UPDATE ON FUELEU AND AFIR NEGOTIATIONS: On 2 March, the Rapporteurs updated the European Parliament's Committee on Transport and Tourism (TRAN) on the interinstitutional negotiations between the EU institutions on ongoing files. Regarding the negotiations on the use of renewable and low-carbon fuels in maritime transport (FuelEU Maritime), Rapporteur Jörgen Warborn (EPP, Sweden) informed the TRAN Committee that the negotiations are still ongoing. Despite having booked progress, co-legislators remain to have different views on Article 4 regarding Renewable Fuels of Non-Biological Origin (RFNBOs) and sub-quotas. Regarding the negotiations on the Alternative Fuels Infrastructure Regulation (AFIR), MEP Isabel García Muñoz (S&D, Spain) reported that the negotiations were stalling as co-legislators could not move forward on several articles (e.g., targets for road transport and onshore power supply). Furthermore, on 6 March, the next Trilogue on the revision of the Renewable Energy Directive (RED III) took place. The next Trilogue meeting regarding FuelEU Maritime should take place on 22 March, while the next AFIR Trilogue is scheduled for 27 March.

EU ENERGY CRISIS UPDATE

COMMISSION STEERS CLEAR OF MAJOR CHANGES IN ELECTRICITY MARKET REFORM: On 7 March, a draft version of the reform of the EU electricity market, to be presented by the European Commission on 16 March, was leaked. The reform consists of two pieces of legislation: one aiming to improve the design of the EU electricity market and another aiming to improve protection against market manipulation. The draft reform steers clearer of a more drastic redesign of the market, which some Member States had called for. Instead, the Commission suggests more minor changes to push countries towards more predictable and fixed power contracts. For example, Member States want to support new investments in wind, solar, geothermal, hydropower or nuclear, they should use a two-way contract for difference (CfD) or an equivalent. This should help reduce the volatility of consumers’ bills. The idea is that consumers should have a choice between long-term contracts with fixed prices and more volatile contracts with dynamic prices if they want to benefit from price fluctuations.

NET-ZERO INDUSTRY ACT TO PROPOSE 40% OF CLEAN TECHNOLOGIES TO BE PRODUCED IN THE EU BY 2030: On 6 March, a draft version of the Net-Zero Industry Act, to be presented by the European Commission on 14 March, was leaked. As part of the Green Deal Industrial Plan, the Net-Zero Industry Act is a response to the green subsidies in the U.S. Inflation Reduction Act. The draft text sets targets for technologies deemed necessary to decarbonize the EU economy, without thereby increasing the EU’s dependence on third countries. As an overall goal, 40% of the clean technologies strategically important to the EU should be produced in the EU by 2030. The draft document also outlines plans for speeding up the construction of energy infrastructure and other clean energy projects: for projects with an annual output of at least one gigawatt, permitting procedures could be shortened to one year at most; for projects with a lower output, this would be nine months. The technologies covered by the proposal are solar technologies, onshore and offshore wind technologies, battery technologies, heat pumps, electrolytic cells and fuel cells, biomethane, carbon capture, use and storage (CCUS), and grid technologies.

INFLATION REDUCTION ACT MAY HARM EUROPEAN BATTERY PRODUCTION, STUDY FINDS: On 6 March, Transport & Environment (T&E) published a study on the potential impact of the U.S. Inflation Reduction Act on European battery production. According to T&E, the American subsidy plans pose a threat to the nearly 50 lithium-ion battery plants Europe aims to construct before 2030. As much as 68% of Europe’s potential battery production capacity risks being delayed, scaled back or not realized if no further action is taken. The study also finds that, within the EU, Germany, Hungary, Spain and Italy have the largest share of battery cell capacity which is at risk. T&E calls for a strong EU response with faster approval for larger projects and funds that are easily accessible. The battery industry is among the sectors expected to benefit from the EU’s Green Deal Industrial Plan and the new Net-Zero Industry Act.

FRANCE AND ITALY SUPPORT EUROPEAN SOVEREIGNTY FUND: On 3 March, French Finance and Economy Minister Bruno Le Maire and Italian Industry Minister Adolfo Urso released a joint declaration on a “Shared Vision of the New EU Industrial Policy towards the Green and Digital Transition.” In the declaration, the ministers backed the European Commission's proposal to establish a new European Sovereignty Fund, noting that it should at first be financed with existing available funding. Le Maire told reporters that Italy and France have also agreed to cooperate on the use of nuclear energy for industrial purposes. A French economy ministry official said that a dedicated working group will be set up. There is no mention of nuclear cooperation in the declaration. Minister Le Maire last year signed a similar document with Germany with no mention or support for a similar fund. Germany has been pushing against efforts to set up a new fund. As part of the Green Deal Industrial Plan proposed by the Commission, European Commission President von der Leyen wants to set up a European Sovereignty Fund in the context of the review of the multi-annual financial framework before the summer of 2023.

FORTHCOMING CRITICAL RAW MATERIALS ACT TO SUPPORT EU MINING OF 10% OF STRATEGIC RAW MATERIALS BY 2030: On 7 March, a draft version of the Critical Raw Materials Act, to be presented by the European Commission on 14 March, was leaked. The new law aims to diversify the supply of critical raw materials needed by the EU for the green and digital transition (for example, materials for solar panels, magnets, electric vehicles and wind turbines). The current EU list of critical raw materials will be reviewed, although the leaked draft text does not provide a new list yet. The Commission further aims to ensure that the EU mines at least 10% of its annual consumption of strategic raw materials within the EU. In addition, at least 40% of the EU’s annual consumption should be processed in the EU by 2030, while 15% of annual consumption of each critical raw material should come from recycling. In the draft text, the Commission also proposes that no more than 70% of annual consumption in the EU of a specific raw material should come from a single third country. This provision addresses the EU’s dependence on China and should help diversify the EU’s supply chain. Finally, the proposal provides a new framework for selecting and implementing strategic projects on critical raw materials, allowing such projects to benefit from faster permitting procedures and additional funding opportunities. This framework could also apply to projects outside of the EU. To learn more about the upcoming proposal, read our interview with Gijsbert Wierink, founder of Plutonic RMA.

EU MEMBER STATES REWRITE NUCLEAR SECTION OF CLIMATE DIPLOMACY DEAL: By 10 March, EU Member States hope to approve a draft text on climate diplomacy priorities – among which a global phasing out of fossil fuels - by rewriting a contentious section on nuclear energy. The draft text aims to set out the EU's diplomatic priorities ahead of this year's U.N. climate summit (COP28). The EU approval has been delayed several times due to disputes over the role of nuclear energy in the green transition. Specifically, Member States could not agree on whether EU diplomacy should promote low-carbon hydrogen - meaning hydrogen produced from nuclear electricity - or focus on hydrogen produced from renewable energy. France and other Member States want more EU policies to promote the low-carbon energy source while Germany and Spain warn that this could hamper efforts to drive massive expansion in renewable energy. The latest draft did not specify which type of hydrogen the EU would promote.

FORMAL VOTE ON CO2 STANDARDS FOR CARS AND VANS POSTPONED INDEFINITELY DUE TO GERMAN OPPOSITION: Germany is blocking final approval of the new CO₂ emission standards for cars and vans in order to shield its industry from the impact of abandoning new combustion-engine cars. In October, negotiators from the EU institutions had agreed that the sale of new CO₂-emitting cars and vans would be forbidden from 2035 onwards. Despite the European Parliament giving its formal approval to the political agreement on 14 February and the preliminary approval given by Member States’ ambassadors in Coreper, a vote in the Council of the EU has now been postponed indefinitely due to fears of a blocking majority consisting not only of Germany but also of Italy, Poland and Bulgaria. Specifically, Germany wants the European Commission to include an exemption to the 2035 combustion engine phaseout for e-fuels: synthetic fuels which are climate neutral but which require more energy to produce than charging an electric vehicle.

ENVIRONMENT COMMITTEE EXCHANGES VIEWS WITH EUROPEAN ENVIRONMENT AGENCY (EEA): On 6 March, the European Parliament’s Committee on Environment (ENVI) exchanged views with Hans Bruyninckx, Executive Director of the European Environment Agency. During the meeting, Bruyninckx explained the overall work of the EEA, especially in regard to the EEA’s work on policies connected to the European Green Deal (EGD). Notably, he underlines the work of the agency in supporting the progress on the ‘Fit for 55’ Package, providing data and figures on climate policies.  Moreover, he mentioned that in 2024, the EEA would publish an integrated report on the prospects for sustainability, looking at the EGD’s longer objectives. Several MEPs centred their questions around specific policy areas where they wanted either advice or clarification from the EEA. Specifically, the MEPs asked about the implementation of the Sustainable Development Goals, how the EEA worked with ocean and sea pollution and the EEA’s view on PFAS.

ACER PUBLISHES ITS ANNUAL INTERNAL ELECTRICITY MARKET MONITORING REPORT: On 28 February, the EU Agency for the Cooperation of Energy Regulators (ACER) published the report on “Wholesale Electricity Market Monitoring 2022- Key Developments”. It is the first report of a series of topical overviews about the energy market situation 2022. The report provides the state of play regarding European internal electricity markets and recommends further actions to foster their integration. Main wholesale electricity trends in 2022 include a reduction in electricity consumption, a new record regarding the installed capacity of renewable energy and an increase in CO₂ emissions due to the rise in coal and gas power electricity generation. Besides, high price levels were reached in day-ahead prices and forward markets due to post pandemic economic recovery and Russia’s invasion of Ukraine. Nevertheless, Q4 of 2022 experienced a sharp increase in negative day ahead prices and reached pre-2019 levels due to demand reductions.

GROUP OF MEMBER STATES CALL FOR CLOSER COOPERATION ON NUCLEAR ENERGY: On the sidelines of the informal Energy Council on 28 February, an alliance of eleven Member States (Bulgaria, Croatia, Czechia, Finland, France, Hungary, the Netherlands, Poland, Romania, Slovakia and Slovenia) met with the European Commission and the Swedish Presidency to reaffirm their commitment to stronger European cooperation in the field of nuclear energy. In particular, ministers signed a declaration expressing their aim to foster closer cooperation between their national nuclear sectors and to explore joint industrial projects and training programs. France was the driving force between the alliance, which aims to ensure that greater account is taken of nuclear energy in all legislative texts being discussed in the EU institutions, so explained the cabinet of French Energy Minister Agnès Pannier-Runacher. Italy, which had been invited to join the alliance, did not sign the joint declaration in the end.

