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Renovation Wave: opportunities for the construction sector

“The green recovery starts at home” said Commissioner for Energy Kadri Simson during the presentation of the European Commission’s Renovation Wave initiative on 14 October. Buildings are responsible for 40% of the energy consumption in the EU, while 75% of European buildings are not energy efficient. With its eyes fixed on the 2050 climate-neutrality target, the European Commission aims to double renovation rates in the next ten years to increase the energy efficiency of buildings and to cut emissions. The goal is to renovate 35 million buildings by 2030, supported with funding of €672.5 billion from the Recovery and Resilience Facility. The Renovation Wave, therefore, offers new opportunities for the construction sector.

Priority actions

The strategy’s main priority is the renovation of the least energy-efficient buildings, which often house people who are most affected by energy poverty. The Commission expects that focussing on these constructions will lead to the greatest cut in emissions. Additional attention is paid to public sector buildings and the decarbonization of heating and cooling systems. The publication of the initiatives to speed up renovations of public buildings, as well as a revision of the Renewable Energy Directive to increase heating and cooling energy targets is planned for June 2021. Legal certainty to take up renovations, well-targeted funding, project capacity increases, smart buildings and the use of circular materials are lead actions to realize the transformation of European homes, schools, offices and townhalls.

Consequences and opportunities for businesses

Renovation of buildings

The Renovation Wave initiative, aimed at renovating the current stock of buildings, would bring opportunities to companies, notably, in the construction sector. The proposal that public buildings should be renovated at a higher pace than those in the private sector might lead to an increased demand in the short term. The Commission also put forward the use of efficient and sustainable products generating a higher energy consumption reduction, which will benefit the sectors providing these materials.

European Bauhaus

The proposals of the Commission do not only focus on CO2 reduction, but also envisage the launch of new European building designs. The launch of the New European Bauhaus will include the vision on how Europe will look like in the future, opening up opportunities for both the designing dimension of the new sustainable style as well as the construction side. The Commission will bring together architects, artists, students, engineers and designers to shape new construction designs.

European Green Deal Impact Scan

Financing opportunities

The Renovation Wave initiative opens up funding opportunities for the construction sector on both national and EU level. To realize action in the above-mentioned areas, an annual investment of €57 billion is foreseen from the Recovery and Resilience Facility. Other funding will be granted by the revenues from the carbon market. In addition, the European Commission will revise state aid rules, so national governments can support renovation in their respective countries.

 Electric vehicles

With electric mobility on the rise, charging vehicles at home or in public places (e.g. office buildings) will be a common practice in the near future. The Commission stresses that in order to reach the 2030 CO2 reduction targets, electric bikes, cars and vans will be the preferred mode of transport. Therefore, innovation, connectivity and accessibility of charging infrastructure will be the main aspects of the Renovation Wave which will thus present opportunities for the construction sector. Buildings will need to be equipped with the necessary infrastructure to support e-mobility.

State of play

In order to realize the European Renovation Wave, the Commission calls on the European institutions and all stakeholders to engage in a discussion on the strategy. Input from different sectors will now determine in what way the current plans and proposals will still be fine-tuned. Dr2 Consultants is eager to help your business understand the impact of the Renovation Wave and assist you in shaping its outcome by building a sound Public Affairs strategy.

For a full overview of the European Commission’s proposed measures, please see the annex to the Renovation Wave initiative.


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Updated EU climate plans: opportunities for businesses at national level

New Belgian federal government’s sustainability policy priorities

After 493 days of negotiations between the political parties in Belgium since the elections in May 2019, the new federal government of the Kingdom of Belgium was sworn in on 1 October 2020 with Alexander De Croo (Open Vld) appointed as new Prime Minister. With a clear difference in engagement compared to Charles Michel’s so-called ‘Swedish coalition”, sustainability – together with employment and solidarity – is one of the key themes in the new coalition agreement, which confirms full commitment to the climate ambitions of the Paris Agreement and the European Green Deal. The ambition is to reduce greenhouse gas emissions by 55% by 2030 and make Belgium climate neutral by 2050.

Another urgent focus of the new government will be addressing the corona crisis and the path to economic recovery by transitioning into a more sustainable economic model. The “Government De Croo” sets out investments and new policies in line with the goals of the European Green Deal, however, it often remains unclear how the goals will be achieved in practice.

Renewable energy sources 

The new Belgian federal government proposes to invest more in the development of renewable energy sources, in particular in wind and solar energy, i.e. by exploring potential additional capacity for offshore wind in the Belgian North Sea. However, environmental organizations already raised their concerns about the lack of measures that would protect nature reserves in the North Sea in case economic activities would be exploited in the area. Additionally, in their pursuit of climate neutrality, public companies are encouraged to develop their own sustainable energy supplies and to gradually replace polluting sources, including nuclear energy.

