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
Rolling out the RED carpet: lights, camera, vote (?)
On 14 June, EU ambassadors were expected to finally find a way out of the deadlock that has blocked formal approval of the revision of the Renewable Energy Directive (RED III) over the last month. However, the vote was postponed until 16 June, as Member States needed more time to study a new proposal put forward by the Swedish Presidency to satisfy French nuclear demands.
In March, the European Parliament and the Council of the EU have already reached a political agreement on the new law, which sets mandatory targets for 2030 and beyond for the uptake of renewable energy by Member States. But French opposition has so far impeded quick approval by the Council of the EU.
Council concessions
Quick reminder: France wants a bigger role for nuclear energy, specifically nuclear-derived hydrogen in the Directive. The Swedish Presidency of the Council of the EU now hopes to satisfy French demands by adding a recital suggesting that some ammonia production plants could be excluded from the calculation of the green hydrogen target for industry. As France is a big ammonia producer, this could help it meet the green hydrogen targets in RED III.
Climate vs. Nature
With RED III approval creeping closer, campaigners and industry representatives have pointed out tensions between the energy transition and protecting nature. RED III will give Member States the mandate to set up zones, in which permitting for renewable energy installations can be carried out much faster. It raises the question whether the consequences new renewables infrastructure may have on the environment will still be adequately considered, given the time pressure.
This balancing act between climate and nature is a hot topic in Brussels. The Nature Restoration Law, which includes restoration targets for ecosystems in the EU, faced a crucial vote in the Parliamentary Committee on Environment, Public Health and Food Safety (ENVI) today. Due to an impasse between the political groups, it was not possible to hold a final vote. Voting on the law will resume on 27 June. As one of the arguments for its staunch opposition to the new law, the centre-right EPP group has argued that the biodiversity protection provisions in the text risk blocking “infrastructure projects that are crucial for our climate transition”.
Can we achieve the energy transition while also protecting nature? This crucial question will have to be answered by the European institutions in the coming years. According to European Commissioner for the European Green Deal Frans Timmermans, the two go hand in hand, but not everyone seems to agree.
What’s next?
In case the EU ambassadors give their approval to the political agreement on Friday 16 June, RED III is expected to soon be voted through by the Council of the EU. After entry into force, Member States will have 18 months to transpose RED III into national law.
Policy update
Energy efficiency efforts need to be doubled by 2030
The International Energy Agency (IEA) presented a report on what is needed to meet the energy and climate goals during its IEA Global Conference on Energy Efficiency in France. The report reveals that the world needs to enhance its annual energy efficiency progress from 2.2% in 2023 to over 4% annually by 2030. Only this way, it would be possible to deliver vital reductions in greenhouse gas emissions.
Based on anticipated policies and announced measures, investments in efficiency-related ventures are estimated to increase by an additional 50%. However, in order to achieve a two-fold annual progress, investments in this sector need to escalate from the current $600 billion to over $1.8 trillion by 2030.
European Parliament fuzzing about the strategic clean label in the Net Zero Industry Act
Currently, the European Parliament is debating about its draft position on the Net Zero Industry Act (NZIA), aiming to accelerate and enhance industries’ green transitions. Promising technologies with strategic importance, including wind, solar, batteries, and electrolysers would also enjoy streamlined permitting processes and reduced EU supervision on government subsidies.
The rapporteur of the file, MEP Christian Ehler (EPP, Germany), proposed to abandon the strategic technology label and wants to refer to the EU’s green finance taxonomy, which categorises industries according to their contribution to the EU’s climate goals. MEP Tiemo Wölken (S&D, Germany) plead for the preservation of a strategic list but wishes to delete “potentially problematic” technologies, such as biogas and biomethane. Besides, nuclear is also a subject to disagreement whether it should be added to the strategic list or not.
