EU Energy & Climate Policy Update | No. 57

Dear reader,

Welcome to the first edition of our monthly Energy & Climate Policy Update for 2025 – a year of beginnings, at least when it comes to the EU policy cycle. With the new Commission now firmly in place, we take a look at one of its first initiatives, the Competitiveness Compass, which was published on 29 January. We reflect on Davos, where Ursula von der Leyen gave some insights into upcoming policy, and analyse the business impact of the TEN-E Regulation.

Stay tuned for our insights below!

Europe’s bold plan for sustainable growth, the “Clean Industrial Deal”, represents a major shift for EU businesses, especially in energy-intensive sectors. Don’t miss your chance to engage with the Commission to shape this deal and influence the policy direction for the next five years.

The spotlight

The Competitiveness Compass

On 29 January, the European Commission released one of its first major initiatives, the Competitiveness Compass. This strategic roadmap outlines how the EU aims to strengthen its economy, drive innovation, and enhance global competitiveness in the coming years. Although the presentation was delayed for two weeks due to President Ursula von der Leyen’s hospital spell, the Compass is now there.

Publyon has unpacked the contents of the document for you here below.

What is the Competitiveness Compass about?

The Competitiveness Compass is a cross-sector, non-legislative roadmap that defines a new European competitiveness model centred on ‘innovation-led productivity’. It outlines the key initiatives the European Commission plans to introduce in the coming years.

Upcoming legislative actions are grouped into three main themes: simplification and coordination, a set of flagship measures (upcoming initiatives on innovation, decarbonisation and security) based on the Draghi report, and a range of horizontal competitiveness enablers.

Simplification and coordination as basic requirements for policies

By prioritising simplification and coordination, the European Commission seeks to create a more efficient, flexible regulatory environment and ensure better alignment between EU and national policies.

On simplification, the Commission aims to reduce regulatory complexity, which should make rules more proportionate, stable, and business-friendly. Each Commissioner of the College will hold bi-annual implementation dialogues with stakeholders to address concerns and identify opportunities for burden reduction. Key climate and energy initiatives include:

• An Industrial Decarbonisation Accelerator Act to extend fast-tracked permitting.
• A simplified Multiannual Financial Framework (MFF) 2028-2034 to improve access to EU funding.

On coordination, the Compass introduces a new Competitiveness Coordination Tool to align EU and national policies by identifying key priorities and developing joint action plans with Member States and stakeholders. Under the next MFF, a dedicated Competitiveness Fund will support these efforts.

Flagship measures on competitiveness

These flagship measures are designed to translate the recommendations from the Draghi report on European competitiveness into actionable steps. Within the Competitiveness Compass, these measures are identified as three primary challenges that the EU must confront. Below is an overview of upcoming climate and energy related actions:

1. Narrowing the innovation gap – addressing the difference in innovation compared to the US, where businesses will benefit from improved access to capital.
   • Start-up and Scale-up Strategy to address bottlenecks to market entry and scale-up.
   • The Commission will promote wider use of the Important Projects of Common European Interests (IPCEI) for innovative sectors.
2. Advancing energy transition and addressing energy price concerns; creating a joint roadmap for decarbonisation and competitiveness.
   • The flagship strategy addressing this challenge will be the Clean Industrial Deal – to be presented on 26 February. The aim is to establish the EU as a key location for manufacturing, including energy-intensive industries, while advancing clean technologies and circular business models.
   • An Affordable Energy Action Plan – to be presented on 26 February – should ensure households and industrial players having wider direct access to low-cost electricity and phase-out of Russian fossil fuels imports.
   • The new Port Strategy highlights the importance of European ports for the EU economy.
   • More investments in modernising and expanding networks of energy transport and distribution infrastructure, accelerating investments in electricity, hydrogen and carbon dioxide transport networks.
3. Reducing dependencies and strengthening economic security to overcome vulnerabilities in global supply chains.
   • A new Platform for Joint Purchase of Critical Raw Materials to identify needs of EU industries, aggregate demand and coordinate joint purchases.
   • New initiatives such as the Water Resilience Strategy and a Climate Adaptation Plan to address extreme weather impacts.