Sustainable transport 

Railway is within the competency of the federal government, where additional investments are expected with the ambition to create more efficient and faster international (night) train connections to major European cities and consequently make Brussels a truly international train hub. The government is also aiming to double the freight traffic by 2030. In consultation with the regions, the government will put forward proposals on the uptake of zero-emission vehicles (subject to the availability of such affordable vehicles on the Belgian market) including an obligation on zero-emission company vehicles by 2026. Also, together with the regions, this government will strive for an ambitious modal shift and the promotion of Mobility-as-a-Service with a view to a significantly increase the share of sustainable mobility modes.

Circular economy 

The new government – in consultation with the regions – will develop a federal circular economy action plan to significantly reduce the use of raw materials and the material footprint in production and consumption. The federal government will also set best practices and include the principle of a circular economy in its public tenders. In line with the ambitions of the European Green Deal, the Belgian government will also promote reduction of waste, reuse and recycling.

Biodiversity 

To improve the negative impact on the biodiversity, the new federal government will investigate the impact of the ban of certain plastics and push to harmonize these standards at the European level. Furthermore, the government will realize an ambitious reduction plan for pesticides with special attention for Belgian (agricultural) companies in order to avoid any competitive disadvantage. In general, the new government seems to align the national biodiversity strategy much more with the European biodiversity strategy.

Recovery 

The new government is investing €3.2 billion in new policies, out of which  €2.3 billion will be earmarked for social policy. €1 billion is reserved for relaunching the economy following the corona crisis, including investment in a new economy (e.g. more energy-efficient government buildings, the development of the use of sustainable accumulators and batteries, improvement and intensification of freight transport by rail and inland waterways). Furthermore, spin-offs that have a positive effect on sustainable development, more specifically on renewable energy, insulation of buildings, climate-friendly technologies, but also in the field of digitization and mobility will be set as priorities. Further details are set to be announced in the coming weeks and months.

Conclusion 

The new Belgian federal government has without doubt set out ambitious goals to achieve a more sustainable and circular economy for the coming years. Together with the recovery plan following the COVID-19 crisis, this provides new opportunities but also poses challenges for companies to adopt their operational and business environments. It is therefore crucial to stay up-to-date with the latest developments and understand when is the right momentum to proactive influence the political agenda.

Dr2 Consultants offers comprehensive Public Affairs support for companies and organizations that are impacted by Belgian policies – either at federal or at regional level. Furthermore, registration is still possible for our dedicated online Belgian Public Affairs training on 16 October 2020 that will provide participants with the opportunity to have a deeper look at the new priorities of the federal and regional governments.

 

Updated EU climate plans: opportunities for businesses at national level

Ambitious, achievable and beneficial for Europe” is how European Commission President, Ursula von der Leyen, characterized her updated EU climate plans. She unveiled her proposal to cut CO2 emissions by 55% by 2030 during her first State of the Union Speech on 16 September. New measures to reach the objective will affect all sectors of the economy from transport, construction to energy. It accelerates the transition to a climate-neutral Europe by 2050, as laid down in the overarching European Green Deal. Therefore, the European Commission is also calling on Member States to step up their efforts. The updated climate targets on a European level provide a unique framework and opportunity for businesses to shape and be part of the green transition at national level.

Stepping up our climate efforts: “We can do it!”

The Commission based the increased 55% target on an assessment of the National Energy and Climate Plans for 2021-2030 (NECPs). The NECPs are ten-year plans, in which EU Member States outline how they will address climate-related issues such as energy efficiency, taking up renewables, reducing greenhouse gas emissions, interconnections and research & innovation. The evaluation of these national climate plans on EU-level showed that the EU is to surpass the current 40% reduction target, enabling the increase of the target to 55% by 2030. Or in Von der Leyen’s words: “we can do it!” As this demands a further increase of energy efficiency and the share of renewable energy, the Commission will present new proposals by June 2021:

  • The Renovation Wave: the renovation of public and private buildings to improve their energy efficiency;
  • Revision of the Energy Efficiency Directive: the alignment of the binding measures that limit energy consumption with the new climate targets;
  • Guidance for the Energy Efficiency First Principle: ensuring energy saving is a priority in policy-making and investment.

In addition to the EU-level evaluation of the National Energy and Climate Plans, the Commission will carry out an assessment of Member States’ individual plans in October, as part of the State of the Energy Union Report, expected by the end of the year. The assessment will evaluate if Member States are on track to achieve the current 40% and proposed 55% emission reduction targets, looking at areas such as energy efficiency and the share of renewables in the national energy mix as mentioned above.