DEVELOPMENTS ON ELECTRICITY MARKET REFORM: Ministers also discussed the upcoming proposal for a reform of the EU electricity market. Germany called for waiting to take a position on the reform until after the European elections in May 2024, while France on 24 February reaffirmed its determination to reach an agreement before the European Parliament elections (May 2024). On 27 February, European Commissioner for Energy Kadri Simson stated that the European Commission will present the proposal – which entails “targeted” proposals focusing on long-term power contracts for industry to mitigate price volatility - on 16 March. The term “targeted” suggests the Commission will not table a root-and-branch review of the EU’s electricity market rules, which many countries argue has helped mitigate power prices during the gas crisis. A more targeted reform of the EU’s electricity market, focused on long-term contracts, might also help conclude negotiations before the European Parliament elections next year.

EUROSTAT PUBLISHES STATISTICS ON THE NEED TO HEAT/COOL BUILDINGS IN THE EU: On 27 February, Eurostat revealed that the need to heat a building has decreased over time. The heating degree days (HDD) value diminished by 19% between 1979 and 2022. On the contrary, cooling degree days (CDD) value has been multiplied by four in 2022 compared to 1979 indicating the need for cooling increased significantly. HDD and CDD are weather-based technical indexes to describe energy requirements of buildings in terms of heating and cooling. HDD and CDD vary greatly across the EU and a North-South division may be perceived. While Finland recorded the highest HHD and Malta the lowest, Malta is observed to have the highest CDD and Ireland the lowest in 2022.

EU ENERGY CRISIS UPDATE

ACER AND ESMA PUBLISH FINAL REPORTS ON GAS MARKET CORRECTION MECHANISM: On 1 March, the EU Agency for the Cooperation of Energy Regulators (ACER) published its final assessment report on the effects of the EU gas price cap. On the same, date, the European Securities and Markets Authority (ESMA) published a final report on the price cap. The two agencies had already published preliminary reports in January. ACER and ESMA both conclude that the gas price cap, which was agreed to on 20 December last year and could be activated since 15 February, does not seem to have had a discernible impact on the gas market so far. While gas prices have continued to fall and are now at a significant lower level than in the months before the adoption of the price cap, the agencies link the price decrease to favorable market fundamentals: successful reduction of consumption, replacement of gas with LNG, warmer winter weather and full gas storage. However, both agencies stress that the price cap could still impact gas prices or security of supply in the future.

EU PLANS TO EXTEND ITS GAS CONSUMPTION REDUCTION MEASURES INTO NEXT WINTER: On 28 February, the energy ministers met during the informal Energy Council meeting in Stockholm. During the meeting, ministers discussed the possibility to extend the EU gas consumption reduction measures into next winter. In July 2022, Member States agreed to reduce gas usage between August 2022 and March 2023 by 15%. Thanks to mild weather and high energy prices, gas consumption actually fell even further by 19,4% compared to the same period from 2017-2022. French Energy Minister Agnès Pannier-Runacher said that Member States discussed extending a number of emergency measures to be able to quickly fill EU gas stocks and cope with possible tensions. Germany calls for a target higher than 15% with German State Secretary, Sven Giegold, stating that it is important not only to prolong the existing rules but to set a more ambitious target in order to send a signal to the market. Other ministers were more reserved about setting a target higher than 15%. Czech Industry Minister, Jozef Sikela, said last year’s moves were not repeatable and instead called for measures to boost energy efficiency.

THE EUROPEAN INVESTMENT BANK PROPOSED TO INCREASE ITS CONTRIBUTION TO REPOWEREU INITIATIVE: On 27 February, during the opening of the first EIB Group Forum in Luxembourg, President of the European Investment Bank (EIB) Werner Hoyer proposed to increase the EIB contribution to RePowerEU plan from €30 billion to around €45 billion. This would boost green energy investments in support of green technologies and EU energy independence from fossil fuels, resulting in strengthening the EU competitiveness and maintaining the EU internal market level playing field. The recently launched European Tech Champions Initiative by EIB will play a pivotal role in reaching these EU goals. By this statement President Hoyer indicates there are sufficient financial resources, but a political will and plan providing certainty to investors and private capital are of utmost importance as well.  EIB is expected to mobilize around €100 billion of the €300 billion EU Global Gateway target to address global challenges.

ADOPTION OF TENTH PACKAGE OF EU SANCTIONS AGAINST RUSSIA: On 25 February, the Council of the EU adopted a tenth package of sanctions on Russia’s war of aggression against Ukraine. The Council of the EU decided to impose restrictive measures on an additional 87 individuals and 34 entities. The new listings also cover economic actors in sectors providing a substantial source of revenue or supporting financially the government of Russia. Specifically, additional export bans worth €11.4 billion are imposed on certain vehicles (e.g., heavy trucks and semi-trailers), military equipment (e.g., electric generators), construction goods (e.g., cranes) and goods critical for industrial activities (e.g., electronics). The package also imposes import bans worth €1.3 billion on bitumen and related materials (e.g. asphalt) and synthetic rubber and carbon blacks.

GERMANY TO ABSTAIN ON COMBUSTION ENGINE BAN VOTE: On 28 February, German Transport Minister Volker Wissing announced that Germany will abstain in the final vote on the new CO₂ emissions standards for cars. The proposed agreement aims to reduce CO₂ emissions of new cars to zero by 2035 and is up for a formal vote by the Council of the EU on 7 March. Wissing stated that the Commission needs to come up with “a binding answer on how to deal with internal combustion engines” in order for Germany to be able to vote in favor. Without German approval, adoption of the file is uncertain, as a qualified majority (at least 15 Member States representing 65% of the EU population) is needed to adopt the file. In the past weeks, Italy voiced its criticism over the ban of new petrol and diesel cars by 2035 and threatened also to abstain during the vote, while Poland and Bulgaria might vote against. The European Parliament already formally approved the agreement on 14 February.

MEMBER STATES TRY TO INFLUENCE COMBUSTION ENGINE PHASEOUT: On 25 February, Italian Industry Minister Adolfo Urso made clear that Italy wants to team up with France and Germany to influence and slow the pace of European Union legislative proposals on the Euro 7 tougher emission rules for cars, vans, trucks and buses, and the proposal on CO₂ emission standards for heavy-duty vehicles. Urso stated that Italy would be determined to stall the two legislative proposals’ approval until after the next European Parliament elections in 2024, unless Rome’s demands for moderation are met. Urso also indicated that Italy would lobby for a broader revision of the stages and modalities of the ecological transition in 2026, when the European Commission is due to review progress made towards the 2035 target of achieving zero emissions from new cars and vans. On 27 February, German state secretary for transport, Michael Theurer, asked the European Union to propose rules allowing combustion-engine cars that run on CO₂-neutral fuels to be sold in Europe after 2035, the date by which the EU has agreed all new cars should have zero emissions. Speaking on his arrival to a meeting of EU transport and energy ministers in Stockholm, Theurer said Germany was convinced battery electric vehicles are the way to go but wanted to see other CO₂-free technologies also supported.

GERMANY TO BOOST PRODUCTION OF DOMESTIC RENEWABLE ENERGY: On 21 February, Robert Habeck, the German Minister of Economy and Climate Action, announced a three-step plan to encourage production of wind and solar energy in Germany. First, he wants to help companies invest and support the operation of renewable manufacturing facilities. Additionally, the government is looking to create a “transformation fund” through which it will seek to acquire shares in renewable energy companies. Second, the government is looking to de-risk onshore wind and electricity grid expansion temporarily. Third, Germany wants to launch a new round of Important Projects of Common European Interest (IPCEI), large-scale European projects and funding opportunities in key strategic value chains, extending them to solar installations.

EUROPEAN ENVIRONMENTAL BUREAU OPINON ON EU HYDROGEN AMBITIONS: On 21 February, the European Environmental Bureau (EEB) stated that the EU’s plans for renewable hydrogen are unrealistic and constitute a risk for the EU’s public finances and decarbonization efforts. While the capacity of the hydrogen industry to deliver the required growth is uncertain, the EEB argues that alternatives are ready. Direct electrification, coupled with increased energy efficiency in buildings, industrial processes and transport modes, could decarbonize EU energy systems without the risk of relying on unproven hydrogen production capacities. According to the EEB, subsidizing hydrogen for the sake of industrial competitiveness will translate into subtracting much-needed financial resources from other crucial investments to deliver renewables, energy efficiency, and energy security.

NO POLITICAL AGREEMENT YET ON FUELEU MARITIME: On 16 February, the third round of Trilogue negotiations between the EU institutions on FuelEU Maritime took place. Negotiating parties had hoped to reach a political agreement but they were unable to settle their differences. Rapporteur Jörgen Warborn (Sweden, EPP) highlighted that there is an agreement on several important topics, including zero-emission at berth and fuel certification, but that issues such as the multiplier and sub-quota for renewable fuels of non-biological origins (RFNBOs) and penalties remain. A new Trilogue meeting is expected to take place in March.

LIMITED PROGRESS DURING RED III TRILOGUE ON BIOMASS: A new round of negotiations between the co-legislators on the revision of the Renewable Energy Directive (RED III) took place last week. The Trilogue meeting, originally scheduled a week earlier but postponed by Rapporteur Markus Pieper (Germany, EPP), dealt with biomass. There was only very limited progress, as the European Parliament and the Council of the EU continue to disagree on the definition of primary woody biomass and on whether the energy produced from biomass should count toward the EU’s renewable energy targets. Member States suggested limiting the definition of primary woody biomass to “high-quality roundwood”. Another proposed compromise would see “industrial grade roundwood” and “coarse woody debris” no longer counted towards the EU’s renewable energy targets. Member States, however, refused to agree to this compromise. Progress was made on one issue, as the negotiating parties agreed to include the cascading principle, which allocates biomass in priority to wood-based products with the highest economic value, in RED III. The European Commission was asked to come up with a draft text. The next Trilogue meeting is planned for 6 March.