Horizontal enablers of competitiveness

The flagship measures in the Compass will be supported by three key enablers: leveraging on the scale of the Single Market by removing barriers, securing financing through an Investment and Savings Union and a restructured European Budget, and promoting skills to boost competitiveness and create quality jobs while ensuring social fairness.

Next steps

The Competitiveness Compass provides businesses with a clear overview of what they can expect from the new European Commission in terms of policies and initiatives aimed at strengthening EU competitiveness.

Key next steps include the upcoming Commission Work Programme 2025, scheduled for release on 11 February, which will outline the specific legislative initiatives and priorities for 2025. Additionally, the Clean Industrial Deal, set to be unveiled on 26 February, will detail the Commission’s strategy to drive the green transition, particularly in industrial sectors, with a focus on sustainability, innovation, and energy efficiency.

Policy update

Discussions on simplification of EU legislation

Debate around the EU’s upcoming efforts to simplify EU legislation is ongoing. While many companies and financial institutions support reducing sustainability reporting requirements, green groups fear this could weaken environmental ambitions. On 23 January, the French Government circulated a proposal calling for a “massive regulatory pause” in EU legislation, aligning with Germany and Poland in reducing regulatory burdens for businesses. Earlier, on 21 January, the Economic and Financial Affairs Council discussed strengthening EU competitiveness by streamlining and reducing regulatory burdens. These discussions will inform the European Commission’s Omnibus Simplification Package, which will be published on 26 February.

Von der Leyen speaks at Davos

From 20 to 24 January, world and business leaders gathered at the World Economic Forum in Davos, Switzerland. European Commission President Ursula von der Leyen was also present; she announced that a key component of the Action Plan for Affordable Energy – which will be released on 26 February – will be advancing the integration of the European grid. The Action Plan will be part of the Clean Industrial Deal, which – as revealed by Politico – will be shaped around 6 themes: energy security and energy prices, financing, recycling and critical raw materials, labor and skills, lead markets (boosting market demand for green products), and global action. Furthermore, Von der Leyen launched, together with the International Energy Agency, a Global Energy Transition Forum. This initiative should bring together countries, companies and investors to incentivise partnerships to realise the clean energy transition.

EU exploring subsidy schemes to boost EV demand

The European Commission is exploring a pan-European subsidy scheme to support the automotive industry by boosting demand for electric vehicles (EVs). At the World Economic Forum in Davos from 20 to 24 January, Vice President Teresa Ribera emphasised that a joint EU approach would prevent competition between national models. However, the scheme must comply with WTO rules and avoid benefiting Chinese car manufacturers. The plan aims to accelerate electrification while addressing challenges like production capacity and the quality of European brands. Ribera rejected postponing the 2035 ban on combustion engines but showed flexibility on annual EV sales targets and penalties for non-compliance.

EPP calls for deregulation

During the European People’s Party (EPP) Leaders’ Retreat on 17 and 18 January, the group, the largest in the European Parliament, drafted a letter in which they state support for deregulation to enhance EU competitiveness. Firstly, EPP leaders call for a two-year postponement of the EU’s corporate sustainability reporting requirements, the EU Taxonomy, and the new CO2 import tariff (CBAM) – which is supposed to impose tariffs from 2026. Secondly, the EPP argues these laws should only apply to large companies for over 1000 employees, and not for SMEs. Also, reporting obligations for large companies should be halved. Thirdly, the EPP opposes an EU-wide renewable energy target, arguing that Member States should decide how to achieve climate goals.

EU launches new hydrogen call

On 15 January, the Clean Hydrogen Partnership launched its 2025 Call for Proposals under the Horizon Europe programme, with a total budget of €184.5 million. This funding is aimed at advancing innovation in the hydrogen value chain, particularly in scaling up technology, reducing production costs, and developing efficient hydrogen production, storage, and fuel cell systems for heavy-duty vehicles and maritime applications. Projects will focus on key challenges such as improving material durability, safety, fuel cell efficiency, and hydrogen infrastructure.

