No. 36 | 02 June 2022

EU ENERGY CRISIS

EU SANCTIONS ON RUSSIA AND THE IMPACT ON THE FIT FOR 55 POLICIES

CZECH PRESIDENCY AIMS TO FINALIZE NEGOTIATIONS ON FIT FOR 55 FILES AND REACH SHORT-TERM REPOWEREU GOALS: On 1 June, Dr2 Consultants organized a webinar with Mr. Petr Binhack, Chairman of the Energy Working Group for the Czech Presidency of the Council of the EU. During the webinar, Mr. Binhack presented the energy priorities of the Czech Council Presidency’s, which will start on 1 July. The Czech Presidency will aim to reach the short-term goals set by the REPowerEU plan and finalize negotiations on several Fit for 55 files. In line with the goals of the REPowerEU plan to reduce the import of Russian gas by two thirds before the end of 2022, energy security will be a priority for the Czech Presidency, together with avoiding energy poverty. The preservation of the competitiveness of the European industry will be another objective. On the Fit for 55 package, the Czech Presidency aims to close several files before the end of the year, namely the Renewable Energy Directive (REDIII) and Energy Efficiency Directive (EED). This will build on the General Approaches of the Council, that are expected to be reached during the next Energy Council meeting on 27 June. Furthermore, the Czech Presidency wants to kick off the discussion on a framework for the hydrogen market, which is necessary for the upscale of hydrogen usage in the EU industry. During its Presidency, the Czech Republic will organize an informal Transport, Telecommunications and Energy Council (TTE) on the topic of the gas market on 11 and 12 October in Prague.

RUSSIA CUTS GAS SUPPLY TO THE NETHERLANDS, GERMANY AND DENMARK: The Russian state-owned gas company Gazprom cut gas supply to the Netherlands as of 31 May in response to the refusal from the Dutch wholesaler GasTerra to pay supplies in rubles. GasTerra decided to not comply with Russian demand for fear it could violate the sanctions imposed on Russia by the EU. Dutch Climate and Energy Minister Rob Jetten supported the Dutch company’s decision and underlined that the country would not suffer gas disruption as GasTerra purchased extra supplies in advance. In addition, on 1 June, Gazprom also interrupted gas flows to Denmark’s Orsted and to Germany’s Shell Energy because the two companies did not pay gas deliveries in rubles. Previously, Russia had cut gas supplies to Finland, Bulgaria, and Poland for the same reason.

EUROPEAN COUNCIL AGREES ON THE SIXTH SANCTION PACKAGE: On 30 May, the European Council reached an agreement on the sixth sanction package presented by the European Commission early this month, which includes sanctions on Russian oil imports. The compromise reached by the EU leaders immediately covers more than 2/3 of oil imports from Russia and will cut around 90% of oil imports by the end of the year. Nevertheless, this is a partial oil and petroleum embargo, as Member States agreed on a temporary exemption for crude oil delivered by pipeline. The temporary exemption does not have an expiration date. Hungary, which was one of the strong supporters for the pipeline exemption, secured also an emergency provision to ensure security of supply in case of sudden interruptions of supply. Other measures proposed as part of the sixth sanctions package include the exclusion of the largest Russian bank Sberbank from the SWIFT international payment system, banning three additional Russian state-owned broadcasters and listing individuals who have committed war crimes in Ukraine. The Council of the EU formally endorsed the package on 1 June.

EUROPEAN COMMISSION SETS UP EU ENERGY PLATFORM TASK FORCE: On 25 May, the European Commission announced the establishment of the EU Energy Platform Task Force. The new Task Force will help deliver on the objective of the REPowerEU plan presented on 18 May of reducing the EU’s dependence on Russian fossil fuels, by enabling Member States and neighboring countries to have access to alternative energy supplies at affordable prices in the coming years. The Task Force will work towards demand aggregation, coordination of capacity and negotiation of energy supplies, while also providing support for the Regional Task Forces of Member States and neighboring countries. Furthermore, it will manage outreach to international partners. The new Task Force will consist of three units, dealing with global demand and international negotiations; relations with the Member States and the neighborhood; and international relations. The Task Force will be under the supervision of the newly appointed Deputy Director-General in the Directorate-General for Energy (DG ENER), Mr. Matthew Baldwin. Mr. Baldwin was previously Deputy Director-General with the Directorate-General for Mobility and Transport (DG MOVE).

Highlights of the week

KEY MEPS HOLD PRESS CONFERENCE ON FIT FOR 55: On 1 June, ahead of the June Parliamentary (6-9 June) Plenary session, during which the European Parliament is expected to adopt its positions on several Fit for 55 files, MEP Pascal Canfin (Renew Europe, France), Chair of the Environment (ENVI) Committee, held a press conference together with the Rapporteurs on the EU Emissions Trading System (EU ETS), the Social Climate Fund, the Carbon Border Adjustment Mechanism (CBAM), the Effort Sharing Regulation, the Land Use, Land Use Change and Forestry Regulation (LULUCF) and the CO2 standards for cars and vans. MEP Canfin confirmed the existence of a wide compromise on the majority of files on the agenda, ensuring their adoption. Indeed, political groups have successfully reached a compromise on key proposals such as the creation of a CBAM and the revision of the EU ETS, including on its extension to road transport and buildings. These compromise texts will not be reopened and will thus be voted as such. However, the ENVI Chair noted that uncertainties remain regarding the CO2 standards for cars and vans. While there is a consensus between political groups on the 2035 deadline for the end of sales of non-zero emission cars, an opposition emerged between Renew Europe, the S&D, the Greens/EFA and the Left that support the Commission’s proposal of having 100% of new cars sold in 2035 and later be zero-emissions, and the EPP and ID that support a 90% target.

