Welcome to the new edition of Dr2 Consultants’ EU Energy and Climate Policy Update. In this weekly update, Dr2 Consultants provides you with the latest insights on the ‘Fit for 55’ interinstitutional negotiations as well as updates on the energy transition, the energy crisis and the EU’s response, including other relevant news on the EU’s climate and emissions reduction policies.
Energy policy updates
INDUSTRY MEPS DISCUSS TRILOGUE DEVELOPMENTS ON RENEWABLE ENERGY DIRECTIVE AND ENERGY EFFICIENCY DIRECTIVE: On 29 November, the Rapporteurs on Renewable Energy Directive (RED III) and Energy Efficiency Directive (EED) presented the latest developments on the interinstitutional discussion before the Industry, Research and Energy (ITRE) Committee. On RED III, Rapporteur MEP Markus Pieper (EPP, Germany) informed MEPs about the modest steps made towards an agreement, notably on systemic integration and training for workers in renewable energy. Moreover, co-legislators decided that the European Commission will have to present a new delegated act in line with the MEPs’ vote to set pragmatic criteria for green hydrogen. On EED, Rapporteur MEP Niels Fuglsang (S&D, Denmark) shared that no agreement has been reached on the level of ambition. However, some progress was made on the projects which will be covered by energy efficiency first principle. The next Trilogue meetings have not been scheduled yet.
FRANCE AND IRELAND TAKE NEXT STEP IN CONSTRUCTING CELTIC INTERCONNECTOR: On 25 November, France and Ireland signed a contract on the development of the Celtic Interconnector, an underwater electricity connection linking the two EU countries. This EU Project of Common Interest – key cross border infrastructure projects that link the energy systems of EU countries – is supposed to be finished by 2027, with the electricity link having an approximate length of 600 km and a capacity of 700 MW, enough to power 450,000 households. In 2019, the project was awarded a Connecting Europe Facility (CEF) grant worth €530 million to support construction works, one of the biggest CEF grants for works.
COUNCIL NOTE ON THE REVISION OF THE ENERGY TAXATION DIRECTIVE: On 25 November, the Czech Presidency of the Council of the EU published a note on the Revision of the Energy Taxation Directive (ETD), containing a state of play in view of the Economic and Financial Affairs Council on 6 December. The Czech Presidency asks the ministers to continue working on the ETD, ensuring the Member States are able to comply with the long-term EU environmental targets, while, at the same time, they should have sufficient flexibility. Indeed, the revision of the ETD should take into account their national tax systems, while ensuring the smooth functioning of the internal market. Furthermore, the Czech Presidency proposes that future work on the ETD should seek to reach a compromise striking a balance between the EU minimum levels of taxation and the length of transitional periods to accommodate the Member States’ economic, geopolitical, geographical and social circumstances, in particular in relation to the most sensitive sectors.
EU ENERGY CRISIS UPDATE
LAST ATTEMPT ON EU TALKS OVER RUSSIAN OIL PRICE CAP: On 28 November, EU Member States resumed talks to secure an agreement for a price cap on Russian oil, with deep splits among the countries on where such a level should be set to inflict maximum pain on Russia while causing minimum harm to Member States. Under pressure from the US and the G7, the measure is expected to come into force on 5 December, to coincide with an EU ban on seaborne imports of Russian crude oil and a similar UK ban on Russian crude oil. Poland and the Baltic states are pushing for a more severe, lower cap, while Greece, Malta and Cyprus are holding out for either a higher price or compensation to protect their shipping industries, according to several EU diplomats. The European Commission presented EU ambassadors with a proposed cap of between $65-$70 per barrel. However, that’s around the level that Russian Urals crude oil currently trades at. U.S. Treasury Secretary Janet Yellen has, in turn, suggested setting the cap at $60 per barrel.
GERMANY AND FRANCE REACH AGREEMENT ON HYDROGEN POLICY: On 25 November, France and Germany published a “political declaration”, affirming Franco-German solidarity on a range of energy issues, including hydrogen regulation. After the publication of the political declaration, the Czech Presidency of the Council of the EU put forward a compromise proposal for the Hydrogen and Decarbonized Gas Package. On the one hand, the Presidency raises the possibility to use low-carbon hydrogen and low-carbon fuels in decarbonization objectives, reflecting France’s wish to count hydrogen made from nuclear towards its climate objectives. On the other hand, the compromise text introduces a new provision excluding low-carbon hydrogen from being labelled as a “renewable” energy source, which reflects the German key interest.