Opportunities to shape the national green recovery

Expectedly, Member States will have to bring their National Energy and Climate Plans in line with the new emission reduction target, if it is approved by the European Parliament and the Council of the EU. Although the new objective may look challenging, combined with the Recovery and Resilience Facility, it offers a unique opportunity for businesses to become part of the green recovery in their countries. The Recovery and Resilience Facility is at the core of the Next Generation EU plan and offers an unprecedented €672.5 billion of loans and grants to Member States to emerge from the COVID-19 crisis. The budget is to be spent in line with the (increased) European climate ambitions. In order to benefit from the budget, Member States draft their national recovery plans outlining how these will contribute to criteria including environmental sustainability.

European Green Deal Impact Scan

As a result, a momentum arises for businesses to help national governments shape a sustainable recovery. Additionally, companies can benefit from European investment in the green ‘flagship areas’ that are to be included in the national plans. These focus areas include the development of renewables, energy efficiency of buildings and sustainable charging and refueling technologies for transport. With the deadline for preliminary drafts of Member States’ national recovery plans set on 15 October, now is the moment to deliver input.

Next steps

The Climate Law Regulation was proposed by the European Commission in March 2020 and is currently being discussed in the European Parliament and Council of the EU. The institutions will need to come to an agreement and approve the 55% emission reduction target. Next to that, Member states are invited to submit their preliminary draft plans under the Recovery and Resilience Facility as of 15 October 2020. The final deadline for submission is 30 April 2021.

With the first deadline for the National Recovery and Resilience Plans fast approaching, it is important to timely deliver input in order to have your ideas heard. If you would like more information on the EU climate plans, or other files that could impact your business, contact Dr2 Consultants. Also, visit our Sustainability webpage for more information.

 

 

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Back to work: EU legislative proposals – 2020 outlook

As the summer recess is coming to an end, the European Commission will start preparing the EU legislative proposals that are still in the pipeline for 2020, according to the work program. As the second semester of the year will be a packed one, it is key to timely prepare input in order to have your priorities heard.

Following our blog on the EU initiatives that were open for feedback over summer, Dr2 Consultants now guides you through the main remaining proposals for 2020 in the transport, sustainability and digital sector. You can find these below in that particular order.

Transport up-to-speed with the new decade

Emerging developments such as the decarbonization of transport, digitalization and the global COVID-19 pandemic have stressed the need to review the Trans-European Transport Network (TEN-T) Regulation. The TEN-T policy aims to develop and implement a Europe-wide infrastructure network linking ports, highways, airports and railways. With the upcoming revision of this EU legislation, the European Commission aims to bring TEN-T up-to-speed with the ongoing green and digital transitions. The Commission is expected to put renewed emphasis on the strengthening of urban nodes, the update of infrastructure requirements, and the alignment of the TEN-T policy with the EU’s environmental policies.

The Commission is currently finalizing the evaluation of the TEN-T Regulation. The different modes of transport are still invited to contribute to dedicated case studies in the course of September. The European Parliament is currently preparing an own-initiative report on the TEN-T policy. The Transport & Tourism committee will discuss the draft report on 3 September. The Commission is expected to publish a roadmap and a public consultation later this year. A legislative proposal is foreseen for summer 2021.

In addition to the TEN-T, the Commission is expected to publish the EU’s Strategy on Sustainable and Smart Mobility. With this strategy, the Commission intends to adopt a comprehensive strategy to reduce transport-related greenhouse gas emissions by 90% by 2050, and to ensure the transport sector is fit for a clean, digital and modern economy. A public consultation has been opened in the summer and is open for feedback until 23 September.

Visit our Transport page.

Green energy and sustainable production

The energy-focused sibling of TEN-T will also be subject to a revision this year. The Trans-European Energy Network (TEN-E) Regulation aims to link European electricity, gas and oil infrastructure into a single network, consisting of nine corridors. TEN-E focus areas are smart grids, electric highways and the cross-border carbon dioxide network. This EU legislation is considered to be instrumental to realize the renewable energy objectives across the Union, for example in stimulating the hydrogen economy. The Commission will come up with a legislative proposal for a revised TEN-E regulation.

European Green Deal Impact Scan

In addition, several EU legislative proposals will be initiated that will have an impact on producers. Proposals that tackle packaging waste, deforestation and industrial emissions are currently in the pipeline. Striving towards a circular economy, the Commission will promote waste reduction by reviewing the Packaging Directive. This may include improved design standards and increased recycled content in packaging materials. Possibly, packaging design standards will also change as a result of the Deforestation Regulation, which could include labelling requirements and verification schemes to increase the transparency of supply chains. Finally, the Industrial Emissions Directive may require additional sectors, such as farms and extractive industries, to implement available sustainable production techniques. Public consultations on the three initiatives are upcoming this year, and the respective legislative proposals are scheduled for 2021.