Commission study on net-zero manufacturing in the EU

On 14 January, the European Commission’s Directorate-General for Energy (DG ENER) released a study on the status of net-zero manufacturing in EU Member States. The report covers sectors like wind, solar, batteries, heat pumps, geothermal energy, carbon capture, and renewables. The report highlights a strong manufacturing industry in heat pumps and geothermal energy, though it faces challenges with slowing demand and a skills shortage. The EU’s electrolyser capacity is set to double by 2030 due to hydrogen investments. The carbon capture value chain is still developing, with major production sites planned in Germany and the Netherlands. The EU leads in grid infrastructure but faces challenges with material imports.

Business impact

The Trans-European Networks for Energy (TEN-E)

The revised TEN-E Regulation already came into effect in June 2022. However, recent geopolitical developments as well as upcoming EU policy (such as the Clean Industrial Deal) have underscored the increasing importance of energy infrastructure, which is why TEN-E earns a spot in this month’s business impact section.

This regulation aims to strengthen the EU’s energy infrastructure policy, aligning it with the goals of the European Green Deal. It is designed to facilitate the creation of an integrated, competitive, and sustainable energy market within the EU by supporting cross-border energy projects.

The regulation aims to enhance the reliability, security, and efficiency of the EU’s energy network while contributing to the overall goal of achieving a climate-neutral energy mix by 2050. Ultimately, TEN-E plays a crucial role in transforming the EU into a less energy-dependent Union, enhancing its strategic autonomy.

But what are the key elements of TEN-E and how does it affect your business? Read on for the answers!

Key features of the revised TEN-E

• Expansion of energy Infrastructure categories: The revised TEN-E regulation introduces new and updated energy infrastructure categories, including hydrogen infrastructure, smart gas grids, electrolysers, and Carbon Capture and Storage (CCS) networks, to stimulate the development of such technologies. In alignment with the EU’s climate objectives, the regulation excludes fossil fuel-related infrastructure projects from the list of eligible initiatives for funding and support.
• Projects of Common Interest (PCIs): The regulation continues to prioritise Projects of Common Interest (PCIs), offering quicker regulatory and permitting provisions. Permitting must be completed in less than 42 months with a single national authority assuming overall responsibility. The revised version broadens the definition of eligible PCIs to include clean energy infrastructure categories, as outlined earlier.
• Projects of Mutual Interest (PMIs): The increased promotion of projects in collaboration with non-EU countries contributes to both the EU’s energy and climate goals and the sustainability objectives of the partner countries. An example of such a project is the electricity power link between Cyprus and Israel.
• European Grid Action Plan: Published in November 2023, the Grid Action Plan aims to enhance the efficiency and pace of cross-border and local electricity grid development. Supported by the TEN-E framework, it focuses on expanding grids across Europe to integrate renewable energy, electric vehicles, and hydrogen production.

What does this mean for your business?

The revised TEN-E Regulation has been in force since 2022, but there are critical aspects businesses must address now – both to comply with the current legislation and to prepare for upcoming proposals that could significantly impact operations and strategies.

• Prepare for PCIs and PMIs: Although the most recent application call closed in December 2024, businesses should plan ahead to meet the criteria for successful project submissions. The Commission issues calls every two years, with the next one anticipated in mid-2026. Businesses can already begin investing in new technologies to support critical energy infrastructure development.
• Prepare for new EU proposals: Key proposals, including the Clean Industrial Deal, the Action Plan on Affordable Energy, and the Roadmap to End Russian Energy Imports, are expected in the coming months, with TEN-E playing a significant role in shaping them. These initiatives will prioritise the growth of clean technologies such as hydrogen, carbon capture, and grid development, which require supportive regulatory frameworks to thrive within the EU. By facilitating clean energy infrastructure through PCIs, TEN-E ensures streamlined regulatory and permitting processes. Proactively monitoring policy developments and strategic planning will be crucial to staying ahead.
• Prepare for the review phase: By 30 June 2027, the European Commission will review this Regulation based on reporting and evaluation results. Over the next two years, the Commission will gather industry feedback and input for a potential next TEN-E revision.

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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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