COMMISSION SETS UP INTERMEDIATE GAS STORAGE FILLING TARGETS FOR 2023: On 24 November, the European Commission set up intermediate gas storage filling targets that Member States should meet next year in order to reach the 90% gas storage target by 1 November 2023. These targets are based on the proposals made by Member States in their storage plans, submitted in September, the filling rates of the preceding five years and the Commission’s assessment of the general security of supply situation. Foreseen under the Gas Storage Regulation, agreed in June 2022, the announced implementing regulation defines the intermediate targets for 1 February, 1 May, 1 July and 1 September 2023 for those Member States with underground storage on their territory and connected to their market area.
Climate policy updates
EUROPEAN COMMISSION PRESENTS NEW RULES ON CARBON REMOVALS CERTIFICATIONS: On 30 November, the European Commission published the Regulation on an EU certification for carbon removals. The proposal is the first EU-wide voluntary framework that would reliably certify high-quality carbon removals. To reach net zero emissions by 2050, the Regulation aims to boost carbon removals by ensuring they are genuine, long-lasting and monitored, using a credible and transparent assessment to give certainty to public bodies and private operators. The proposal establishes four QU.A.L.ITY criteria (quantification, additionality, long-term storage and sustainability) setting out rules for certification processes and looks at three methods of carbon removal and storage: permanent removal, carbon stored in long-lasting products and carbon farming. Following the publication, the European Parliament and the Council of the EU will begin discussions separately.
CO-LEGISLATORS REACH AGREEMENT ON THE INCLUSION OF THE MARITIME SECTOR IN EU EMISSIONS TRADING SYSTEM: On 29 November, the European Parliament, the Council of the EU and the European Commission agreed preliminarily on the conditions on how to include maritime emissions in the EU Emissions Trading System (ETS). On the gradual phase in of the EU ETS, co-legislators agreed shipping companies will have to surrender allowances that cover 40% of their emissions in 2024, 70% in 2025 and 100% in 2026. Moreover, the agreement includes in the scope offshore vessels bigger than 5000 gross tonnage, CO2, methane and N2O emissions, and trips within the EU as well as trips from EU port to third countries and for third countries to EU port (50%). However, co-legislators are still far from reaching an agreement on the inclusion of buildings and road transport in the EU ETS. The next Trilogue meeting on the ETS is scheduled for 16-17 December where negotiators will try to reach an agreement on the outstanding issues.
On 5 December, the Czech Presidency will inform ministers in the Transport Council on Trilogue’s developments on RefuelEU Aviation and FuelEU Maritime as well as Alternative Fuel Infrastructure Regulation.
On 13 December, the energy ministers will meet for another extraordinary Energy Council meeting to try to reach a deal on the gas price cap. Should ministers reach an agreement, this will be formally adopted during the European Council on 15 and 16 December.
Between 12 and 15 December, the MEPs will meet in Strasbourg for the Plenary sitting. On 13 December, the European Parliament will debate the RePowerEU’s amendments to EED, RED III and EPBD as regards permitting procedures.
On 16-17 December, co-legislators will meet to discuss the EU ETS and CBAM, trying to reach a final compromise.
What’s the word on Twitter?
Last night we reached a final agreement on the integration of the maritime sector into the European carbon market. Container ships will finally pay a fair price for their emissions, which will accelerate the decarbonization of the sector. #climate #EUGreendeal
— Pascal Canfin (@pcanfin) November 30, 2022
#EUETS: Bye, bye bunker fuels. 🚢Ships must use greener fuels – that’s good for climate and for air quality especially for cities close to rivers and coast. Not only trips inside the EU but all international trips from and to EU ports are covered (50%)👉https://t.co/EE2g7hdamj
— Peter Liese MEP (@peterliese) November 30, 2022
Welcome to the first-ever EU Tax Symposium!
Happy to talk how taxation supports 🇪🇺 energy autonomy.
It’s important to ensure that final energy price ⚡️reflects every cost, not just the financial one. This also means the cost to our environment & future generations.#taxmix2050 pic.twitter.com/Hfqrwp0CoL
— Kadri Simson (@KadriSimson) November 28, 2022
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