EU ENERGY CRISIS UPDATE

FRENCH ELECTRICITY UNION SHARES RECOMMENDATIONS ON THE EU MARKET REFORM: On 22 February, the French Electricity Union, which represents more than 500 companies, shared their EU market reform recommendations. The suggestions come ahead of the upcoming proposal by the European Commission to reform the EU’s electricity market, which the European Commission plans to present on 14 March. The French Electricity Union underlines the need to preserve the current achievements of the European electricity market as well as to offer more visibility to investors and consumers on electricity prices. Previously, the issue about visibility for both investors and consumers on electricity prices has been a contested issue in the EU, especially during the negotiations on the EU’s Clean Energy Package. Furthermore, they propose specific recommendations regarding energy purchasing contracts (e.g., including all-low carbon technologies) and argue in favor of the integration of a capacity mechanism in the electricity market design.

THE COUNCIL OF THE EU ADOPTS REPOWEREU PLAN CHAPTERS: On 21 February, the Council of the EU formally adopted the Regulation to include REPowerEU chapters in the Recovery and Resilience Facility plans. Member States will be able to add a new REPowerEU chapter to their national recovery and resilience plan. This will help finance, under NextGenerationEU, key investments and reforms that will help achieve the REPowerEU objectives. Additional €20 billion will be made available to finance the investments and reforms. The financing sources will be the Innovation Fund (60%) and frontloading Emissions Trading System allowances (40%). Member states will have further opportunities to request loan support including in the case of requests above 6.8% GNI where the relevant conditions apply. The European Parliament adopted the Regulation in first reading on 14 February 2023. Now that the Council of the EU has also formally adopted the text, it will be published in the EU’s Official Journal and enter into force on the following day.

EU GAS CONSUMPTION DROPPED BY 19%: On 21 February, Eurostat reported a drop in EU natural gas consumption by 19.3% between August 2022 and January 2023 compared to the average gas consumption for the same months between 2017 and 2021. The decrease of gas consumption is a result of the Regulation on coordinated demand-reduction measures for gas which has been incorporated in the REPowerEU plan to phase out EU dependence on Russian fossil fuels. The Regulation sets a reduction target of 15% for the period August 2022 – March 2023 compared to the same period of the five previous consecutive years. Ireland registered the smallest decrease in natural gas consumption and Finland the greatest decrease by -0.3% and -57.3%, respectively.

GERMANY PUSHES TO DELAY ELECTRICITY MARKET REFORM: Although France and Spain support the reform of the EU’s electricity market, Germany is pushing for a postponement until after the 2024 European Parliament’s elections. The German government argues that domestic consultations for the reform of the electricity market are still ongoing; hence, no proposal should be tabled before consultations are finalized. On 20 February, Germany launched its "climate neutral electricity system" consultation platform, a working group to develop the German position on the reform. For this reason, Germany is not expected to make a concrete contribution to the debate until after the European Commission's proposal in March. On 13 February, Germany, Denmark, Estonia, Finland, Luxembourg, Latvia and the Netherlands published a joint letter on the reform of the electricity market, calling on the European Commission to maintain the current design.

EUROPEAN PARLIAMENT ADOPTS RESOLUTION ON GREEN DEAL INDUSTRIAL PLAN: During a plenary session on 16 February, the European Parliament adopted its resolution in response to the Green Deal Industrial Plan, which was unveiled by the European Commission on 1 February. In the resolution, MEPs stress the importance of strengthening the EU’s production capacity in strategic technologies, including solar and wind power, heat pumps and batteries. They also call for economies of scale and better commercialization of these technologies. Furthermore, fast and predictable permitting procedures, such as those also provided for in the REPowerEU plan, should ensure that the new renewables projects can be set up as quickly as possible. On the topic of funding, MEPs call on the proposed European Sovereignty Fund to avoid fragmentation due to uncoordinated national state aid schemes. In addition, the relaxation of EU state aid rules should be targeted, temporary and proportional. The largest political group in the European Parliament, the center-right EPP group, did not support the resolution, with MEP Christian Ehler (Germany, EPP) stating that the plan is overly focused on regulating and lacks a business case for industrial transformation towards carbon neutrality.

CZECH REPUBLIC FORMS COUNTRY COALITION AGAINST EURO 7 PROPOSAL: On 22 February, the Czech Republic, together with ten other EU-Member States, shared a joint position regarding the proposal for a Regulation on Euro-7 emission standards for cars, vans, lorries and buses proposal of the European Commission. The letter expressed their concerns regarding the list of obligations to car manufacturers and addressed argues against the ‘unrealistic’ timetable for implementing the new emissions standards the law proposal contains. Moreover, they Member States stated the new law would facilitate generate additional costs for manufacturers, which eventually resulting in a significantly raise of costs for smaller cars. Although the Czech Republic prefers that the proposal would not to be implemented at all, the majority of Member States of the coalition signing the letter agrees to the view that emissions from transportation transport sector should be reduced further.

MEMBER STATES DISAGREE ON NUCLEAR HYDROGEN DURING CLIMATE DIPLOMACY TALKS: During the Foreign Affairs Council on 20 February, Member States failed to adopt their conclusions on climate diplomacy. At the heart of the issue is a dispute between France and a number of other Member States (such as the Czech Republic and Hungary) that want more EU policy to promote the use of nuclear energy in reducing CO₂ emissions on the one hand, and countries such as Germany and Spain, which warn that promoting nuclear energy risks diverting attention from efforts to expand renewable energy, on the other. More specifically, Member States disagree on whether the text should explicitly promote low-carbon hydrogen (hydrogen produced from nuclear electricity) or rather focus on hydrogen produced from renewable energy. The Council conclusions would have served to set the EU’s diplomatic priorities for the UN climate conference COP28, to be held in Dubai later this year. After the Council meeting, EU High Representative for Foreign Affairs and Security Josep Borrell, expressed his hope that Member States will approve a final text in writing very shortly.

NEW STUDY REVEALS ENVIRONMENTAL BENEFITS OF ADAPTABLE BUILDINGS: On 15 February, the Directorate-General for Environment published a comparison between the environmental impact of two design versions of the same residential building, one using a flexible, reversible design and one with a traditional design. While an emphasis is given to energy efficiency during the design of new European buildings, the study builds further on quantifying the impact of different types of material used in construction. The study concludes that flexible buildings considered in this study may not appear advantageous in a 60-year life cycle assessment (LCA), but if time, costs and a longer building lifespan are considered, the environmental performance of a flexible building becomes apparent. One may avoid demolition of the building due to the possibility of adapting the building space to future needs and reversibility decreases mixed demolition waste and increases material recirculation. Besides, the study affirms that the sustainability issue in buildings needs all stakeholders on board with cleaner production, better durability of components and wider recycling and re-using loops need to be established.   

EUROPEAN COMMISSION PUBLISHES NEW DELEGATED ACTS ON RENEWABLE HYDROGEN: On 13 February, the European Commission published two new delegated acts on hydrogen, setting more detailed rules to the Renewable Energy Directive (RED). The rules should ensure that all renewable fuels of non-biological origin (or RFNBOs) are produced from renewable electricity. As the EU aims to increasingly focus on hydrogen in diversifying its energy mix, fears rose that the electrolyzers needed for hydrogen would increase electricity demand. With the first delegated act, the Commission defines the conditions under which hydrogen can be considered and RFNBO. The act clarifies the principle of additionality for hydrogen and specifies that electrolyzers for the production of hydrogen should be connected to new renewable electricity production. Specifically, by 2028, hydrogen producers must prove that their electrolyzers are connected to renewable energy plants which are not older than 36 months. The second delegated act sets out a methodology for calculating life-cycle greenhouse gas emissions for RFNBOs. 

EU ENERGY CRISIS UPDATE

GAZPROM’S EXPORT REVENUES TO FALL BY 50% IN 2023: On 15 February, analysts mentioned they expect that exports revenues made by Gazprom, Russian state-owned energy company, dropped after Russia invaded Ukraine due to Western sanctions and a decline in Russian import of gas in Europe. Reuters finds that Gazprom’s revenues from exports of gas declined in January 2023 to $3.4 billion compared to $6.3 billion in January 2022. Nevertheless, the company has still increased its revenues in 2022 to $80 billion, due to high gas prices. The record revenues would be difficult to replicate in 2023, since global gas prices have fallen, and the EU drastically reduced its gas imports from Russia. Gazprom also experienced a deficit of $24 billion in January 2023, prompted by a decline in energy revenues and increasing expenditure. The Russian Economy Ministry forecasts export revenues up to $35 billion and $46 billion in 2023. 

EUROPEAN PARLIAMENT DECIDES TO INCLUDE REPOWEREU MEASURES IN NATIONAL ENERGY PLANS: On 14 February, the plenary of the European Parliament confirmed the agreement made with the Council of the EU in December 2022 regarding the inclusion of REPowerEU measures in national recovery plans. Under the new rules, Member States applying to receive additional funds as part of their recovery and resilience plan will be required to include clean energy and energy efficiency measures while diversifying energy supplies. These elements are part of the REPowerEU plan which aims to boost energy independence and fight energy poverty. 30% of the REPowerEU budget will be allocated to cross-border projects with the aim of addressing existing issues in energy transmission, distribution and storage while enhancing cross-border flows. It is a plan to reduce the economic impact of the war and to advance the green transmission, stated co-rapporteur MEP Eider Rubial (S&D, Spain). Following the formal approval by the Council of the EU, the regulation will enter into force once published in the Official Journal of the EU.  

SEVEN EU COUNTRIES CALL ON THE EUROPEAN COMMISSION TO KEEP ITS UPCOMING ELECTRICITY MARKET REFORM CAUTIOUS: On 13 February, Germany, Denmark, Estonia, Finland, Luxembourg, Latvia and the Netherlands published a joint letter regarding the review of EU electricity market rules.  The seven Member States call on the European Commission to preserve the current electricity market design in its upcoming reform, planned for 14 March. They underline the need to not increase costs for citizens and companies as well as to ensure security of supply. Specifically, the letter provides principles for the reform of the electricity market design, inter alia retaining the benefits of the market integration, boosting the roll-out of renewable energy and ensuring a level playing field. 