COUNCIL PUBLISHES GENERAL APPROACH ON REFUELEU AVIATION: On 1 June, the Council of the EU published its draft General Approach on REFuelEU Aviation. The General Approach takes into account the main issues raised during negotiations between Member States, namely the definition of eligible fuels, the possibility for Member States to introduce an additional minimum share of synthetic fuel at some of their airports and the exemptions from the limitation of fuel tankering. As regard the definition of sustainable aviation fuels (SAF), the Council considers SAF biofuels, which comply with sustainability criteria in the Renewable Energy Directive (except those produced from food and feed crops), synthetic aviation fuels and recycled carbon aviation fuels. As regard Article 4 and the share of SAFs in EU airports, the Council adds some flexibility for Member States compared to the European Commission’s proposal. In particular, biofuels should account for a maximum of 3% of fuels supplied by each supplier to EU airports. Moreover, in case the minimum share of SAF has been reached in average, a Member States could decide to apply a higher share of SAF for the following reporting period until 2034. The higher share should not exceed 1% until 2029 and 3% until 2034. On the refueling obligations, the General Approach includes the possibility for requesting exemptions for route of less than 1200 km in case of operational difficulties in refueling the aircrafts with SAFs. Finally, the Council proposes to use revenues generated from the fines for non-compliance with the Regulation should be used to support research and innovation in SAF. The General Approach will be adopted today, 2 June, during the Transport Council meeting.

COUNCIL PUBLISHES GENERAL APPROACH ON ALTERNATIVE FUELS INFRASTRUCTURE REGULATION: On 25 May, the Council of the EU presented its draft General Approach on the Alternative Fuels Infrastructure Regulation (AFIR). The Council amends the Commission proposal by introducing flexibilities concerning the total power output of charging stations for light vehicles located along the TEN-T network. This is to take into account different situations in terms of traffic level. In addition, the Council has added a possibility to increase the maximum distance between dedicated charging stations for light vehicles along sections of the TEN-T network with very low traffic. With regards to electric heavy-duty vehicles, considering that the level of market development is less advanced than for light vehicles, the Council has chosen to adopt a progressive approach for charging station deployment, encouraging a corridor logic. The objective set by the Council is to start the deployment of charging infrastructure in 2025, and gradually cover all the roads included in the TEN-T network by 2030. Similar flexibilities than for light vehicles with regards to total power output of charging stations and distance between them along sections of TEN-T network with low traffic are also introduced. With regard to the refueling of road vehicles with hydrogen, it was decided to focus the requirements on the deployment of hydrogen refueling infrastructure along the TEN-T core network only, with particular attention for urban nodes and multimodal hubs. The General Approach will be adopted today, 2 June, during the Transport Council meeting.

COUNCIL PUBLISHES DRAFT GENERAL APPROACH ON FUELEU MARITIME: On 24 May, the Council of the EU published its draft General Approach on the FuelEU Maritime proposal. The Council revises the scope of the requirements regarding shore power supplies to allow Member States to extend obligations existing for ships at berth to ships anchored in ports. Additionally, provisions relating to the roles of companies, auditors and public authorities, as well as monitoring, reporting and auditing procedures, have been clarified and strengthened with the objective of ensuring a stronger governance system. The Council also removes the earmarking of revenues generated by fines for non-compliance to the Innovation Fund. Instead, the Council plans for these revenues to be distributed between Member States, although they should still go towards support for the energy transition of the maritime sector. The General Approach will be adopted today, 2 June, by the Transport Council.

ENVIRONMENT COMMITTEE PUBLISHES OPINION ON RENEWABLE ENERGY DIRECTIVE: On 24 May, the Environment (ENVI) Committee published Rapporteur Nils Torvalds’ opinion on the revision of the Renewable Energy Directive (REDIII), which was adopted on 17 May. ENVI MEPs agreed to raise the renewable energy target to 45% by 2030, instead of the 40% proposed by the Commission. To reach this target, the opinion calls for a stable and predictable regulatory investment framework for renewable energies in general, and not only renewable hydrogen. Additionally, in coherence with the Biodiversity Strategy, the opinion proposes to limit support for the use of primary forest biomass, whilst recognizing the need of continued support for the use of secondary forest biomass. On carbon sinks, ENVI MEPs call for the introduction of National Bioenergy Plans. Furthermore, the opinion introduces the obligation for the European Commission to adopt a dedicated legislative proposal establishing maximal values for the use of forest biomass for energy purposes at Member State level.

ENVIRONMENT COMMITTEE PUBLISHES REPORT ON EFFORT SHARING REGULATION: On 24 May, the ENVI Committee published its report on the Effort Sharing Regulation, which was adopted on 17 May. The report calls for strengthened convergence between Member States’ national targets. To this end, the report makes the national targets as strict as possible. Additionally, Rapporteur Jessica Pölfjard (EPP, Sweden) removed or restricted several potential loopholes, notably when it comes to the ability of Member States to borrow emissions allowances from their future emissions budget, as well as on the ability for Member States to trade allowances. The report also adds a requirement that any proceeds by a Member State from emissions trading within the ESR must be allocated to climate action. MEPs also agreed to repeal the provisions introducing an additional safety reserve composed of surplus removals generated by Member States in excess of their targets in the LULUCF Regulation.

What’s next?

Today, 2 June, the Transport Council is due to adopt the Council position on FuelEU Maritime Initiative, RefuelEU Aviation Initiative, and the Alternative Fuels Infrastructure Regulation.

On 7 June, the European Parliament Plenary will hold a joint debate on the Fit for 55, focusing on the CBAM, the EU ETS, the EU ETS for aviation, the Effort Sharing Regulation, the LULUCF and the CO2 emissions performance standards for cars and vans. Following the debate, MEPs will have to vote on the European Parliament’s position on the files.