Increasing resistance to EU’s green policies: building efficiency is next
On 6 June, the European Parliament and Council of the EU held the first Trilogue meeting on the Energy Performance of Buildings Directive (EPBD). It is expected that discussions will not be easy. Several Member States have expressed they fear the EPBD will impose heavy renovation costs on EU citizens in the ongoing cost of living crisis. Voices are rising from Italy, Poland and Czechia to oppose the revised Directive. These Member States were already critical on the European Commission’s proposal and now are firmly against the higher ambition introduced by the European Parliament. The MEPs’ position caused national debates also in Germany, Finland and Estonia regarding forcing renovation of individual homes.
The European Parliament’s stance on the file is that new buildings should be zero-emission starting 2028, and already-existing buildings have to comply with specific energy classification targets starting 2030. The Parliament’s lead negotiator on the EPBD, MEP Ciarán Cuffe (Greens/EFA, Ireland) is well aware that discussions with the Council of the EU will prove difficult. A date for the second round of Trilogue meetings has not been announced yet.
EU fossil heating systems ban: turm-oil in Germany
Recent declarations in the German press cast an uneasy shadow over Ursula von der Leyen, President of the European Commission. The German FDP party criticised President von der Leyen for the Commission’s ban on ‘stand-alone’ fossil fuel boilers from 2029 in the EU single market, under the REPowerEU Plan.
At national level, Germany has already endorsed a ban on fossil heaters from 2024 onwards, albeit according to different rules. In April 2023, a dedicated working group of the European Commission decided that heating systems marketed after 2029 would have to respond to an energy efficiency standard of 115%. Traditional heating systems, such as gas and oil heaters are not capable of reaching this target, which de facto entails that such heating systems will not be able to be marketed anymore.
However, other heating systems running on hydrogen or e-fuels, accepted under Germany’s 2024 ban, would not live up to the 115% standard. As such, Germany and the EU’s legislation stand in opposition. This has unleashed targeted criticism in Germany against von der Leyen, which might well compromise her possible nomination to run again.
Mission accomplished: the EU successfully calmed down European electricity markets
The European Commission announced not to prolong with emergency measures introduced to shield businesses and households from soaring energy prices. Commissioner for Energy Kadri Simson stated these measures have resulted in successfully calming energy markets. Concerning gas, the EU has decided to extend a voluntary target to curb their gas demand by 15% until March 2024.
Simson concluded that some aspects of the emergency measures have been used as a basis for proposals on long-term structural adjustments in the EU’s electricity market design regulation. The proposal aims to safeguard consumers from future price spikes and make the EU’s industry cleaner and more competitive.
What’s next?
- On 19 June, the ministers in Energy Council will meet hoping to reach a common position on the reform of the EU electricity market.
- On 20 June, the Environment Council will meet. Among other things, ministers will discuss the developments on the CO2 emission standards for heavy-duty vehicles.
- On 26-27 June, the Parliamentary Committee for Environment, Public Health and Food Safety (ENVI) and the Parliamentary Committee for Transport and Tourism (TRAN) have their next meetings.
- On 28 June, Parliamentary Committee for Industry, Research and Energy (ITRE) will hold its next meeting.
- On 11 July, the European Commission expects to present a Greening Transport Package, which will aim to further decarbonise freight and road transport.
Blog
EU’s competitiveness strategy: 9 key drivers
As the global economy and cross-border challenges rapidly evolve, countries and regions around the world are fiercely competing for a piece of the pie. As a result, the EU has launched a comprehensive competitiveness strategy aimed at fostering innovation, boosting investment, and strengthening Europe’s position in the global market.
READ ARTICLE
Where can you run into our team?
- On 20 June, our managing partner Viktoria Vajnai will deliver a keynote speech at the Insurance Europe event “Moving Mobility Forward”.
- On 20 – 22 June, you can find our colleagues Sara, Arnaud and Nicolas at the European Sustainable Energy Week 2023, organised by the European Commission.
Sara Orcalli
Hi, my name is Sara and I am curating the Energy & Climate Policy Update to bring you 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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