Dear reader,
Welcome to a new edition of the monthly Energy and Climate Policy Update. The EU institutions are currently finalising their work on some last energy and climate energy files before the European elections in June. The European Commission is also already looking forward: this month, it presented the 2040 climate target communication, as well as a strategy about carbon capture technologies. Meanwhile, competitiveness is becoming an ever-bigger theme. That means we have more than enough to talk about in this update – so read on!
Before you move on…
Undoubtedly, 2024 is a time of political shift. The upcoming European and Belgian elections taking place in June, are a unique moment for businesses as they provide an exceptional chance to proactively shape the political dialogues and decisions that will influence the forthcoming term in Belgium and the broader EU.
Publyon is proud to introduce you to our Beyond the Ballot series of webinars and reports that will help your organisation to be well-informed about the political developments in Brussels and provide you with guidance on how to effectively take advantage of opportunities stemming from the elections.
Sign up for free to our Belgian elections webinar here below!
For more information, visit our dedicated page.
The spotlight
With elections in sight, industry and Single Market high on the EU agenda
The European elections are a little more than three months away. Polls and national trends are pointing towards a rightward shift in the European Parliament. A partial result of this may be a shift of focus on climate policy: less towards setting ambitious targets, more towards implementing the Fit for 55 package and supporting industry. Competitiveness of European industry is especially becoming a prominent campaign topic; amidst competition from (especially) the US and China, both EU businesses and the EU institutions are asking themselves how to keep EU (green) industry in Europe. In this regard, a few recent developments are worth highlighting.
On 14 February, the European Commission published its annual Single Market and Competitiveness report, which gives an overview of Europe’s economic strengths and challenges. Together with two upcoming expert reports by former Italian Prime Ministers Enrico Letta (to be presented in April) and Mario Draghi (to be presented later this year), the report should help inform future policy on boosting the EU’s competitiveness.
While the report notes that private investment in the EU has held up, more private investment needs to be unlocked to accelerate the green transition in the coming years, for example by strengthening the Capital Markets Union and utilising strategic public procurement (see also below). The report also notes that the EU is making strides in clean energy policy, but that it is crucial to accelerate modernisation of grids, deployment of renewable energy and manufacturing of clean tech in the coming years.
In addition, on 22 February, Enrico Letta spoke in the Parliamentary Committee on the Internal Market and Consumer Protection (IMCO). Letta is expected to present his High-Level Report on the Future of the Single Market to the European Council ahead of its meeting next month. The former Prime Minister underlined that a major question the EU will need to answer is how to finance the green and digital transition. In addition, he stated that his report will consider four domains as European strategic assets: defence, telecom, energy, and financial services. These were not fully integrated into the Single Market in the past but might need to be integrated more if EU industry wants to remain competitive, says Letta.
As the election campaign unfolds, the European Council finalises its strategic agenda, and both Letta and Draghi present their reports, then, a few months from now we should know a lot more about how the EU plans to support its (green) industry – including, perhaps, through reforming the Single Market.
Next steps
Enrico Letta is expected to present his report on the Single Market to the European Council next month. Mario Draghi’s report should follow a few months later. Both documents, as well as the annual Single Market and Competitiveness report, should inform the Council’s strategic agenda 2024-2029, which will concern the high-level priorities for the EU in the coming years and should be finalised by June.
Policy update
Commission softening 15% reduction target in gas consumption towards a voluntary measurement for Member States
On 27 February, the European Commission recommended that Member States continue to curb gas use by 15%, compared with average consumption during 2017-2022. However, it removed an option, agreed in 2022, that could have made the 15% gas cut mandatory in a supply crisis. The Member States’ energy supply situation has been significantly improved since then, as countries have managed to replace Russian supplies with renewable energy and gas from other suppliers. Moreover, between August 2022 and December 2023, the overall gas consumption in the EU dropped 18%, due to several factors such as reduced industrial activity, mild winter temperatures and increased generation from renewable energy.
Industry leaders adopt wish list for next policy term
On 20 February, an industry summit took place in Antwerp, co-organised by the Belgian Presidency of the Council of the EU and chemical industry association Cefic. Notably, President of the European Commission Ursula von der Leyen attended – her first official visit after having announced her candidacy for a second term as the head of the Commission the day before.
At the summit, European industry leaders signed the “Antwerp Declaration for a European Industrial Deal” – essentially a wish list of what industry thinks it needs to stay competitive. The signatories stress that an Industrial Deal should form the core of the Commission’s next agenda: an action plan to create the conditions for a stronger business climate in Europe. Among other things, the declaration also calls for additional investments and simplified state aid rules for clean tech in energy-intensive industries.
Agreement on certification scheme for high-quality carbon removals
The EU institutions reached a provisional agreement on an EU-wide voluntary certification framework for high-quality carbon removals on 20 February. The scheme should ensure the authenticity of carbon removals through developing criteria. Notably, the text also includes a definition of what carbon removals are: negotiators define them as technologies, practices and approaches that remove and durably store carbon dioxide from the atmosphere. The text can enter into force after formal approval by the EU institutions. That will likely only happen, however, after the European elections, as there is not enough time anymore for the Parliament to still vote on the text.