COMMISSIONER GENTILONI OUTLINES FURTHER ENERGY MEASURES TO ENSURE ENERGY RESILIENCE: On 13 February, Commissioner for Economy Paolo Gentiloni spoke on the energy crisis after a meeting of the Eurogroup, where EU finance ministers had discussed developments in the energy markets as well as the labor market. Due to favorable weather conditions and successful EU energy measures, Gentiloni mentioned that there is a window of opportunity in the coming months to improve the quality of these measures. He stated that the European Commission intends to put in place a joint purchasing tool before the end of the first quarter. This should help support the filling of gas storage before next winter. In addition, the reform of the electricity market, expected on 14 March, and the further implementation of REPowerEU measures aim to boost the EU’s energy resilience. 

EU LEADERS WELCOME GREEN DEAL INDUSTRIAL PLAN: On 9 February, EU heads of state and government welcomed the Green Deal Industrial Plan during an extraordinary European Council meeting. In the European Council conclusions, EU leaders call on the European Commission to relax state aid policy, free up EU funding, simplify rules and regulations, boost green and digital skills, and support public and private investment. The European Council also calls for an ambitious and sustainable trade agenda to ensure a worldwide level playing field. EU leaders will again consider the Green Deal Industrial Plan during the next summit on 23 and 24 March. Before that, the European Commission is expecting to present a Net-Zero Industry Act, which should provide a regulatory framework for the quick deployment of net-zero industrial capacity, on 14 March. On the same date, the Critical Raw Materials Act should also be published, aiming to ensure sufficient access to materials for manufacturing key technologies, as well as the reform of the electricity market design. All initiatives form part of the Green Deal Industrial Plan. 

EUROPEAN COMMISSION PUBLISHES NEW CO2 STANDARDS FOR HEAVY-DUTY VEHICLES: On 14 February, the European Commission presented its plans for the revision of the CO2 standards for heavy-duty vehicles. The Commission proposes to amend the scope of the current Regulation to also cover buses, long-distance buses and trailers; the current text covers only heavy trucks. New vehicles should on average reduce their CO2 emissions by 90% by 2040. Intermediate targets for 2030 and 2035 are set at 45% and 65%, respectively. These targets concern the average emissions percentage of all heavy-duty vehicles produced by a manufacturer; if a manufacturer produces hydrogen- or electricity-powered models, it can continue to produce a diesel model as long as it complies with the 90% target. The proposal also sets out that all new city buses will have to be zero-emissions vehicles by 2030. The new initiative was unveiled the same day as the vote in the European Parliament on the revision of CO2 emission performance standards for new cars and vans. 

EUROPEAN PARLIAMENT APPROVES ZERO CO2 EMISSIONS TARGET FOR NEW CARS AND VANS BY 2035: On 14 February, the European Parliament approved by 340 votes in favor, 279 against and 21 abstentions the political agreement on the revision of CO2 emission performance standards for new cars and vans that was reached with the Council of the EU in October 2022. It establishes an EU fleet-wide target to reduce emissions produced by new cars and vans by 100% in 2035, compared to 2021 levels. Intermediate emissions reduction targets are set for 2030 at 55% for cars and 50% for vans. The current zero- and low-emission vehicles (ZLEV) mechanism to incentivize manufacturers to sell ZLEV will be adapted in 2025, where a sales benchmark will be set at 25% for new cars and 17% for new vans. As of 2030, the incentive will be removed. These targets create clarity for the industry while stimulating innovation and investments, stated Rapporteur Jan Huitema (Renew, the Netherlands). Besides, in 2025, the European Commission will present a methodology to assess and report data on CO2 emissions throughout the full life cycle of cars and vans and will introduce an appropriate legislative proposal.  

INDUSTRY COMMITTEE ADOPTS POSITION ON HYDROGEN AND GAS MARKET PACKAGE: In a vote on 9 February, the European Parliament’s Committee for Industry, Research and Energy (ITRE) adopted its position on the revision of the Gas and Hydrogen Directive and Regulation. The proposals aim to promote the deployment of renewable and low-carbon gases within the EU gas market to combat climate change and enhance the EU’s energy security. MEP Jens Geier (Germany, S&D), Rapporteur on the Directive, called the agreement “the next step towards a climate-neutral Europe”. MEP Jerzy Buzek (Poland, EPP), who serves as Rapporteur on the Regulation, likewise responded positively to the vote. The package should provide incentives for investments in European hydrogen. Production and uptake of green and low-carbon hydrogen as well as biomethane should be boosted. Since MEP Buzek obtained a special mandate to bypass the plenary vote, the Council of the EU and the European Parliament can already start Trilogue negotiations. The Council of the EU hopes to adopt its position in June. 

INDUSTRY COMMITTEE ADOPTS ITS POSITION ON ENERGY PERFORMANCE BUILDING DIRECTIVE: During the same session on 9 February, ITRE MEPs adopted their position on the Energy Performance of Buildings Directive (EPBD) with 49 votes in favor, 18 against and 6 abstentions. MEPs voted to oblige buildings owned by public bodies to achieve at least energy performance class ‘E’ by 2027 and class ‘D’ by 2030. Moreover, residential buildings should achieve class ‘E’ by 2030 and class ‘D’ by 2033. Negotiations with the Council of the EU can start after plenary vote, which is also expected on 13 March.  

NINE HYDROGEN VALLEYS ACROSS EUROPE REPOWERING THE EUROPEAN UNION: The Clean Hydrogen Partnership – comprising the European Commission and Hydrogen Europe – has selected nine Hydrogen Valley projects following its first call for proposals (2022), good for a total of €105 million in funding. The projects focus on the production of green hydrogen. Moreover, the development of Hydrogen Valley projects contributes to the acceleration of interconnected hydrogen ecosystems in the EU. This leads to strengthening the competitiveness of the clean hydrogen value chain. Currently, there are 25 European projects that are part of ‘the Innovation Hydrogen Valley Platform’ mission. 

NEGOTIATIONS ON THE REVISION OF RENEWABLE ENERGY DIRECTIVE COME TO A HALT: German MEP Markus Pieper (EPP), that leads the negotiations on Renewable Energy Directive (RED) on behalf of the European Parliament, has cancelled the Trilogue meeting planned on 6 February, due to the European Commission failing to present a draft delegated act on renewable hydrogen. The revised RED seeks to double the amount of renewables in Europe, aiming for a 40-45% share of wind, solar and biomass in the EU’s overall energy mix by 2030, up from 22% currently. Among other objectives, the directive defines the share of renewable energy that must be reached in the transport sector – which includes hydrogen among Renewable Fuels of Non-Biologic Origin (RFNBOs). The next Trilogue meeting was planned in mid-March, but it remains to be seen if it would take place. 

EU ENERGY CRISIS UPDATE

POLAND PUSHES FOR NUCLEAR POWER AHEAD OF EU ELECTRICITY MARKET REFORM: On 14 March, the European Commission is planning the publication of the reform of the EU electricity market rules. Ahead of the EU’s proposal, Poland circulated a non-paper stating that Member States should have “an unrestricted right” to subsidize power plants providing dispatchable electricity in case wind and solar are unavailable. While a non-paper is an informal document put forward in closed negotiations within EU institutions, it provides an insight into Poland's priorities and position on the reform: that Member States should have their hands free to subsidize electricity generation capacity as back-up to intermittent wind and solar. The overall aim of the reform on EU electricity is to ensure that all European consumers can benefit from cheap renewable electricity. Stakeholders can provide input to the revision until 13 February. 

EUROPEAN COMMISSION RECOMMENDS JOINT EU EXIT FROM ECT: During a meeting on 7 February, the European Commission recommended a joint EU exit from the Energy Charter Treaty (ECT) to Member States. Earlier this week, the Commission had already circulated a document telling Member States that a joint EU exit from the ECT appeared to be unavoidable. Pressure on the Commission was increasing after France, Germany, the Netherlands, Poland and Spain all already announced plans to quit the treaty. This recommendation comes as a surprise, as the Commission had previously been an outspoken supporter of reforming the ECT. The ECT is controversial because companies can sue governments for profits lost because of government policies, even if these policies are aimed at combating climate change. 

ACER PROPOSES CHANGES TO IMPROVE EU ELECTRICITY FORWARD MARKETS: On 6 February, ACER published a policy paper where it identifies issues related to the EU electricity forward market such as market fragmentation and a lack of integration. Moreover, it serves recommendations regarding a revision of the Forward Capacity Allocation Regulation. The creation of different virtual trading hubs and the issuance and improved allocation of transmission rights in the form of financial obligations by Transmission System Operators (TSOs) may be beneficial for its functioning. By establishing regional hubs liquidity of the forward market will be increased while hedging products will cover the majority of price risks faced by market participants. The remaining risk will be covered by transmission rights issued by TSOs. ACER organizes a workshop on 13 March to present its policy paper.  

EU OIL IMPORT BAN ON RUSSIAN OIL TAKES EFFECT, NEW PRICE CAPS ON RUSSIAN PETROLEUM PRODUCTS: On 5 February, the EU import ban on Russian oil products came into effect. The EU ban is designed to work in tandem with the G7 price cap to crack down on Russian oil exports. While the EU import ban cuts off one of Russia’s most important fossil fuel markets, the price caps should ensure that Russian exports continue flowing into the world market as long as trade remains below the price cap level, preventing a major oil shortage or price shock. On 3 February, just before the ban went into effect, the EU and the G7 reached an agreement on a price cap for Russian petroleum products, such as diesel and heating oil. Two caps were agreed upon: the first, at $100 dollar per barrel, will apply to “premium” petroleum products such as diesel, gasoline and kerosene. A second ceiling of $45 will apply to cheaper products, such as heating oil and naphtha. The G7 and the EU already have installed a price ceiling of $60 per barrel for crude oil. The price caps will be reviewed every two months starting in March. 