Visit our Sustainability page.

Trustworthy AI and shared data spaces

Artificial Intelligence (AI) is increasingly affecting our society. Applications can bring about revolutionary changes in healthcare, governance, research, production and many other areas of our society. On the one hand, opportunities such as the precision of diagnosis, the prevention of car accidents and more efficient farming are promising. On the other hand, AI carries several potential risks, including racial, gender or other discriminatory biases, infringements of our privacy and reduced governance accountability.

Amidst global competition, the European Commission aims to distinguish the EU approach with its emphasis on European values. The EU strategy must embrace opportunities, while protecting citizens from potential harmful impacts. The European approach for trustworthy artificial intelligence will propose ethical requirements for AI, following the general strategy presented in the White Paper, stakeholder consultations and the draft guidelines presented by the High-Level Expert Group on AI in 2018. The initiative will be a review of the draft guidelines, on which stakeholders will be invited to deliver input through the upcoming roadmap.

Another aspect of the EU digital strategy is the regulation of the growing volume of data. Data can give valuable insights that drive innovation in areas such as medicine, mobility and policy-making. The creation of common European data spaces will allow citizens, businesses and organizations to access non-personalized data from different Member States, pooled across different key sectors. European privacy rules (GDPR) and competition law continue to be applied. Although the roadmap has already closed, input can be delivered through the upcoming public consultation. Adoption by the College of Commissioners is expected by the end of 2020.

Visit our Digital & Tech page.

Next steps 

Commission proposals on the EU legislative initiatives mentioned above are expected by the end 2020, or in the course of 2021. As the Commission is preparing for a proposal-packed final quarter, it is key to reach out early to have your interests set on the agenda.

Want to know more about the upcoming initiatives, COVID-19, or other files that might affect your business? Please contact Dr2 Consultants to see what we can do for you.

Summer recess – what’s next?

As EU leaders agreed on a new proposal for the new Multiannual Financial Framework and the Recovery Plan on 21 July, the European Parliament was given good food for thought over its summer recess. However, the new long-term budget is not the only priority on the EU agenda. The Commission is already chewing on a series of proposals to be expected later this year and in 2021. In fact, now is the moment to deliver input on some key, planned legislative proposals, as the Commission launched a series of public consultations that are open until after summer. Let’s have a look what is next after the 2020 summer recess.

Transport: smarter and greener

The green and digital transition as the twin priorities of the Von der Leyen Commission are also reflected in the upcoming transport initiatives. To deliver the ambitious European Green Deal climate neutrality objective, the mobility sector needs a 90% emission reduction by 2050. The Strategy for Sustainable and Smart Mobility, expected towards the end of the year, will be the overarching strategy for the delivery of the twin transitions in this area. Stakeholders can contribute to the public consultation until 23 September.

Expectedly, the strategy will include the integration of alternative fuels, in line with the recently published hydrogen strategy that already outlines a pathway for the deployment until 2050 in all modes. The strategy is also complemented by the upcoming FuelEU initiatives for the maritime and aviation sector. The FuelEU Maritime initiative, aimed at boosing alternative fuels in shipping specifically, is open for feedback until 10 September. The public consultation on ReFuelEU Aviation, initially planned for the first quarter of 2020, is still to be expected ahead of the Commission proposal this year.

Sustainability: a bigger role for tax

Taxation will become a more important instrument for the Commission to align consumer choices and business investments with its climate targets. On 23 July, public consultations on both the revision of the Energy Taxation Directive and the creation of a Carbon Border Adjustment Mechanism were launched. Having been unchanged since its adoption in 2003, the Energy Taxation Directive will be subject to a thorough review. The exact changes are yet to be determined based on the consultation outcome, however, what is clear is that it will include a correction of the minimum taxation rates for electricity, gas, and coal, as well as a tax exemption reduction for fossil fuels. The proposal, which is part of the European Green Deal, is scheduled for June 2021. The consultation is open for feedback until 14 October.

In addition, the Commission proposes a Carbon Border Adjustment Mechanism to prevent ‘carbon leakage’. This ‘CO2-tax’ internalizes emissions in the price of a product, so production does not shift to countries with lower climate ambitions. The exact instrument is still to be determined, and could take the form of an EU-wide import tax or an extension of the Emmission Trading System (ETS). The latter has already seen critical responses, as this may not be in line with WTO rules. The Commission plans to scrutinize the issue and present a proposal later this year. The revenues would directly contribute to the ‘own resources’ of the EU budget for the next seven years that would help finance the new €750 billion recovery plan. Stakeholders can deliver their contribution to the plan until 28 October.

