU launched the REPowerEU plan, increasing energy efficiency targets in the revised Energy Efficiency Directive (EED), already part of the Fit for 55 package, as a solution to reduce reliance on Russian fossil fuels and lower energy bills.

The political agreement on the revision of the EED has been formally approved by the Parliamentary Committee on Industry, Research and Energy (ITRE) on 25 April, bringing it a step closer to entering into force.  But what will the EED change for businesses? Let’s find out!

What is the Energy Efficiency Directive?

The EED recast sets a binding target for Member States to collectively reduce the energy consumption of at least 11.7% by 2030, compared to energy forecasts made in 2020. Member States will contribute by integrating energy saving measures in their national plans. However, each country will have some flexibility on how to implement the new rules.

The public sector will be required an additional effort meeting higher energy efficiency targets and Member States will have to yearly renovate 3% of the total stock of public buildings.

How will the revised EED affect your company?

The EED will impact businesses of all shapes and sizes. Under the new rules, large enterprises are required to conduct energy audits or implement energy management system while small and medium-sized enterprises (SMEs) are encouraged to do the same.

Meaning? On the one hand, the compliance would lead to extra administrative costs. On the other hand, the EED will support companies to better monitor and control energy consumption in their plants, and therefore reduce their energy bills. Moreover, as Members States are obliged to set up energy efficiency obligation schemes, businesses could receive financial or technical support to improve their efficiency.

To comply with the revised EED, it is essential to have a strategic approach to energy management. Want to know more about EED and the impact it would have on your organisation? Reach out to our experts.

What’s next?

Pending final approval by the European Parliament and the Council of the EU, the new rules will be applicable two years after the entry into force of the revised EED.

Policy update

MEPs urge the Commission to set binding reduction targets for methane emissions

The Committee on Industry, Research and Energy (ITRE) made a significant move on climate change, adopting its report on reducing methane emissions in the energy sector. With extraction processes responsible for a 40% of the total methane emissions, the report imposes strict obligations on energy importers of coal, oil and gas. Furthermore, companies need to repair leaks and submit a methane leak detection and repair programme to national authorities.

MEPs have also called on the European Commission to propose binding reduction targets for EU methane emissions by the end of 2025. By taking decisive action against this powerful greenhouse gas, the EU aims to slash the 30% contribution of methane to global temperature rise.

Are electric cars set to dominate the global market?

The International Energy Agency (IEA) published statistics on electric vehicles. The annual outlook expects a spike in global demand of 35% in 2023, meaning electric cars’ share will increase to 18%. This trend will have massive implications for global oil demand, as the electrification of our vehicles fleet is expected to replace 5 million barrels of oil a day by 2030.

Even though most sales are concentrated in three markets – China, Europe and USA – there are promising signs of market expansion in other markets such as India, Indonesia, and Thailand.

Done deal on decarbonising aviation

The ReFuelEU Aviation initiative, part of the Fit for 55 package, is poised to boost the decarbonisation of the aviation industry. It does so by boosting supply and demand for sustainable aviation fuels (SAFs) in the EU. This move is set to cut the environmental impact of aviation and contribute to the EU’s climate goals. On 25 April, the European Parliament and the Council of the EU reached a political agreement on the file.

Negotiators agreed to set high targets for SAFs at 6% by 2030 and 70% by 2050. In addition, a special sub-target for synthetic fuels from green hydrogen will be implemented from 2030. It will kick off at 1.2% and gradually increase to 35% by 2050. The provisional deal now needs to be formally approved by both co-legislators before the law can enter into force.

The aviation industry welcomed the political agreement as a necessary step to achieve climate targets, but stressed that the sector requires further support through complementary EU initiatives, such as investments and funding.

Final green light for key climate laws

April has been a turning point for the Fit for 55 package. After the vote in the European Parliament earlier last month, on 25 April, Member States formally adopted several key pieces of climate legislation. This means that the files are ready to enter into force after publication in the EU’s Official Journal.

The revision of the EU Emissions Trading System (EU ETS) – the EU’s carbon market – might be the most eye-catching of the adopted laws. Member States also approved the Social Climate Fund (SCF) and the Carbon Border Adjustment Mechanism (CBAM). Want more information on these three files? You can find it in our previous newsletter.

Commission launches new AggregateEU mechanism – joint purchasing of gas, how does it work?

On 25 April, the European Commission launched a first call for gas demand aggregation under the new AggregateEU mechanism. Registered companies had until 2 May to respond to the call. This new process should help European companies prepare for joint purchasing of gas at EU level. Further calls will be carried out regularly over the next year.

How does the mechanism work? Individual companies can submit their gas purchase needs via the mechanism after a call goes out. The AggregateEU system matches up European gas needs with global suppliers. Companies then start talking terms and delivery with suppliers, without involvement from the Commission. The first gas deals should be set before the summer.

Brand new EU-Norway partnership should deepen climate cooperation

Norway and the EU have long been partners on climate issues. On 24 April, President of the European Commission Ursula von der Leyen and Norwegian Prime Minister Jonas Gahr Støre gave a new impulse to this collaboration by establishing a new “EU-Norway Green Alliance”.

Under the Green Alliance, both sides pledge to become climate neutral and to align their policies to achieve the net-zero goal. This is the second such agreement, after an earlier one with Japan signed in 2021. The EU and Norway will also work together for ambitious climate action on the global stage, for example during the COP28 negotiations later this year.

What’s next?

• From 19 to 21 May, the next G7 meeting will take place in Hiroshima, Japan, where G7 leaders will discuss various pathways to achieve the net-zero goal by 2050.
• On 24 May, the Parliamentary Committee on Transport and Tourism (TRAN) will vote on the political agreement on the Alternative Fuels Infrastructure Regulation (AFIR).
• On 1 June, the next Transport Council will take place where Member States will discuss developments on Euro 7 and CO₂ emissions standard for heavy-duty vehicles.

Blog

Carbon pricing in the transport sector: 5 major consequences for your business

In this blog post, Publyon brings you five major consequences of increased carbon pricing across different transport modalities to help you understand the European Commission’s greening efforts in the transport sector and how these will impact your business operations.

READ ARTICLE

Events update

Where can you run into our team?

Energy experts Sara and Arnaud will attend the launch event of the Energy Storage Coalition. If you are also there, grab a drink with them at the networking reception!

You might also sit next to our transport expert Martijn at the event “Towards a greener planet: Building international alliances for green industrial policy”.

Sara Orcalli

Hi, my name is Sara and I am curating the Energy & Climate Policy Update to bring you, every week, the latest news on ‘Fit for 55’ as well as energy and climate insights. Do not hesitate to reach out should you have any questions or if you want to know how EU energy and climate policies might impact your business.

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