EU Energy & Climate Policy Update | No. 49

Dear reader,

Welcome to a new edition of the monthly Energy and Climate Policy Update. As the European elections will take place in one week, campaign mode is in full swing. In this update, we put the climate plans of the political groups in the spotlight: what might the future of the European Green Deal look like? Meanwhile, the co-legislators are still working on some legislative files; we provided an overview of ongoing negotiations under “Policy updates”. Enjoy reading! 

The spotlight

The European Green Deal after the European elections

Over the past five years, the European Commission has set ambitious climate targets for 2030 and beyond, with the ambition of making Europe the first climate-neutral continent by 2050 under the European Green Deal. In recent months, this framework has been subjected to increasing scepticism from right-wing parties, who argue that the targets are overly ambitious, burdening industry, and too costly.

With projections indicating that the power balance in the European Parliament will slightly shift to the right after the European elections, what does the future of the European Green Deal look like? In this spotlight, we look at what we expect to be the climate priorities in the next mandate, taking into account what the major European political groups have stated and what is still on the table.

What do the political groups want?

• The centre-right European People’s Party (EPP) calls for focusing on implementation of current energy and climate legislation and stresses that the needs of industry, regions and consumers to be taken into account when setting new climate targets. Biodiversity policy can only be made with farmers, the party argues.
• The centre-left Party of European Socialists (PES, represented in the European Parliament by the Group of Socialists and Democrats) calls for a new ‘Green Social Deal’ which aligns social and ecological policies. The party underscores the need for climate neutrality by 2050 as agreed in the Paris Agreement.
• The right-wing party of the European Conservatives and Reformists (ECR) wants to review the Green Deal, which it argues places unrealistically high expectations on industry.
• The European Green Party (EGP, represented in the European Parliament by the Green/EFA Group) also calls for a Green Social Deal and aims for full climate neutrality by 2040.
• The Alliance of Liberals and Democrats for Europe (ALDE, which forms part of Renew Europe) commits to adopting current energy and climate legislation to meet EU targets.
• The Left Group proposes raising greenhouse gas reduction targets and bringing forward EU climate neutrality to 2035.
• The radical-right party Identity & Reformist (ID) decided not to publish an election Manifesto.

What are some of the issues the new EU institutions will tackle?

• 2040 Climate Target: the next European Commission will make work of a legislative proposal on a 2040 climate target, which should inform future climate policy; the expectation is that a 90% emissions reduction target will be set.
• Energy infrastructure: focus on increasing grid capacity, enhancing cross-border interconnectors, lowering energy prices, and deploying robust energy infrastructure in (industrial) hubs where supply and demand intersect.
• Fossil energy taxation: while negotiations on the revision of the Energy Taxation Directive (ETD) have stalled, there still seems to be increasing political support for the phasing-out fossil subsidies.
• Emissions trading system: the 2026 review of the EU’s Emissions Trading System could lead to further expansion of its scope, for example by determining whether negative emissions should be covered.
• Capital for the green transition: to ensure the competitiveness of EU industry, companies will need to have adequate access to finance – both public and private. In his recent report on the Single Market, Enrico Letta made several recommendations on how to do so.

Next steps

Based on party programmes, it is likely that there will still be a broad majority for the ambitions of the European Green Deal. At the same time, parties differ on how to reach those ambitions. In addition, there is a growing call among parties to place greater emphasis on supporting industry. Currently, there is no political business case for nature and biodiversity policies (as there is for climate and energy), resulting in deadlock on files such as the Nature Restoration Law. In case there is a rightward shift, this is expected to continue in the next mandate.

Policy update

Energy Council outcomes

Today, the Energy Ministers of the Council of the EU gathered in Brussels to discuss and vote on outstanding legislation under the European Green Deal. The Council approved conclusions on the EU electricity grid infrastructure and called for a series of measures to enhance the interconnectedness and resilience of the European electricity grid. The Council aims to ensure energy security and independence while contributing to the energy decarbonisation goals of the EU. Besides, Energy Ministers have given a final green light to the EU’s withdrawal from the Energy Charter Treaty. Nevertheless, Member States can remain a contracting party if it is desired.

