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
White Smoke! Both Wopke Hoekstra and Maroš Šefčovič confirmed as Commissioners
Last week, after three days of spicy hearings by the respective European Parliament committees, the nominees for the EU’s new climate Commissioner Wopke Hoekstra (EPP, The Netherlands) and the new Green Deal Commissioner Maroš Šefčovič (S&D, Slovakia) have been officially appointed by the European Parliament in plenary.
Both politicians were asked to answer additional written questions after failing to impress MEPs in their hours-long hearings. Following the submission of their responses, Šefčovič and Hoekstra secured the support of two-thirds of the Parliamentary Committee on Environment, Public Health and Food Safety (ENVI), as per the requirement.
Commissioners’ hearings overshadowed by political drama
Both faced a disappointing reception from lawmakers during their confirmation hearings, which devolved into a political standoff between the Parliament’s two major groups; centre-right EPP and the centre-left S&D.
S&D and Greens questioned Hoekstra about his lack of experience on climate-related policies as well as about his previous work experiences at the oil company, Shell and with McKinsey consultancy. At the same time, MEPs probed Šefčovič’s on his stance on Russia’s conflict in Ukraine and 2040 climate targets.
As both political groups threatened to reject each other’s Commissioner-designates, approvals were delayed for two days. But as much as the MEPs strongly emphasised that this was primarily about content, they ultimately confirmed Maroš Šefčovič and Wopke Hoekstra as the EU’s new Green Deal-climate leadership duo, despite receiving few new policy pledges.
Hoekstra and Šefčovič’s ambitions
One of the main highlights from the hearings is the pledge made by the newly appointed Commissioners to cut EU’s greenhouse gas emissions by 90% by 2040.
Hoekstra placed a strong emphasis on phasing out fossil fuels subsidies (read accelerating the work on the revision of the Energy Taxation Directive) as well as creating own resources to increase funding to finance the green transition (e.g., using EU ETS and CBAM revenues). Besides, he highlighted that achieving climate neutrality is not solely the EU’s responsibility, emphasising the importance of global collaboration and climate financing in the upcoming UN climate change conference, COP28.
Šefčovič hinted at the upcoming initiatives planned under the European Green Deal, which should be still published under the current mandate of the Commission. Notably, the wind power package, the mobility package, the revision of the Combined Transport Directive and the action plan to facilitate grids roll-out. At the beginning of 2024, the Commission should also publish a communication on carbon storage technologies and on the 2040 Climate Targets.
What’s next?
Now that the EU has the new commissioners in office, the first significant test will be the COP28 climate summit between 30 November and 12 December in Dubai, where the Commission wants to argue for restricting the reference to unabated fossil fuels.
However, geopolitical discussions are not promising regarding the summit outcome. In the meantime, Hoekstra has already started visits to EU capitals to discuss with ministries the EU priorities for the COP28 and he also plans to engage in meetings with non-EU countries before the climate summit.
Policy update
Fit for 55 towards the end line: paving the way for 42.5% renewable energy target
The Council of the EU formally approved the revision of the Renewable Energy Directive (RED III), which boosts the proportion of renewable energy in the EU’s total energy consumption to 42.5% by 2030, with an additional 2.5% indicative top-up that would allow it to reach 45%. The new Directive aims to speed up the transition to renewables in sectors where its integration has slowed down.
What is in the scope? Sector-specificA new industry-wide target is also set, declaring that industries will need to annually increase the use of renewable energy by 1.6% and that 42% of the hydrogen used in industry should come from renewable fuels of non-biological origin.
RED III also tries to simplify and shorten administrative procedures for renewable energy projects that will benefit from fast-tracked permitting procedures thanks to the renewables’ acceleration areas. After its entry into force, the Member States have 18 months to transpose the directive into national legislation.