ENVIRONMENT COMMITTEE APPROVES PROVISIONAL AGREEMENTS ON SEVERAL ‘FIT FOR 55’ FILES: On 9 February, the European Parliament’s Environment Committee (ENVI) formally approved several files in the ‘Fit for 55 package’ for which a political agreement was reached in December. The ENVI Committee approved the agreements on the EU Emissions Trading System (EU ETS), the new Carbon Border Adjustment Mechanism (CBAM) and the Social Climate Fund (SCF) and the EU ETS for aviation. The agreed texts are now up for a plenary vote. Upon approval, the work of the Parliament will be done. If the agreements are also approved by the Council, they are ready to be published in the EU’s official journal; 20 days after that, the legislation will enter into force. 

NETHERLANDS CIRCULATES NON-PAPER ON CRITICAL RAW MATERIALS ACT: Ahead of the publication of the Critical Raw Materials Act on 8 March, the Dutch government circulated a non-paper among Member States this past week. To reduce the dependence of the EU on critical raw materials such as cobalt, lithium and rare earths, the Netherlands proposes five priority areas for the upcoming EU proposal: building domestic production capacity, diversifying supply through international partnerships, supporting circularity, improving analysis and monitoring of supply risks of critical raw materials, and ensuring a sustainable supply chain. The non-paper argues that diversification of critical raw materials is preferable to stockpiling and that Member States should be involved in decision-making.  

RESEARCH FINDS RECORD GENERATION AND CONSUMPTION OF SOLAR AND WIND POWER: On 31 January, the independent energy think tank Ember published its review of the EU electricity transition in 2022 and the expected developments in 2023. The European Electricity Review analyses full-year electricity generation and demand data for 2022 in all EU-27 Member States to understand the region’s progress in transitioning from fossil fuels to clean electricity. According to Ember, 2022 saw a record generation of wind and solar power, which reached 22% of EU electricity. Notably, the EU solar generation increased by a record of 24% in 2022. The growth of renewable energy in the EU is also reported by Eurostat, which finds that production of electricity from renewable energy sources increased by nearly 5% from 2020 to 2021. Furthermore, wind and hydropower made up most of renewable energy consumption, 37% and 32% respectively, while remaining consumption came from solar power (15%), solid biofuels (7.1%) and other renewable sources (8%). Among these, solar power is notable for being the fastest growing source of renewable electricity; in 2008, it only accounted for 1% of EU gross electricity consumption. 

TRANSPORT COMMITTEE DISCUSS THE STATE OF PLAY ON AFIR AND FUELEU MARITIME: On 31 January, the Transport (TRAN) Committee in the European Parliament discussed the state of play regarding Trilogue negotiations on Alternative Fuels Infrastructure Regulation (AFIR). Rapporteur Ismail Ertug (S&D, Germany) informed MEPs that co-legislators found an agreement on the scope. However, discussions will still be needed to strike a deal on the level of ambition on electric research and hydrogen infrastructure, light-duty vehicles (LDV) and heavy-duty vehicles (HDV), as well as the provisions on payment arrangements for electric recharging. The next Trilogue meeting taking place on 7 February and 27 March will aim at reaching an agreement. Regarding FuelEU Maritime, Rapporteur Jörgen Warborn (EPP, Sweden) mentioned that the main contentious issues in the negotiations have been the GHG limits of energy used on-boards by ships (Article 4) and the zero emissions requirements of energy used at berth (Article 5). The next Trilogue meeting will take place on 16 February, when co-legislators aim to reach a final agreement on the text. 

POLITICAL GROUPS REACH AGREEMENT ON EPBD IN INDUSTRY COMMITTEE: Ahead of the vote in the European Parliament’s Committee on Industry, Research and Energy (ITRE) on 9 February, the Rapporteur (Greens) and shadow Rapporteurs (EPP, S&D, Renew, the Left) reached a compromise agreement on the revision of the Energy Performance of Buildings Directive (EPBD), on 30 January. MEPs aim for all public buildings to achieve at least the energy performance class “E” by 2027, which is one grade higher than the European Commission’s proposal. By 2030, these buildings should attain “D” performance. For residential buildings, a more controversial aspect of the EPBD proposal, ITRE MEPs aims to increase the original target to class “E” by 2030 and “D” by 2033. To reach a compromise, EPP requested several derogations for Member States to exempt their buildings from mandatory renovation requirements. Furthermore, when buildings are renovated or constructed, hybrid appliances using gas and hydrogen would be exempt from the ban on fossil heating.  

FRANCE COULD CHANGE STANCE AND BACK AN EU-WIDE TARGET OF 45% FOR RENEWABLE ENERGY: Co-legislators are currently debating a revision of the Renewable Energy Directive (RED), with an EU-wide target of 40-45% under consideration for 2030. On the one hand, the European Commission and the European Parliament are both in favor of raising the target to 45% for renewables in the EU’s energy mix by 2030. On the other hand, Member States want to retain the original 40% target. MEP Pascal Canfin (Greens, France), the Chair of the European Parliament’s environment committee has recently hinted that France could change its original position and support a 45% renewable target at EU level. According to MEP Canfin, France could consider a higher target if the revised RED recognizes efforts by Member States to decarbonize their electricity mix. The next Trilogue meeting is scheduled for 7 February, when co-legislators will continue the discussion over the RED target. 

EU ENERGY CRISIS UPDATE

EUROPEAN COMMISSION PRESENTS GREEN DEAL INDUSTRIAL PLAN: On 1 February, the European Commission President of the Commission Ursula von der Leyen presented the Communication on the Green Deal Industrial Plan, which was earlier announced during the World Economic Forum in Davos. The Communication should enhance the competitiveness of the EU’s net-zero industry in the face of competition from the US and China through a four-pillar strategy. First, the plan should simplify the regulatory framework through the upcoming Net-Zero Industry Act and Critical Raw Materials Act. Second, the plan should speed up investment and financing for clean tech in Europe through a relaxation of EU state aid rules. Third, the European Commission aims to foster skills development in clean tech sectors. Fourth, the EU will continue to work on new trade deals while protecting the Single Market. The European Commission also plans to facilitate investment in strategic sectors through a new European Sovereignty Fund.  

MEASURES OF MEMBER STATES TO COMBAT THE IMPACT OF INFLATION: On 30 January, Eurofound published an article summarizing policy responses of EU and Member States to help citizens deal with rising food and energy prices. The article underlines how several Member States introduced of one-off lump sum payments (e.g., to cover energy bills), reduced taxes on energy bills and provide subsidies on household’s electricity. According to Eurofound, as rising energy prices are trickling through the economy, more wide-ranging adaptations can be expected to allow wages and incomes to catch up with increasing prices. Measures to adapt wages to increasing costs would for instance take the form of wage bargaining, the annual setting of statutory minimum wages, the uprating or indexing of social benefits, or further tax reforms to maintain people’s purchasing power. 

EU SUGGESTS A $100 PRICE CAP ON RUSSIAN OIL: On 27 January, the EU suggested a price cap of Russian oil concerning EU and G7 countries and is working with the G7 to impose a price cap level for third-country sale as well. The price cap will hinder Russia's ability to earn money from its vast oil reserves by limiting the price of Moscow's refined oil products. The EU is proposing that Member States and G7 allies cap the price of Russian diesel at $100 a barrel and set a separate cap of $45 for other cheaper oil products. While G7 countries agree with the EU price cap for exports of Russian diesel, they would prefer a higher price than $100 — driven by concern that setting too low-price cap could risk causing price spikes or supply glitches in Europe. While there is still uncertainty on the exact price of the cap, the EU ban on importing processed petroleum products from Russia is set to take effect on 5 February.   

MEMBER STATES OPPOSE TO NEW EU FUNDS IN RESPONSE TO US IRA: On 26 January, seven Member States (Austria, Czechia, Denmark, Estonia, Finland, Ireland and Slovakia) sent a joint letter to Commissioner for Trade Valdis Dombrovskis stating that the EU should be using existing funding instruments for its Green Industrial Plan instead of seeking more money. The letter argues that the priority should be to ensure that the economy can better absorb the already agreed EU funding rather that creating new ones. Member States point out that only around €100 billion of the total of €390 billion of the RRF grants have been used. Despite not signing the letter, Germany, the Netherlands and Belgium also oppose new joint EU borrowing, further complicating the EU’s plans ahead of the European Council meeting on 9 and 10 February.  

COMMISSION REPORT: EMISSIONS, SHARE OF FOSSIL FUELS NEED TO PLUMMET TO REACH PARIS TARGETS: On 26 January, the European Commission published its Global Energy and Climate Outlook 2022. The European Commission models that limiting global warming to the Paris Agreement target of 1,5°C would see global emissions fall by 85% in 2050 compared to today’s levels. The share of fossil fuels in global energy trade would drop by 80%. The modelling exercise finds that global emissions are still not on track to deliver these targets. Despite this, some progress was made in 2021. Effective policies in major emitting countries as well as reduced costs and increased deployment of clean technologies helped to limit the temperature increase in the reference scenario to 3°C by the end of the century, which is a better outcome than the projection of a 3.2°C in the 2021 report. 

EU’S GLOBAL GATEWAY INITIATIVE INVESTS IN SOUTH AFRICA'S JUST AND GREEN RECOVERY: On 27 January, the European Commission together with its Member States launched officially the Team Europe Initiative in Pretoria, South Africa during a Ministerial-level meeting between EU and South Africa. The partnership encompasses more than €280 million in grants to foster South Africa's green and digital transitions and provide support to combat domestic socio-economic challenges. Commissioner for International Partnerships Jutta Urpilainen stated that this new initiative will support greening South Africa's economy and create sustainable jobs. This initiative is part of a broader EU Global Gateway Initiative where the EU, Member States and European financial institutions aiming to mobilize up to €300 billion for EU partner countries. It acts as a fund enabling developments in infrastructure pursuing the goal to establish sustainable, biodiversity-friendly and circular economies and reaching the domestic climate change objectives.