Council approves Net-Zero Industry Act (NZIA)

On 27 May, the Council gave its final approval to the Net-Zero Industry Act (NZIA), meaning that the law can now enter into force upon publication. This Regulation aims to bolster the industrial deployment of net-zero technologies, like heat pumps, battery storage, and carbon capture and storage, positioning Europe as a leader in green industrial innovations. It streamlines permit processes, facilitates market access, enhances workforce skills, and coordinates EU actions in this sector. The Act also fosters innovation through regulatory sandboxes. Key targets include achieving 40% of the EU’s deployment needs and 15% of global production for net-zero technologies by 2040. Do you want to know what impact the NZIA has on your business? Check out our earlier newsletter in which we discuss the NZIA in detail.

Council adopts Electricity Market Reform

On 21 May, the Council of the EU approved new electricity market rules aimed at making energy prices more stable, cutting down on fossil fuel use, and giving consumers better protection during crises. The reforms encourage long-term power purchase agreements (PPAs) and two-way contracts for difference (CfDs) to keep prices steady and boost renewable energy investments. In times of crisis, measures to protect vulnerable consumers, like banning disconnections, will be increased. To ensure a reliable energy supply as we use more renewables, capacity mechanisms will also be enhanced offering long term, fixed measures instead of temporary solutions.

European Commission presents new guidelines for renewable energy production

On 13 May, the European Commission presented updated recommendations and guidelines to streamline permitting procedures and auctions for renewable energy, two years after the release of the REPowerEU plan. The guidelines are supported by many green groups, including Bird Life, Nature Conservancy, and WindEurope, who argue that it provides more clarity and long-term security for investors, while also increasing the protection of nature and wildlife. The plan focuses on simplifying permitting, using digital tools, engaging stakeholders, and designing auctions for sustainable growth and environmental sustainability. According to the Commission, these initiatives are vital for achieving climate neutrality by 2050 and reducing reliance on Russian fossil fuels.

Council approves new CO2 standards for heavy-duty vehicles

On 13 May, EU member states gave their approval to a new law to reduce truck carbon dioxide emissions, meaning that the law can now enter into force after publication. The text mandates a 90% reduction in CO2 emissions from new heavy vehicles (HDVs) by 2040, with stricter targets for 2030 and 2035 – truck manufacturers must reduce fleet CO2 emissions by 45% by 2030, up from the current target of 30%, and by 65% by 2035. Manufacturers must sell a significant number of fully CO2-free trucks, including electric and hydrogen fuel cell vehicles, to offset any remaining CO2-emitting vehicle sales by 2040.

Possible PFAS exception for essential sectors

European Commission President Ursula von der Leyen has informed European People’s Party (EPP) MEPs that the Commission prioritises permanent exemptions to an expected ban on PFAS (per- and polyfluoroalkyl substances) for applications essential to the EU’s digital and environmental transition and strategic autonomy, such as medical devices and wind turbines. Last year, five countries proposed restricting toxic PFAS, known as “forever chemicals,” in various EU sectors, raising concerns about potential delays in the EU’s green and digital transition due to their use in technologies like lithium batteries and heat pumps. The European Chemicals Agency (ECHA) is currently assessing the PFAS restriction proposal. The Commission has not yet officially commented on the nature of potential exemptions. Want to know more about PFAS while we await the proposal? Read our blog post here!

Business impact

Business impact: cutting methane emissions in the energy sector

On 27 May, the Council adopted a new Regulation to track and reduce methane emissions as part of the EU Methane Strategy and ‘Fit for 55’ Package. This Regulation mandates new requirements for measuring, reporting, and verifying methane emissions in the energy sector, with measures to detect and repair leaks and limit venting and flaring. It also includes global monitoring tools to ensure transparency of methane emissions from oil, gas, and coal imports into the EU. After approval, the Regulation can soon enter into force. So, what does this mean for your business? Find out below.