Digital: fit for the COVID-19 reality

Following its pledge to make Europe ‘fit for the digital age’, the Digital Education Action Plan and the Digital Services Act are also high on the Commission’s agenda. The Digital Education Action Plan, due to be published in September this year, will be part of the Next Generation EU program. The COVID-19 crisis has seen schools and universities close their doors and increasingly turn to remote, digital teaching. The Action Plan aims to promote high-quality and inclusive education and training in the post-COVID digital reality. Feedback on the proposal can be delivered until 4 September.

Part of the Next Generation EU financing is the digital tax element of the Digital Services Act, to be presented by the end of 2020. The Digital Services Act is an attempt to regulate online platforms when it comes to illegal goods, product safety, political advertising and offensive content. The initiative may face intense debates before its approval, as previous attempts to implement an EU-wide Digital Taxation mechanism have so far been unsuccessful. The consultation remains open until 8 September.

Next steps

The Commission’s proposals on the above initiatives are expected before the end of 2020, except for the Energy Taxation Directive which is due in June next year. From the above-mentioned public consultations, it is evident that the European Commission is gearing up for a busy end-of-year period. Early (proactive) action is desirable for stakeholders that aim to represent their interests on these files, which will also be closely examined by the European Parliament and Council of the EU in 2021 (and later).

Want to know more about the upcoming initiatives, COVID-19, or other files that might affect your business? Please contact Dr2 Consultants to see what we can do for you.

The novelties of the new EU budget

On Tuesday, after almost five days of negotiations, the 27 Member States of the EU reached an agreement on a €1,074 trillion Multiannual Financial Framework (MFF), as well as a €750 billion Recovery Fund (Next Generation EU, or ‘NGEU’) for the period of 2021-2027.

The MFF sets out the EU budget for the coming seven years, setting funding priorities and dividing money amongst the different instruments. The long-term budget will, due to the COVID-19 outbreak, be accompanied by the so-called Recovery Fund called ‘Next Generation EU’. The NGEU will in part add additional funds to the existing European funding instruments, but also provide direct loans and grants to those Member States hardest hit by the pandemic.

Member States must leave behind their reservations on taxes and common debts

As was the case in previous EU budgets, Member States contribute a percentage of their gross national income (GNI) to the MFF. The funding of NGEU will, however, be unprecedented in the history of the EU, as it will be funded by the Union as a whole assuming loans on the capital markets. The EU-27 will borrow, through the European Commission, money from the capital markets. This means low interest rates, as all 27 Member States guarantee the loan.

Additionally, the loans will be repaid in part by raising the ‘own resources’ of the EU. These own resources will range from income from an EU-wide plastics tax to the introduction of a digital or financial transaction tax, a novelty in European tax policy where Member States traditionally firmly hold the reins.

Digital high on the agenda, or not?

The digital transition will remain one of the focal points of the EU budget. As such, important funding instruments such as Horizon Europe and Digital Europe are set to receive more funding compared to the current (2014-2020) budget, but less compared to the Commission proposal from May this year. The Digital Europe program, which finances the EU’s cyber defense and artificial intelligence development, will receive €6.80 billion during the coming seven years, a major increase compared to the millions it received in the previous financial framework. However, the proposed fund by the European Council is lower than the program was set to receive in the Commission proposal. Member States aim to streamline existing instruments into the InvestEU program. However, the new agreement downsizes the InvestEU budget to €8.40 billion compared to earlier proposals from the European Commission.

While the digital transition remains high on the agenda, the new EU budget does not draw exact parallels to the EU’s ambitiousness. While the current foreseen budget is higher compared to the current MFF, it lacks the firepower foreseen in the Commission proposal from May to push the EU to become a frontrunner in this area.

Sustainability as a main catalyst

The European Green Deal will also remain one of the main pillars of the EU budget in the European Council’s agreement. According to the new proposal, at least 30% of the total EU expenditure will have to contribute to climate objectives. The question remains exactly how the institutions will enforce the climate funding objective since the European Council remains very vague on the subject, a worry which is shared by the European Parliament.

In this context, the European Council invites the Commission to put forwards proposals for:

  • A carbon border adjustment mechanism, which will prevent the transfer of the production of goods to non-EU countries who happen to have less strict emission rules and ambitions;
  • A levy on non-recycled plastic waste, to be introduced in January 2021, of €0.80 per kilogram to discourage the generation of non-recycled plastic waste;
  • The revision of the Emission Trading System (ETS), to include a smaller amount of emission allowances in order to further boost carbon cuts and a possible extension to the maritime sectors.

Contrarily, the budget suffered several significant cuts during the negotiations in the sustainability policy area compared to the original proposal. For example, the flagship Just Transition Fund, intended to support carbon-intensive regions in the transition to a sustainable economy model, was heavily downsized from €40 billion to €17.5 billion.