COMMISSIONERS TO TALK GREEN HYDROGEN AND SUSTAINABLE RAW MATERIALS WITH NAMIBIA: On 24 and 25 January, Commissioner for the Internal Market, Thierry Breton, and Commissioner for International Partnerships, Jutta Urpilainen, visited Namibia to enhance ties between the EU and Namibia and mark the 33^rd anniversary of the EU-Namibia Partnership. The focus of the visit was the enhanced cooperation under Global Gateway, the EU's strategy to deliver trusted and sustainable projects with partner countries mobilizing €300 billions of investments in digital, climate, energy, transport as well as health and education. Specifically, Commissioner Breton visited several operations relevant to the partnership meeting with companies working on sustainable raw materials and on green hydrogen. The visit follows the Memorandum of Understanding on the EU-Namibia Partnership on Sustainable Raw Materials and Renewable Hydrogen signed by Commissioner President Ursula von der Leyen and President Geingob at COP27 in November 2022.

FRANCE AND GERMANY TO AGREE ON ROADMAP FOR DECARBONIZED HYDROGEN: On 22 January, during the Franco-German Council of Ministers, President Macron and Chancellor Olaf Scholz confirmed their aim to agree on a ‘common roadmap’ for clean hydrogen in which nuclear-based hydrogen will play an important role. In previous months, France has insisted that the EU should recognize the role of nuclear-based low-carbon hydrogen, while Germany has instead pushed for a strict definition that requires clean hydrogen to be produced only from renewable energies. However, the roadmap indicates a softening of the German position moving towards the demands of France and its EU allies on the matter – Romania, Poland, Slovakia, Slovenia, Croatia, Bulgaria and Hungary. A joint Franco-German working group on hydrogen is expected to provide clarification on the common approach in April. It remains to be seen how this new cooperation will be reflected in negotiations on the Gas and Hydrogen Markets Directive, currently under discussion in the Council of the EU.

EU GRANTS €1.8 BILLION THROUGH INNOVATION FUND: On 19 January, projects’ leaders met in Brussels for the signing of the agreement granting their projects support from the Innovation Fund, during the conference ‘Innovation Fund: Financing Innovative Clean Tech’. The EU has granted €1.8 billion through its Innovation Fund to 16 innovative projects that will avoid about 125 million tons of CO₂ emissions in the first 10 years of operation. The projects cover ground-breaking technologies from green hydrogen and synthetic sustainable aviation fuel to methanol production from renewable hydrogen. The conference was organized by DG Climate Action and the European Climate Infrastructure and Environment Executive Agency (CINEA) with the objective of raising awareness amongst project developers, public and private financiers and other stakeholders about the many business opportunities brought about by the EU Innovation Fund.

MEMBER STATES AGREE ON NEW AMBITION TO EXPAND RENEWABLE OFFSHORE ENERGY: On 19 January, Member States agreed on new and ambitious long-term goals for the deployment of offshore renewable energy up to 2050 in each of the EU’s five sea basins, with intermediate objectives to be achieved by 2030 and 2040. The agreement builds on strong regional cooperation instruments and tools established by the revised Regulation on trans-European energy networks (TEN-E Regulation). This non-binding agreement represents the first deliverable of the regulatory set-up enshrined in the revised TEN-E Regulation and builds on last year’s Summits and ministerial meetings of the North Sea and Baltic Sea.

EU ENERGY CRISIS UPDATE

VESTAGER HINTS AT NEW TEMPORARY CRISIS STATE AID FRAMEWORK: On 25 January, during the High Level Forum of Member States, Executive Vice-President (EVP) Margrethe Vestager announced the European Commission will soon present a new Temporary Crisis and Transition Framework. Firstly, the new framework aims to make the calculation of the aid amount simpler and the approval faster, while enlarging the scope to cover all renewable energy technologies.  Secondly, it will introduce new anti-relocation investment aid possibility for productive investments in strategic sectors for the green transition. The new provisions aim to counter the risk that investments might be diverted to non-EU countries. During the same event, EVP Vestager also shared criticism over the request to soften and relax State Aid rules to allow Member States to intervene more freely in the economy and boost the competitiveness of European industries. She underlined how long-term competitiveness cannot rely on short-term subsidies and how taxpayers will pay the highest costs. In addition, EVP Vestager explained that relaxed rules will cause a ‘subsidy race’ that will benefit only richest Member States, leading to unfair competition within the Single Market.

EUROPEAN COMMISSION PUBLISHES CONSULTATION ON ELECTRICITY MARKET REFORM: On 23 January, the European Commission published a public consultation on the upcoming proposal to revise the EU electricity market. The reform should render the electricity market more resilient and reduce the impact of volatile and high gas prices on electricity bills. At the same time, it should support the energy transition boosting the deployment of renewable energy. The consultation focuses on four issues: electricity bills should become less dependent on short-term fossil fuel prices, security of supply and full use of alternatives to gas should be ensured, consumer protection should be improved, and market transparency and oversight should be increased. The publication of the revision is planned for March 2023.

EU ENERGY AGENCIES WARN GAS PRICE CAP COULD IMPACT MARKET LIQUIDITY: On 23 January, the European Securities and Markets Authority (ESMA) published a preliminary report on the effects of the gas price cap on the European gas market. The cap, agreed to by Member States in December, will take effect from 15 February. The ESMA’s report states that market participants are likely to change their behaviour to prevent the cap from taking effect or to prepare for it. While this behaviour seems rational on an individual basis, it could lead to major changes in the broader market environment and in turn affect financial stability. Market participants would likely switch to non-EU trading venues or trade over the counter. This could harm liquidity in the regulated markets. On the same day, the EU Agency for the Cooperation of Energy Regulators (ACER) also published a preliminary report on the price cap. ACER similarly warns of the risk that trading moves outside of EU hubs or happens over the counter, resulting in lower liquidity. The two agencies will both produce a full report on the potential impact of the gas price cap by 1 March at the latest; these are likely to be discussed during the informal meeting of energy ministers on 27 and 28 February.

ECB PUBLISHES NEW STATISTICAL INDICATORS TO NARROW CLIMATE DATA GAP: On 24 January, the European Central Bank (ECB) published a first set of climate-related statistical indicators to assess the impact of climate-related risks on the financial sector and to monitor the development of sustainable and green finance, including the carbon emissions financed by financial institutions and climate-related physical risks. While the indicators are a step in the right direction to help narrow the climate data gap, the indicators are still a work in progress and should therefore be used with caution. The ECB, together with the national central banks, will work to improve the methodology and the data used in line with EU initiatives on climate-related disclosures and reporting.

ECB ARGUES FOR SYNERGY BETWEEN EU ETS AND CBAM: On 23 January, the European Central Bank (ECB) published a working paper arguing for more synergy between the EU Emissions Trading System (EU ETS) and the new Carbon Border Adjustment Mechanism (CBAM), which was agreed to by co-legislators in December. The paper finds that the EU ETS has contributed to cutting greenhouse gas emissions in the EU by 2 to 2.5 percentage points per year through costlier emissions and more stringent caps. However, some carbon leakages occurred as declining emissions in regulated industries were offset by intensification elsewhere. Outsourcing of production to other countries or industries helps companies to dodge the payment of EU ETS allowances. This also becomes increasingly tempting as coverage of the EU ETS is extended to new industries. To mitigate carbon leakage, the ECB argues for a careful joint design of the EU ETS and CBAM. This would help to avoid a scenario where the CBAM is applied only to a restricted list of imports, putting the EU at a greater risk of carbon leakages without reducing global emissions.

EUROPEAN COMMISSION TO IMPOSE PENALTIES IN CASE OF FALSE GREEN CLAIMS: On 23 March, the European Commission is expected to publish a new proposal on substantiating green claims. According to the Commission, almost half of the environmental claims made about products today are unsubstantiated. The aim of the proposal is to help consumers make better-informed choices about the products they buy. Companies will have to demonstrate their claim using a verification system designed by the EU Member States. Subsequently, Member States will be responsible for the enforcement of the rules and will be able to impose proportionate and dissuasive penalties on offenders.

THE EUROPEAN COMMISSION LAUNCHES A COALITION OF TRADE MINISTERS FOR CLIMATE:  On 19 January, the European Commission together with Member States and 26 EU partner countries launched the first Ministerial-level global forum covering trade, climate and sustainable development challenges at the World Economic Forum (WEF) in Davos. The Coalition aims to identify how trade policies may address climate change and promote trade and investments in goods, services and technologies supporting adaptation and mitigation initiatives. Moreover, it provides political guidance and trade-related strategies and solutions to changing climate conditions while integrating the United Nations Framework Convention on Climate Change (UNFCCC), the Paris Agreement, Sustainable Development Goals. Pivotal to the Coalition, it will foster trade policies that support developing and least developed countries facing great risks from climate change. The Coalition will exist of trade ministers, civil society, businesses, international organizations and climate and finance communities.

NEW EUROSTAT FIGURES SHOW THAT 22% OF EU ENERGY CONSUMPTION CAME FROM RENEWABLE ENERGY IN 2021: On 19 January, Eurostat released new data showing that the share of EU gross final energy consumption from renewable sources reached 21.8% in 2021. The percentage is still below the 2030 target (32%); hence, they will have to intensify their effort to comply with the EU renewable energy trajectory. Among Member States, Sweden has the highest share of renewable energy with 62.6% (relying mainly on biomass, hydro, wind, heat pumps and liquid biofuels), followed by Finland (43.1%) and Latvia (42.1%). The lowest proportions of renewables were recorded in Luxembourg (11.7%), Malta (12.2%), the Netherlands (12.3%), Ireland (12.5%) and Belgium (13.0%). 

REPORT FINDS THAT BUILDING RENOVATION COULD SAVE 44% ENERGY FOR HEATING: On 19 January, the Buildings Performance Institute Europe (BPIE) released a report on insulation opportunities in the EU. BPIE finds that renovating residential buildings in the EU, focusing on their insulation, would significantly contribute to securing the EU’s energy independence by 2050. Specifically, the full renovation of residential buildings would lead to a 44% reduction of energy demand for heating and potentially reaching 46% and 48% of gas and coal demand, respectively. To achieve these goals, the report explains that the renovation rate must be at least doubled by 2030, and further increases must occur to reach 3% by 2035 and almost 4% by 2040. 