ReFuelEU Aviation approved: new targets for a greener aviation sector
The Council of the EU approved the ReFuelEU Aviation, a new regulation aimed at reducing the aviation sector’s carbon footprint. How? The new rules mandate aviation fuel suppliers to include a minimum share of sustainable aviation fuels (SAF) in their offerings, starting at 2% in 2025 and reaching 70% by 2050.
It also requires aircraft operators to uplift 90% of their yearly aviation fuel needs at EU airports to prevent tankering (increasing emissions from excessive plane weight). The regulation covers various sustainable fuels (i.e., renewable hydrogen, biofuels and low-carbon aviation fuels). It also promotes transparency through a new labelling scheme about environmental performance for aircraft using SAF. When will the new rules apply? ReFuelEU Aviation is applicable as of 1 January 2024, while specific SAF mandate obligations from 1 January 2025.
Member States seek resolution for Electricity Market Reform
Member States aim to break a nearly four-months deadlock over reforms to the EU electricity market, with the goal of approving their negotiating stance by 17 October. The reform, introduced by the European Commission in March 2023 to address rising energy prices due to the invasion of Russia in Ukraine, has been hindered by disputes over state aid for power producers.
EU ambassadors have discussed compromise proposals that aim to find a common ground over the much-debated article 19 on direct price support schemes for new investments in generation, but further negotiations are required before a joint position can be reached. Resolving the impasse is crucial to enter into Trilogue negotiations with the European Parliament, and to agree on the final text before the legislative recess ahead of the European Parliamentary elections in June 2024.
Energy self-sufficiency will cost the EU €2 trillion
€2 trillion! That is how much the EU would need to invest to be completely energy self-sustainable according to a new report from the Potsdam Institute for Climate Impact Research. The study claims the continent would need annual investments of €140 billion by 2030 and 100 billion a year the decade after. Investments would primarily be focused on onshore wind expansion, solar, hydrogen and geothermal resources.
Although €2 trillion is a daunting figure, in 2022 alone the EU spent €792 billion just to maintain the status quo systems and protect consumers from the effects of the energy crisis. The study adds that the necessary technologies to achieve self-sufficiency are available, but Europe needs an enabling legislative framework as growth rates of renewable energy have been too low to meet targets.
Europe’s Carbon Border Adjustment Mechanism takes effect
Since the 1 October Carbon Border Adjustment Mechanism (CBAM) obliges exporters in carbon-intensive industrial sectors to report their emissions to EU authorities. CBAM aims to protect European industry by making foreign companies pay the same carbon price as EU manufacturers, preventing carbon leaking and green dumping from foreign companies. Who is in the scope? CBAM will apply to imports of cement, iron and steel, aluminium, fertilisers, electricity and hydrogen.
For the time being, companies in the scope are only required to collect emissions data and report them to a transitional registry hosted by the European Commission. From 1 January 2026, importers will have to declare their imports of the preceding year as well as the embedded carbon emissions. Based on this data, foreign companies will be required to pay an adjustment fee to cover the gap with EU companies. CBAM is expected to drive up the price of imported products and services in the EU.
What’s next?
- On 17 October, the European Commission is expected to publish its Work Programme for 2024.
- On 23 & 24 October 2023, the Environment, Public Health and Food Safety Committee will vote on the HDV Regulation & Carbon Removal Certification Framework.
- The Industry, Research and Energy Committee will vote on Net-Zero Industry Act on 25 October 2023.
- On 26 & 27 October, the European Council is meeting, where discussions on the EU economy is on the agenda.
Blog
European Cyber Resilience Act
The European Cyber Resilience Act (CRA) aims to establish cybersecurity standards for digital products and connected services in the EU to protect against cyber threats. It introduces rules to safeguard digital products, making it the first ‘Internet of Things’ (IoT) legislation globally.
READ ARTICLE
Events update
Where can you run into our team?
On 23 October, you can grab a drink with our colleague Arnaud at the ‘Making Better use of Biofuels: How can the EU Ensure Policy Consistency?’ event organised by EURACTIV.
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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