Why is reducing methane emissions important?

Methane, a potent greenhouse gas, requires urgent reduction to meet Paris Agreement goals. Nearly 40% of global emissions stem from the energy sector, and accounts for over a third of methane emissions from human activity necessitating rapid action to limit warming to 1.5°C. The new EU Regulation aims to monitor and reduce methane emissions across value chains.

What’s in the Regulation?

The Regulation mandates the Commission to create a global methane monitoring tool using satellite data to identify significant methane sources worldwide. Additionally, a rapid alert system will be established for “super-emitting” events, enabling prompt action to mitigate or prevent high methane emissions. Besides that, the new methane Regulation carries the following obligations:

• Beginning in 2030, the EU will enforce “maximum methane intensity values” for fossil fuels sold on the European market. The European Commission will establish specific methane limits by that time. Importers of oil and gas that exceed the limit could face financial penalties.
• Oil and gas operators must measure emissions at the source, create monitoring reports verified by accredited bodies, and maintain inventories and mitigation plans for inactive oil and gas wells in the past 70 years. Emissions from closed or abandoned coal mines must also be monitored and national authorities will conduct periodic inspections for compliance.
• Oil and gas operators must detect and repair methane leaks within specified intervals, with a full repair deadline of 30 days.
• Venting and flaring, the practice of burning off excess gas from oil, gas, and coal deposits from drainage stations will be banned by 2025 and from ventilation shafts by 2027, except in emergencies.
• Methane emissions from the EU’s energy imports will also be tracked, with global monitoring tools enhancing transparency. Starting in 2027, the EU will mandate that new import contracts for oil, gas, and coal can only be signed with foreign producers who adhere to methane emissions reporting rules equivalent to those of the EU.

The Regulation will take effect on the twentieth day after its publication in the Official Journal of the EU. The Commission will review the regulation’s implementation in 2028, assessing the extent of emissions reduction achieved.

What impact will the Regulation have on your business?

The Regulation will have a dual impact. Oil and gas operators will face significant challenges due to stricter methane measurement, reporting, and repair requirements, potentially necessitating infrastructure updates and leading to higher operational expenses. Non-EU operators will also need to comply with EU-equivalent methane reporting rules starting from 2027. This will likely result in increased costs for users further down the oil and gas value chain, as producers pass on additional expenses through pricing. However, the Regulation presents opportunities for operators to showcase compliance and leadership in methane reduction, thereby improving their reputation and market standing as sustainable and responsible organisations.

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Inside the EU's vision for digital & tech policies

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What’s next?

• From 6-9 June the European Parliament Elections will take place across the European Union. In the weeks that follow, we will get more clarity as to which MEPs will sit on which committees, as well as to what the new College of Commissioners will look like and who will become Commission President.
• From 13-15 June, the G7 Summit will take place in Italy discussing developing nations, Africa, the Indo-Pacific, migration, climate-energy issues, and food security. Artificial Intelligence will also be a key topic, emphasising developing human-centred governance mechanisms.
• On 17 June, the Environmental Council will convene.
• On 18 June, the Transport Council will meet.
• From 27-28 June, EU state leaders will meet during the European Council meeting, discussing topics such as Ukraine, security and defence, competitiveness, external relations, and the next institutional cycle.
• The 10^th Parliamentary term will officially start on Tuesday 16 July 2024, the start of the constituent Plenary session of the European Parliament in Strasbourg. Newly elected MEPs will elect their President, 14 Vice-Presidents and five Quaestors. Moreover, votes will be held regarding the composition of Parliament’s standing committees and subcommittees.
• The election of the Commission President is expected to take place on 16-19 September during the first Plenary session after summer recess. In October/November 2024, candidate-Commissioners will be heard and, if deemed to be qualified, confirmed by Parliament.

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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