Next steps

In order have the new EU budget operational by 1 January 2021, both the European Parliament as well as the national parliaments of the Member States need to approve the European Council’s proposal. However, both have voiced their skepticism towards the compromise that was reached. In the Member States, especially the national parliaments of the Netherlands, Austria, Denmark, Sweden and Finland are expected to take a critical stance. Starting September, we expect to have more clarity on the shape of next year’s budget. In an extraordinary plenary session on 23 July, the European Parliament passed a resolution voicing criticism of the EU budget deal in its current form.

Want to know more about the EU budget negotiations, COVID-19, or other dossiers that might affect your business? Please contact Dr2 Consultants to see what we can do for you.

All eyes on Berlin as Germany starts the Council Presidency

On 1 July, Germany took over the Presidency of the Council of the EU from Croatia, for the second half of 2020, which is already dubbed the ‘Corona-Presidency’. The upcoming six months will bring historic challenges as the management of the recovery from the current health crisis will coincide with some fundamental political choices in the EU, and the outcome will determine the future direction of European integration.

As one of the most powerful Member States of the EU takes over at this crucial moment in time, it will have to play multiple roles at the same time.

Crisis management

First and foremost, the German Presidency will have to play its role as ‘crisis manager’ in the context of the COVID-19 pandemic. Based on epidemiological developments and assessments, the German Presidency will seek to increase coordination in Europe to gradually return to a fully functioning Schengen Area. Furthermore, Germany is expected to lead the politically complicated negotiations on potentially expanding the list of third countries from which travel to the EU is allowed. These priorities will be central during the whole German Presidency mandate.

EU budget negotiations

Germany will also take an active part in managing the negotiations on the new Multiannual Financial Framework (MFF) 2021-2027 and the Next Generation EU Recovery Fund during the summer months. The main challenge will be to find common ground between the hard-hit Member States, such as Italy, Spain and France on the one hand, and the ‘frugal four’ – Austria, Denmark, the Netherlands and Sweden – on the other hand, with the latter group being against grants as part of the Recovery Fund. Germany will be directly responsible for the legislative work on the different sector programs within the MFF (e.g. Horizon Europe, Just Transition Fund and InvestEU) and the Recovery Fund, and will lead the trilogue negotiations with the European Parliament on the financial framework, once there is political agreement on the general features of the future budget. France and Germany expressed their ambition for a quick agreement by end of July, as European leaders are set to meet face-to-face on 17 and 18 July.

Brexit negotiations

With the Brexit transition period ending on the 31 December 2020 and the United Kingdom declining the opportunity to extend this deadline, the German Presidency will have yet another prospective challenge. Once an agreement has been reached at European Commission level, the Member States will have to give their consent. German EU ambassador Michael Clauss stressed that Germany will be exclusively focusing on “brokering agreements between the 27”.

The German Presidency program expresses the Presidency’s ambition for a comprehensive partnership between the EU and the UK. However, it also reads that the Member States will not accept an agreement that would distort fair competition within the Single Market. If there is an acceptable agreement before the end of the year, the German Presidency is expected to align Member States in its role as ‘Brexit-Broker’.

Work program

The work program sets out, in broad terms, the policy priorities for the second half of 2020. In general, Germany will prioritize the digital and green transitions throughout all of its activities. The German Presidency is committed to an innovative Europe based on three pillars: expanding the EU’s digital sovereignty, enhancing competitiveness and a sustainable and stable financial architecture. It will also ensure that the Green Deal’s implementation will contribute to the recovery from the COVID-19 pandemic in Europe.

The German Presidency will have an extremely challenging task of fostering European unity in the budget negotiations in the face of existing difficulties such as the COVID-19 crisis and Brexit. For more information on the German Presidency’s sector-specific priorities, please read our analyses of the German priorities in the fields of digital & tech, sustainability and transport:

Climate ambitions of Flanders and the European Green Deal

On 21 June, in an interview on Flemish news television VRT, First Executive Vice-President of the European Commission, Frans Timmermans, called on Flanders to be more ambitious in the fight against climate neutrality. However, he also said, he was optimistic that Flanders would do its part being a wealthy region, which already has industrial pioneers on board for the European objectives. But what exactly are the Flemish climate objectives, and how are they aligned with the EU plans?

Greenhouse gas emissions reduction by 35%

The Flemish climate policy plan sets out the guidelines for the climate policy for the period 2021-2030. In line with the objective imposed by the EU for Belgium, the plan puts forward the objective to reduce greenhouse gas emissions in Flanders by 35% by 2030 compared to 2005. However, the EU is setting this goal at a reduction level of 50-55% by 2030. The required effort is identified per sector and, where necessary, the greenhouse gas reduction target is converted into sub-targets. In addition, the plan also contains the main measures required to achieve this objective and puts Flanders on the path towards a low-carbon future.