EU BLUE BIOECONOMY REPORT PUBLISHED: On 13 January, the European Commission published the 2022 edition of the report on EU blue bioeconomy. The biennial report provides an updated overview regarding any economic activity based on the sustainable use of renewable aquatic resources to create products. Notably, the report provides an analysis of the emerging Marine Renewable Energy sector and its role for the decarbonization of the EU energy system, namely offshore wind energy, ocean energy, floating solar photovoltaic (FPV), and renewable hydrogen production offshore.  It also provides an update regarding the role of seaweed within the marine carbon cycle and acting as a net sequestrator of CO2. Besides seaweed’s climate mitigation potential, the industry is facing challenges related to governance and market issues. The report finds that stable access to raw materials, growth in value-added products and exchange of expertise between regions will accelerate the small-scale regionally imbalanced industry and flourish new regional economies. 

EU ENERGY CRISIS UPDATE

VON DER LEYEN UNVEILS GREEN DEAL INDUSTRIAL PLAN IN DAVOS: On 17 January, European Commission President von der Leyen addressed the audience at the World Economic Forum, unveiling new details in the EU’s Green Deal Industrial Plan to ensure that the EU stays at the forefront of the clean tech industry and, thus, avoid dependencies on the growing US and especially Chinese industries. The Green Deal Industrial Plan is a key part of reaching the EU goal of net zero emission in 2050 and will be covering four key pillars: the regulatory environment, financing, skills and trade. The regulatory environment pillar rests upon a Net-Zero Industry Act to help fast up-scaling for sectors crucial to reaching net zero, such as solar, wind, green hydrogen and carbon capture. Secondly, the financing pillar aims at boosting investments and financing of clean-tech production to keep the European industry attractive. The third pillar is centered around developing the needed skills to make the green transition happen, meaning increased investments in skilled workers within the clean tech industry. Lastly, the fourth pillar will facilitate open and fair trade, aiming to prompt international trade and make the most of trade agreements.  

TIMMERMANS DISCUSSES ENERGY TRANSITION IN LIGHT OF THE CRISIS: During the International Renewable Energy Agency (IRENA) High-Level Plenary Session, Executive Vice-President Frans Timmermans touched upon the ongoing effort of the EU to move away from carbon fuels towards energy sovereignty. Calling the Russian invasion of Ukraine a history changing moment, he reported that the EU remains committed to speeding up its efforts for emissions reduction and the introduction of renewables. He stressed the European resilience, as its citizens reduced their energy consumption by 20% in a short time frame. Therefore, he is optimistic and sees much potential for renewable energy, for example for wind energy in the shallow North Sea. When asked about the controversy with regards to the US Inflation Reduction Act, Executive Vice-President Timmermans stressed that the US and the EU are on the same page with regards to their policy objectives, but that efforts should be synchronised.  

FRENCH SENATORS REJECT A RESOLUTION TO TAKE FRANCE OUT OF THE EUROPEAN ELECTRICITY MARKET: On 12 January, the French senate voted against a French motion to exit the European electricity market. Despite the expected result, the vote revealed growing scepticism against the EU electricity market. Several senators from the centre-left and the centre-right supported the motion, which was proposed by the French Communist Group. The resolution argued that the assurances provided by the common electricity market such as lower prices, new production capacities and incentives for innovation were not upheld. Consequently, the resolution called to extend France's regulated electricity tariff (TRV) to all consumers which guarantees a fixed electricity price based on true production costs. Moreover, a suspension of selling price limits for the state-owned EDF on nuclear energy – called the ARENH law – had been plead. Debates regarding the subject have been intensified in recent months with an increasingly division among parties and a growing defiance against the EU energy market.  

EUROPEAN COMMISSION'S 45% RENEWABLE ENERGY BY 2030 TARGET: Member States and the European Parliament are currently negotiating the revision of the Renewable Energy Directive (RED), a revision that will boost the European green transition, including 2030 renewable targets in the energy mix. In an interview, Vice-President Timmermans emphasizes the need to increase the renewable energy target to 45% (supported by the European Parliament), while Member States aim to retain the original 40% renewable target as part of the Trilogue negotiations on the revision of RED. Nevertheless, Vice-President Timmermans hints that Member States are becoming more positive regarding more ambitious targets to strengthen the EU's energy security and become independent from Russia's fossil fuel exports. Despite the increased short-term reliance on coal for energy production, the EU is enhancing midterm goals to decarbonize the energy system. For instance, Poland indicated higher potential to expand its clean energy targets by 2040 instead of 2030. 

ENVIRONMENT COMMITTEE ADOPTS PROVISIONAL AGREEMENT ON LULUCF, ESR AND DEFORESTATION: On 16 January, MEPs in the Environment, Public Health and Food (ENVI) Committee approved the provisional interinstitutional agreement on two key files related to the Fit for 55 package. The ENVI Committee agreed upon the text agreed in Trilogue negotiations regarding the regulation on Land-Use, Land-Use Change and Forestry (LULUCF), which sets out 2030 targets for Member States and the collective achievement to reach climate neutrality by 2035 in the land use, forestry and agriculture sector. Furthermore, the ENVI Committee adopted the Effort Sharing Regulation (ESR) Trilogue agreement on binding annual reductions of GHG emissions by Member States from 2021-2030. Finally, MEPs adopted the agreement on the Deforestation Regulation, which  includes a ban of certain commodities and products associated with deforestation and forest degradation within the EU market. Following the vote in the ENVI Committee, the texts need to be formally adopted by the European Parliament and by the Council of the EU before entering into force. 

EUROPE'S BIGGEST DEPOSIT OF RARE EARTH METALS DISCOVERED IN SWEDEN: On 12 January, LKAB – a Swedish state-owned mining company – stated that it located more than one million tons of rare earth oxides in the North of the country. The newly found deposit is the largest of its kind ever identified on European soil. It possesses apatite – a group of phosphate minerals – which takes a pivotal role in the EU Green Deal as those minerals are essential to produce electric vehicles, wind turbines and in other high-tech manufacturing processes. The deposit will contribute to the EU's strategy for self-sufficiency in key minerals and independence of Russia and China. Even though, the European Commission identifies rare earth metals to be among the most critical resources, exploitation of the deposit will take approximately 10-15 years due to Sweden's demanding concession procedures. To address this issue and make the EU more resilient, on 8 March, the European Commission will publish the EU Critical Raw Material Act. Currently, the EU lacks the capacity to process rare earth metals and create intermediary products due to the absence of rare earth mining in Europe. European Commission President von der Leyen welcomed the discovery as a strategic gain for the EU during her visit in Sweden.  

VON DER LEYEN REAFFIRMS THE EU EFFORT TO ENSURE EU COMPETITIVENESS: On the occasion of the inauguration of the Swedish Presidency of the Council of the EU, President Von der Leyen addressed some key EU priorities for 2023 in a statement. Under the Swedish Presidency, the EU is planning to continue a swift progress regarding energy independence by operationalizing a joint purchasing mechanism and establishing a further scale up of the deployment of renewables. Besides that, she is confident that, during this Presidency, negotiations on the legislation related to the European Green Deal and the Fit for 55 package will be concluded. Competitiveness of the EU’s businesses should also be ensured, for instance supporting the clean-tech industry and preserving a level playing field with China and the US (Inflation Reduction Act). Therefore, she calls upon the Swedish Presidency to prioritize legislation that would reduce EU’s dependency from non-EU countries, such as hydrogen and raw materials. Moreover, she calls on an update of Europe's state aid framework that still preserves the European Single Market. 

INTERNATIONAL ENERGY AGENCY (IEA) AND EUROPEAN PATENT OFFICE (EPO) PUBLISH A NEW JOINT STUDY ON HYDROGEN PATENTS: The report, published on 10 January, analyzes the extent of innovation regarding hydrogen technologies, finding that the development of hydrogen technology lead towards clean and low-emission solutions. By using global patent data, the study reviews major trends in hydrogen technologies across countries and industry sectors over the period 2011-2020 and cover all types of hydrogen technology such as supply and storage, distribution, and transformation as well end-use applications. The study finds that the EU is taking the lead in global hydrogen patenting (28%) while the number of hydrogen patents applications has been declining in the United States. Moreover, data shows that the European chemical industry has been a prominent first mover in clean hydrogen technologies such as electrolysis and fuel cells. Finally, the study finds that, in 2020, nearly 80% of all patents related to hydrogen production were inspired by climate change concerns. Overall, the report endorses hydrogen’s potential to decarbonize industries where few clean alternatives exist such as aviation, steel production, long-distance transport or power generation.

CONNECTING EUROPE FACILITY (CEF) EXTENDS ENERGY PROGRAM 2021-2027: The CEF Energy Program has been set up to provide financial support to meet EU decarbonization targets and focuses on renewable energy and energy supply security. Recently, it has been extended with a cross-border renewable energy (CB RES) window which opts for cross-border cooperation both physically as well as non-physically between EU Member States, but also between Member States and non-EU countries. Therefore, the European Commission and the European Climate, Infrastructure and Environment Executive Agency (CINEA) are launching a second call to obtain a status of cross-border renewable energy projects (CB RES Status), eligible for CEF funding. Moreover, obtaining the status may provide further benefits such as higher visibility and investor certainty as well as stronger support from EU countries. Applications must be submitted by 3 May 2023 via the CB RES submission platform.

GERMANY AND NORWAY TO STRENGTHEN ENERGY PARTNERSHIP: On 5 January, Norwegian Prime Minister Jonas Hag Store announced that Norway and Germany have agreed to a establish a strategic partnership on climate, renewable energy and green industries. The partnership is meant to ensure closer cooperation on hydrogen, offshore wind batteries, carbon capture and storage, green shipping, microelectronics and raw materials. The partnership should lead to the building of hydrogen pipeline between the two countries. German Vice-Chancellor Robert Habeck added that Norway is Germany’s most important energy supplier and will continue to be during both states’ energy transition.

EU LEGISLATORS EXPECTED TO REACH AN AGREEMENT ON THE ENERGY EFFICIENCY DIRECTIVE IN 2023: In 2021, the European Commission proposed a revision of the Energy Efficiency Directive in order to stir and increase energy savings at EU level. Amid the energy crisis and increased geopolitical tension, necessity for energy savings has increased, yet progress on the file has been rather slow under the Czech Presidency.. Although co-legislators found a deal on the majority of the legislation’s articles, most political topics such as the EU’s overall energy efficiency target and national targets are still being debated, with strong opposition between both institutions. Nevertheless, co-legislators expect to reach an agreement under the Swedish Presidency of the Council of the EU, which will last between January and July 2023, in order to further move away from Russian energy.

