EU Energy & Climate Policy Update | No. 44

Dear reader,

As we step into the festive season, this edition marks the final EU Energy and Climate Policy Update of 2023.  

Our team will be taking a short break and will return with a brand-new format of the newsletter.

As of 2024, we will switch to a monthly frequency. The first edition will be out on 25 January 2024. This revamped edition will be shaped by the valuable feedback we’ve received from our recent survey. If you haven’t shared your input yet, you’re still on time to do so. 

Thank you for your support, and we look forward to providing you with even more spot-on content on EU energy and climate legislation in the new year.  

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The spotlight

The spotlight

Deal on emissions and battery durability for road vehicles 

After a bit more than a month of negotiations, the co-legislators have struck a provisional agreement on a Regulation governing the approval of motor vehicles, engines, and related components. It sets new requirements for systems and technical units, focusing on cutting emissions and bolstering batteries’ durability.  

The so-called Euro 7 Regulation covers all type of vehicles, addressing gas emissions and other pollutants and includes constraints on brake-emitted particles, especially in electric vehicles, and incorporates lifetime requirements for compliance.  


What is new?  

Euro 7 will place both light and heavy-duty vehicles, such as cars, vans, buses and lorries under a single set of rules. While the agreement maintains the existing Euro 6 exhaust emission limits for cars and vans, it restricts the emission of exhaust particles that will be measured starting from 10 nm (PN10), instead of 23 nm as in Euro 6, thus including smaller particles. Moreover, for heavy-duty vehicles the regulation establishes additional limitations for a numerous of pollutants, such as nitrous oxide (N2O).  

For the first time, pollution standards will target emissions generated during braking and microparticles discharged from tires. These issues are expected to persist even with the transition to electric mobility. Finally, considering the green transition, Euro 7 introduces minimum performance criteria for battery durability in electric and hybrid vehicles.  


Highly politicised legislation 

The original proposal by the European Commission faced backlash from the industry and conservative policymakers, arguing that compelling modifications to combustion engines would make it significantly more expensive to manufacture new vehicles. They argue the cost of production for new vehicles would exponentially increase and consequences would be faced also by consumers. Moreover, they argued that funds could be more efficiently utilised for the transition to electric mobility. 

In the context of the numerous legislations put forward to reduce emissions from the road transport sector (e.g., CO2 standards for passenger cars and the revision of the EU ETS to name few), car manufacturers claimed that the Commission’s ambition would overburden and disrupt the sector in the EU while damaging the competitiveness of the industry vis-à-vis the rest of the world.  

The final text approved by the Parliament and the Council reflects these concerns and provides less stringent requirements for cars and vans, compared to the Commission’s proposal. Welcomed by the central and right groups in the Parliament, the agreement has been heavily criticised by MEPs from S&D and the Greens. 


Next steps 

Parliament and Council must now formally approve the agreement before it can be published in the Official Journal of the EU. After publication, manufacturers will have three years to comply with the Regulation for cars. For trucks, the rules will not apply until 2030 at the earliest 

Policy update

Policy update

Deal on the EU network on sustainable connectivity 

December has been the month of Trilogue agreements on several legislations, last but not least co-legislators reached a deal on the revised guidelines for the development of the trans-European transport network (TEN-T).  

Member States will be required to support the development of a coherent, connected, and high-quality transport infrastructure across the EU, looking at solutions to decarbonise transport and boost multimodal solutions. The new guidelines set three main deadlines for the completion of the TEN-T network: until 2030 for the core network, 2040 for the extended core, and 2050 for the comprehensive network. 

The TEN-T network aims to ensure sustainable connectivity boosting the passenger and freight railway network and road safety. Member States will also have to ensure better infrastructure for motor traffic and establish sustainable urban mobility plans for each urban node (strengthening urban mobility). Co-legislators will formally approve the text by Q1 2024 before it enters into force. 


EU sparks change with Electricity Market Design reform 

The co-legislators closed a deal on the EU’s Electricity Market Design (EMD) reform. The reform intends to mitigate the impact of volatile fossil fuel prices on electricity rates while expediting the integration of renewable energies.  

The reform will shield consumers from sudden price fluctuations, ensuring greater stability in electricity costs for EU citizens. The reform applies two-way Contracts for Difference for investments in new power-generating facilities, ensuring a minimum payment for constructing new renewable and nuclear energy facilities. This move aims to prevent overcompensation while reflecting the cost of new investments. 