Finally, some movement on ETD
While most of the Fit for 55 package has been made into law by now, the revision of the Energy Taxation Directive (ETD), which should ensure that clean energy is taxed less heavily than polluting energy, has been stuck in the institutions for months now. The main obstacle: since taxation is a competence of Member States, unanimity in the Council of the EU is required to adopt any position. Especially in the wake of the energy crisis, this has been difficult. However, there is some movement: the Belgian Presidency of the Council of the EU is circulating a new compromise text, which tries to break the deadlock among Member States by including some new exemptions in the text, for example for biomass. Whether the Belgian Presidency will succeed in establishing a compromise position remains to be seen.
Commission presents 2040 climate targets
On 6 February, the European Commission unveiled its roadmap to achieving a 90% reduction in greenhouse gas emissions by 2040, compared to 1990 levels. This ambition represents a significant step towards achieving net-zero emissions by 2050 and serves as a clear roadmap for ongoing efforts. The Communication underlines the importance of new sustainable growth sectors and the importance of targeting these sectors with investment schemes. In addition, the document underlines the need for expansion of carbon capture technologies to combat emissions. Interestingly, amid the recent wave of protests by farmers relating to EU green rules, emission reduction measures for the agricultural sector were largely kept out of the document.
Commission presents Industrial Carbon Management strategy on carbon capture
On 6 February, the European Commission not only presented its roadmap to a 2040 climate target, but also unveiled a Communication on Industrial Carbon Management. The Communication contains future actions on boosting carbon, capture, utilisation and storage (CCUS) technologies in the EU. The strategy outlines several targets for storage space the EU needs to attain to reach its climate goals: by 2030, the Commission aims to develop at least 50 million tonnes per year of CO2 storage capacity in the EU (a target also included in the Net-Zero Industry Act, see below); by 2040, 280 million tonnes; and by 2050, 450 million tonnes. Meeting these ambitious growth targets will require substantial efforts to boost CCUS at the European level.
Also, a heads-up: stay tuned for more information about the strategy and the general policy environment for CCUS – we are publishing a blog post on the topic soon!
Business impact
What is in the Net-Zero Industry Act and what does it mean for businesses?
On 6 February, the EU institutions reached a political agreement on the Net-Zero Industry Act (NZIA), which should help boost Europe’s clean tech industry amidst growing competition from especially China and the US. While the agreement still has to be formally approved by the European Parliament and the Council, it is likely that the content of the agreement will remain intact. That means it is high time to look at the NZIA’s business impact: which technologies are covered by the law? And what are the measures they can count on?
The NZIA contains supportive measures for ‘net-zero technologies’. These are final products, specific components or specific machinery primarily used to produce the technologies found in Article 3a. Most of the usual suspects are there: solar, wind, batteries, heat pumps, hydrogen, biogas and biomethane, carbon capture and storage, electricity grid technologies, and sustainable alternative fuels, among others. A major contention during negotiations was the inclusion of nuclear energy in the text; the final agreement includes nuclear.
Taken together, EU manufacturing capacity of these technologies should be able to satisfy at least 40% of EU demand by 2030. Globally, EU net-zero technologies should have a 15% market share.
Support measures for net-zero technologies include the following:
- Member States will have to provide administrative support to projects on their territory, for example by helping them comply with reporting obligations.
- Permit-granting processes for net-zero technologies will be sped up. They may not exceed 12 months for projects with an annual manufacturing capacity of less than 1 GW and 18 months for projects above that threshold. For net-zero technologies deemed ‘strategic’, these limits are 9 months and 12 months, respectively.
- Net-zero technology projects should have increased access to markets and financing, for example through strategic public procurement and the organisation of auctions by Member States.
- The Commission will support the launch of ‘European Net Zero Industry Academies’ which should address skills shortages.
In addition, the NZIA will set a binding target for CO2 storage: by 2030, the EU should have the capacity to annually inject 50 million tonnes of CO2. This target is also listed in the Industrial Carbon Management Strategy (see above), the main difference being that the NZIA target is legally binding. Oil and gas producers will be required to make contributions to this target by investing in or developing CO2 storage projects; they can be penalised if their contribution is not large enough.
In conclusion, the agreement includes several measures which should help the clean tech industry. At the same time, the NZIA is only one part of the puzzle to make EU’s strategic industry more competitive: businesses are calling for a broader approach that does more to address issues such as red tape and funding (see also the article on the Antwerp Declaration above). The NZIA is not yet that.
Want to know more about what the NZIA might mean for your organisation or specific sector? Feel free to reach out to the head of Publyon’s Transport & Energy practice, Mr. Niels van den Ouden.
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What’s next?
On Monday, 4 March, the Parliamentary Committee on Transport and Tourism (TRAN) will gather. Among other things, TRAN is expected to adopt its draft report on the use of railway infrastructure capacity while the Court of Auditors will present a special report on sustainable biofuels in transport.
On Monday, 4 March, the Transport, Telecommunications and Energy Council (Energy) will exchange views on security of supply and preparing for winter 2024-2025. Moreover, it is expected Member States will reach a political agreement on coordinated demand reduction measures for gas.
Martijn Meijer
Hi, my name is Martijn and I am curating the Energy & Climate Policy Update, aiming to bring you insightful updates straight from Brussels. At Publyon, I work mainly on transport and energy files. Do you have any questions on EU energy and climate policies or how these might impact your organisation? Feel free to reach out!
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