Energy efficiency

Another priority for Flanders is to increase energy efficiency for all sectors. The three largest energy consumption sectors in Flanders are industry, residential and transport sectors. In addition to improving energy efficiency, simultaneous efforts must be made to achieve the strong development of renewable energy. Energy services and technologies will be digitally controlled and intelligently linked. However, this is a huge challenge for Flanders. In the period 2005-2018, emissions decreased by only 5%. The Flemish Government, therefore, intends to focus more on increasing innovation, the persistence of circular economy, parallel federal policies and additional EU instruments (legislative and financial).

Transforming buildings will also play an important role in increasing the energy efficiency in densely populated Flanders. The climate policy plan encourages the renovation of residential buildings, rebuilding after demolition and making the heating installation more sustainable. This is in line with the EU’s ‘Renovation Wave’ initiative, part of the European Green Deal, with the goal to double the annual renovation rate of the existing building stock. The European Commission will publish communication on this in September 2020.

How can Dr2 Consultants advise you

The EU’s ambition is to lead the way towards a more sustainable future. Contrary to the fear that the COVID-19 pandemic would jeopardize the green agenda for the coming years, the Commission has shown its commitment to accelerate the green transition during the recovery phase. This green transition will pose challenges but will also provide opportunities to businesses, like front runners who can introduce their new and innovative approaches in Flanders. With the Dr2 Consultants’ European Green Deal Impact Scan, we will provide you with a comprehensive analysis of how the European Green Deal will affect your business, identifying the opportunities and challenges and highlighting moments to positively influence the policies and legislation. In addition, we are able to provide you with high-end intelligence on the developments in Flanders that allows for a comprehensive overview of relevant files for your business.

From Green Deal to Green Recovery

While the COVID-19 crisis has seen unprecedented challenges for the European transport sector, it also demonstrated the crucial role transport plays to ensure an uninterrupted supply of goods and services across Europe. Although the recovery of the sector is of vital importance of Europe’s economy, the recovery from the crisis also provides a momentum for the industry to act on the ambition of decarbonization and reaching climate neutrality by 2050. As put forward in the Commission’s EU Recovery Plan, the COVID-19 recovery phase should be used to pave the way towards not only a resilient and reliable transport sector, but also a sustainable one that is at the heart of the European Green Deal.

Following the publication of the Commission’s plan for recovery – dubbed as ‘Next Generation EU’ – as well as its updated Work Program for 2020, we have a clearer picture how the greening of the sector will unfold in the coming years. Dr2 Consultants’ transport team presents four take-aways for sustainable transport that will dominate the EU’s policy agenda in the years to come.

1. Alternative fuels, sustainable vehicles

Alternative fuels are a key priority for the Commission to cut emissions and create jobs. The EU’s executive arm aims to accelerate the production of low-emission fuels and the deployment of sustainable vehicles and vessels. In order to finance this, public investment should come with a commitment from the industry to invest in cleaner and more sustainable mobility.

The roadmaps for the further deployment of different fuel types are expected to be part of the highly-anticipated FuelEU proposals – to be published later this year – that will aim at increasing the use of alternative fuels in the maritime and aviation sector. Furthermore, in early 2021, the Commission will put forward the revision of the Alternative Fuels Infrastructure Directive, which will ensure the development of the necessary infrastructure across Member States to stimulate the uptake of sustainable fuels for all transport modes. 

2. The convergence of the energy and mobility systems

In order to decarbonize the transport sector, no stone is currently left unturned. Although electrification seems to be the most viable option on the short term, hydrogen is dubbed as the energy source for the future. The Commission’s flagship instrument for research and innovation, Horizon Europe, will be instrumental to kick-start the clean hydrogen revolution. The Commission has increased its budget in the new Multiannual Financial Framework (MFF) with €13.5 billion, bringing Horizon Europe’s new budget to a total of €94.4 billion.

Later this month, the Commission will launch the Clean Hydrogen Alliance to stimulate the upscaling of clean hydrogen production in Europe. Also, the work of the European Battery Alliance will be accelerated. On 24 June, the Hydrogen Strategy is expected to be published.

3. Cities at the heart of sustainable mobility

With over 70% of EU citizens currently living in urban areas, achieving sustainability in cities across Europe is one of the main challenges of the recovery period. As a direct result of the COVID-19 crisis, noise pollution and air quality figures have dropped to an unprecedented level. Moreover, cities reinvented the way citizens move around, e.g. by giving priorities to pedestrians, introducing speed limits for vehicles and implementing new cycling lanes. The shift towards smart and more livable cities, therefore, places a big responsibility on the transport sector.