The Commission will oversee excessive compensation cases and redistribute extra profits to consumers. Lastly, the co-legislators agreed to give the Council the power to declare a crisis. The provisional agreement now needs to be endorsed and formally adopted by both the Parliament and the Council before it can enter into force.  


How is the EU positioned on the Green Deal roadmap? 

The monitoring report on the Environment Action Programme (EAP)’s 8th objectives, the EU’s ambitious roadmap for environmental policy until 2030, shows that the path towards carbon neutrality requires further effort. 

In line with the European Green Deal, the EAP addresses eight priority objectives such as climate change mitigation, adaptation, circular economy, zero pollution and toxicity, and biodiversity.  

The report shows that the EU is expected to miss most of its 2030 environmental targets, including overshooting primary energy consumption targets and failing to double the use of recycled materials. Despite these challenges, optimism remains that the EU will achieve the 55% reduction in greenhouse gas emissions by 2030, while the report highlights a shift in priorities as funds earmarked for the Green Deal are redirected to defence, migration and energy diversification. 


EU’s green gas revolution: common rules for hydrogen and gas market 

In our last Newsletter, we covered the agreement on the directive on renewable and natural gases. Now, here’s the latest news: the Council of the EU and European Parliament have reached a provisional agreement on the regulation promoting renewable and low-carbon gases, particularly hydrogen and biomethane. This move aligns with the Fit for 55 package, targeting a 55% reduction in greenhouse gas emissions by 2030.  

The deal establishes the EU entity for Hydrogen Network Operators, which promotes cross-sectoral cooperation. Notably, the agreement extends voluntary gas purchasing mechanisms, restricting Russian or Belarusian gas supplies. Member States gain the ability to limit gas supply from these countries for security reasons.  

The agreement also provides for solidarity measures in times of crisis, tariffs consultations for hydrogen markets and support for biomethane production. Pending formal adoption by the institutions, this agreement heralds an important step toward sustainable energy in the EU. 


Carbon-neutral homes: deal on energy performance of buildings 

The Council and the Parliament have reached a pivotal provisional agreement to revise the energy performance of buildings directive, a key component of the Fit for 55 package. The revised Directive imposes more stringent energy performance standards for new and renovated buildings, aiming to make all new buildings zero-emission by 2030 and transform existing building stock by 2050.  

Notable provisions include the integration of solar energy systems, improved minimum energy performance standards, and a commitment to reduce energy consumption in residential buildings. It also outlines a roadmap to phase out fossil fuel boilers by 2040.  

With buildings responsible for a significant share of EU emissions, this is a crucial step towards climate neutrality by 2050. The agreement must now be formally adopted by the Council and the Parliament. 


COP28 ends with historic call to move away from fossil fuels 

Between 30 November and 12 December, 200 countries negotiated on a climate deal which includes targets to triple renewables, double energy efficiency by 2030 and for the first time, calls to transition away from fossil fuels by 2050.  

During the COP, the Global Stocktake acknowledged the insufficient emission reduction efforts and outlined pathways to realign national targets with the Paris Agreement. The COP28 also saw an agreement on the loss-and-damage fund, one of the key priorities of the COP28, with the EU and its Member States pledging over €400 million. The COP28 agreement is a non-binding pact, leaving it up to the individual states to implement the agreement as they see fit. The voluntary nature of the agreement leaves a lot of follow-up decisions for the COP29 next year in Azerbaijan.  

If you would like to learn more about the outcome of COP28, check out our dedicated update. 

What’s next?

  • Take a break: the EU institutions will be in winter recess from 25 December 2023 until 7 January 2024. 
  • On 1 January, the Belgian Presidency will kick off its work for the next six months. 


Critical Raw Materials Act: boosting the twin green and digital transition

The Critical Raw Materials Act aims to reduce dependence on non-EU countries, particularly China, for critical raw materials. It sets targets for the mining, processing and recycling of materials, including those essential for electric vehicles and wind turbines. The Act establishes the European Critical Raw Materials Board and sets targets for domestic production and processing. Companies are urged to diversify their supply chains and prepare for potential disruptions. What’s new?

Critical Raw Materials Act: boosting the twin green and digital transition
Sara Orcalli

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.