The Commission aims to increase the support for zero and low-emission mobility in cities by investing significantly in clean urban mobility. Funding calls in the Connecting Europe Facility (CEF) and InvestEU programs will focus on clean fleet renewals by cities, the deployment of charging points and mobility-as-a-service solutions.

4. Taxation, anyone?

In the Next Generation EU, the Commission proposes to generate additional own resources by new taxes. Although the Commission still must draw up the specifics, it floated the option of extending the EU’s Emissions Trading System (ETS) to the maritime sector, thereby raising up to €10 billion annually that will feed into the EU’s budget. In addition, the so-called carbon border adjustment mechanism is likely to be introduced, putting a carbon levy on non-EU imports.

Raising these kinds of ‘European’ taxes is unprecedented. As Member States have diverging views on this matter, it remains to be seen whether we can expect a breakthrough on these new own resources any time soon.

Next steps

The Commission aims to have the new MFF and recovery fund operational by 1 January 2021. EU leaders are expected to start the negotiations on the budget proposal during the European Council Summit on 19 June and will have multiple rounds of very difficult talks until a compromise is made. This ultimately means that the budget as proposed now for transport-related funding instruments can still change. The budget negotiations are expected to accelerate when Germany takes over the rotating six-months Presidency of the Council of the EU on 1 July 2020.

Europe’s green recovery from the COVID-19 pandemic

On 27 May, the European Commission’s published its historic proposal for the ‘Next Generation EU’ recovery fund worth €750 billion, topping the renewed proposal for a €1.1 trillion Multiannual Financial Framework (MFF) 2021-2027. This proposal for unprecedented investment in the European economy is set to dominate the political agenda of the European institutions for the upcoming months. However, as the European Green Deal was put on the top of the agenda only recently, the current situation begs the question how Green Deal initiatives are incorporated into the Commission’s recovery plans.

Main takeaways                

  •  The European Green Deal will be central in Next Generation EU, public recovery investments should follow EU energy and climate priorities;
  • Additional funding of €30 billion for the Just Transition Fund, bringing the total up to €40 billion;
  • The CAP budget will fall by around €34 billion, but farmers will receive funds for the green transition;
  • The Commission will increase its own resources via an extension of the Emission Trading System (ETS) to the maritime and aviation sectors and a carbon border adjustment mechanism.

Accelerated investments in the green transition

Within the recovery fund, the Commission proposes to set up a Solvency Support Instrument to mobilize private investment and thereby kick-start the economy. The Solvency Support Instrument will have a budget of €31 billion and will unlock up to €300 billion in support that will be linked to the green and digital ambitions of the EU. Apart from that, a new Strategic Investment Facility will be built into InvestEU, generating investment up to €150 billion in boosting the resilience of strategic sectors, notably linked to the green and digital transition.

To kick-start the green transition in times of crisis, the European Commission will come up with a Communication to start a European ‘renovation wave’ in the third quarter of 2020. This massive renovation wave of buildings will improve energy efficiency and promote the circular economy, whilst creating local jobs in the coming years.

On top of the renovation wave, the Commission will focus on rolling out renewable energy projects, especially wind and solar. To this end, the Commission will publish an offshore renewable energy strategy later this year. Moreover, the EU will reinforce its efforts to develop a clean hydrogen economy in Europe, something that is currently mainly promoted by Germany and the Netherlands.

When it comes to clean transport and logistics, the Commission aims to accelerate the production and deployment of sustainable vehicles and vessels as well as alternative fuels. This ambition includes the installation of one million charging points for electric vehicles and a boost for rail travel and clean mobility in European cities and regions.

The Next Generation EU recovery fund also adds €30 billion to the Just Transition Mechanism, bringing its allocated budget 2021-2027 up to €40 billion. As part of the Just Transition Mechanism, the Just Transition Fund will be reinforced to support re-skilling and to help businesses create new economic opportunities in the regions of the EU that are most affected by the green transition.

EU ‘green’ levies to finance recovery

How will this sustainable recovery be financed? The Next Generation EU will raise money by temporarily lifting the own resources ceiling to 2.00% of EU Gross National Income, allowing the Commission to use its strong credit rating to borrow €750 billion on the financial markets. To repay these loans in a fair and shared way, the Commission proposes a number of new own resources. The Commission will for example increase its own resources via an extension of the Emission Trading System (ETS) to the maritime and aviation sectors and a carbon border adjustment mechanism.

Next steps

German chancellor Angela Merkel, shortly before the start of the German Presidency of the Council of the EU, expressed the ambition to reach a compromise on the future EU budget and recovery fund by fall 2020. The proposal of the Commission, as well as the plans put forward by the Franco-German axis and the Frugal Four (Austria, Denmark, the Netherlands and Sweden), have kept the green transition high on the agenda and one can therefore reasonably expect the EU’s great leap forward in green technologies to materialize in the upcoming years.