EU ENERGY CRISIS UPDATE

COMMISSIONER FOR INTERNAL MARKET THIERRY BRETON PRESENTS EU’S RESPONSE TO THE AMERICAN INFLATION REDUCTION ACT (IRA): On 10 January, Commissioner for Internal Market Thierry Breton announced a plan – the Clean Tech Act – to build a more resilient European industry. This plan comes as a response to the US Inflation Reduction Act (IRA), that could eventually jeopardize future investments in EU industries. The ’European IRA’ should protect the EU market through horizontal legislation and by levelling the playing field for industries in terms of equal access to European subsidies, especially regarding sustainable supply chains. To assemble a broad European support for his Act, Breton seeks allies in those Member States whose economies are heavily industrialized, such as Belgium, Poland and Spain. Breton’s announcement follows the proposal by the French Minister for Economy, Bruno le Maire, on a new bill aiming to incentivize green industries to bring production sites to France. The bill mainly targets companies active in green hydrogen, electric batteries production, nuclear energy and renewables. The bill will come alongside Germany and France’s push to agree on a European Inflation Reduction Act (IRA), which also intends to subsidize green industries. The bill comes as a protectionist measure shortly after the adoption of the US Inflation Reduction Act which has sparked fear that US state aid will siphon away EU investments. At the EU-level, Member States asked the European Commission to present a proposal to ensure European companies’ competitiveness in response to the US IRA. The proposal is expected to be discussed during the European Council meeting in February.

EUROPEAN PARLIAMENT, COUNCIL OF THE EU AND EUROPEAN COMMISSION PRESENT JOINT DECLARATION ON PRIORITIES FOR 2023 AND 2024: On 15 December 2022, the European Parliament, the Council of the EU and the European Commission presented the EU legislative priorities for 2023 and 2024. In the declaration, they indicate that their utmost priority is delivering on the European Green Deal to reach climate neutrality by 2050. This notably means working to accelerate the green and just transitions as a key part of the solution to ensure energy security and tackle high energy prices. They also aim to swiftly conclude work on the ‘Fit for 55’ package to achieve the EU’s 2030 emissions reduction targets, coupled with an enhanced ambition to achieve the REPowerEU objectives of phasing out dependence on Russian fossil fuels and boosting renewable energy in Europe. To that aim, the institutions will prioritize the overhaul of the EU electricity market, the kick-start of the EU hydrogen market and a faster roll-out of renewables. Furthermore, the three EU bodies wish to further advance on climate measures, notably on transport emissions and pollution, greening freight transport as well as on carbon removal certification. They will also give priority to reducing waste and its environmental impact.

FRENCH MEPs CRITICAL OF EU PLANS TO INCLUDE PRIVATE HOUSEHOLDS UNDER THE EU ETS: On 18 December 2022, the European Parliament and Council of the EU agreed to expand the EU Emissions Trading System (EU ETS) to the budling and transport sector, including private households as well, starting from 2027 (compared to 2029 in the original European Commission’s proposal). The decision has sparked strong criticism among French MEPs. In spite of a decision to establish a Social Climate Fund to support the transition, French lawmakers warned that the consequences may lead to strong social revolt, similar to the Yellow Vests movement. According to the French lawmakers, the EU ETS reform will make the most vulnerable pay more. MEP Pascal Canfin (RE, France), who initially opposed the inclusion of private households under the EU ETS, eventually defended the decision on grounds that the extension will be implemented “under very strict conditions”.

EUROPEAN PARLIAMENT PUBLISHES STUDY ON ROLE OF FINANCIAL OPERATORS IN ETS MARKET: The study was published on 5 January at the request of the parliamentary Committee on Industry, Research and Energy (ITRE). It studies the role of financial actors, such as banks and investors, in the EU Emissions Trading System (ETS). Notably, the study finds that financial operators responsible for the largest trading volume carbon allowances on the market. Additionally, the study finds that, since 2017, the market has attracted an increasing number of new financial players, including some that want to generate gains from speculating. Hence, the study observes that market activities should be further monitored, while the quality and availability of data on the matter should be improved. Regulation on this matter might be required in the future.

SWEDEN AIMS AT REACHING AGREEMENTS ON KEY CLIMATE PROPOSALS DURING ITS PRESIDENCY: On 1 January, Sweden took over the rotating presidency of the Council of the EU from Czech Republic. In that context, Swedish ambassadors presented the Swedish Presidency’s priorities on 8 January. During its six-month mandate, the country has the intention to finalize the Trilogue negotiations on key climate legislations, namely the Renewable Energy Directive, the Energy Efficiency Directive, the Energy Performance of Buildings Directive as well as FuelEU Maritime and RefuelEU Aviation. Negotiations on the Energy Taxation Directive are expected to take longer, as talks in both the Council of the EU and in the European Parliament have slowed down due to the energy crisis and the high energy prices.

ENERGY COUNCIL AGREES ON ACCELERATED PERMITTING PROCEDURES: On 19 December, the Energy Council reached a General Approach on amendments to the Renewable Energy Directive, proposed under the REPowerEU plan. As regards “renewable go-to areas”, the Council of the EU agreed that that permit-granting processes should not last longer than one year for renewables projects, and two years for offshore renewables projects. For areas outside “renewable go-to areas”, permitting procedures should not exceed two years. 

Ministers also agreed on the target of at least 40% of the share of energy from renewable sources in 2030 in the EU’s gross final consumption (REPowerEU proposed 45%). However, not all Member States agreed upon the lower target. Following the Energy Council meeting, a group of Member States (Austria, Denmark, Estonia, Germany, Greece, Luxembourg, Portugal and Spain) issued a joint declaration supporting the 45% renewable target. Significantly, they called for higher ambition during the Trilogue negotiations on the Renewable Energy Directive (RED). The European Parliament voted on the file on 13 December, setting more ambitious permitting targets than the Council of the EU; the co-legislators will now be able to factor their positions into the ongoing negotiations on the RED. 

ENERGY COUNCIL ADOPTS GENERAL APPROACH ON METHANE EMISSIONS REGULATION: During the same meeting on 19 December, the Energy Council adopted a General Approach on the Methane Emissions Regulation. Member States voted to lower the ambition of the European Commission proposal. For example, they propose that companies should check their infrastructure for methane leaks twelve months after the law takes effect. Afterwards, compressor stations and LNG terminals would be checked every six months, valve stations every twelve months and pipelines every two years. The European Commission previously proposed checks for all infrastructure every quarter. The Council of the EU is now ready for negotiations with the European Parliament, which still has to adopt its position; the Parliament Environment (ENVI) and Industry (ITRE) Committees, which are jointly responsible for the file, expect to vote in March 2023. 

EU ENERGY CRISIS UPDATE

ENERGY COUNCIL AGREES ON GAS PRICE CAP: On 19 December, the Energy Council managed to find an agreement on a gas price cap. The so-called “market correction mechanism” is to take effect on 15 February and will last for one year. If a price level of €180 per megawatt hour is reached on the European gas exchanges and European prices are at least €35 above the global LNG price during that time, a €180 gas price cap will come into effect. This ceiling is slightly higher than the current market price, but considerably below the peaks of about €300 that were reached earlier this year and the €275 price cap which had originally been proposed by the European Commission. The proposal was adopted by qualified majority voting: Hungary voted against, while The Netherlands and Austria abstained. In a reaction, Dutch Minister for Climate and Energy, Rob Jetten, stated that he was concerned about a possible distortion of the European energy market. Germany, which previously opposed gas price cap proposals, now supported the scheme. According to Minister for Economic Affairs and Climate, Robert Habeck, the cap contains sufficient safeguards. 

ENERGY COMMISSIONER SIMSON WELCOMES THE AGREEMENT ON GAS PRICE CAP: Following the agreement in the Energy Council, Commissioner for Energy, Kadri Simson, welcomed the deal reached by energy ministers on the “market correction mechanism”. She stressed how the European Commission’s proposal on the gas price cap aims to better prepare the EU for next winter and support storage filling in 2023. Commissioner Simson underlined that the mechanism agreed comes with risks, such as attracting liquified natural gas (LNG) supplies, liquidity in financial markets and gas consumption. To assess if the risks outweigh the benefits, the European Commission asked the European Central Bank (ECB), the European Union Agency for the Cooperation of Energy Regulators (ACER) and European Securities and Markets Authority (ESMA) to issue a report on the mechanism before it enters into force on 15 February. In case of negative findings, the European Commission will suspend ex ante the activation of the mechanism. 

FRANCE AND GERMANY CALL FOR FAST-TRACK SUBSIDIES IN RESPONSE TO US INFLATION REDUCTION ACT: On 19 December, French and German ministers for economy called on the European Commission to support European industries with a new European Green Industrial Policy in response to the recently announced US Inflation Reduction Act. To safeguard European companies’ competitiveness, France and Germany propose a more agile and reliable state aid policy framework. They argue that the state aid framework should allow targeted subsidies and tax-credits for key industrial sectors (e.g., wind, heat pumps, hydrogen and photovoltaic) and support companies in the decarbonization of their operations. Furthermore, the Member States announced their support for the green industrial transition, for instance ensuring access to affordable, safe and sustainable electricity as well as boosting hydrogen infrastructure and wind energy production. 

EUROPEAN COMMISSION APPROVES ENERGY STATE AID FOR CZECH REPUBLIC AND THE NETHERLANDS: On 16 December, the European Commission approved a €1 billion Dutch scheme to support small energy users in the context of Russia's war against Ukraine. The measure will be open to all small energy users active in the Netherlands (mainly SMEs) to offset a part of the monthly energy bills for electricity, gas and heat. Moreover, the European Commission authorized a €1.2 billion Czech state aid scheme to promote green and more efficient district heating mainly based on renewable energy. The scheme will be financed by the EU Modernization Fund and will run until 14 January 2026. The goal is to support the installation of new heat generation units based on renewable energy or high-efficiency cogeneration to replace existing installations, as well as the modernization of existing heat generation unit to operate with biomass instead of coal. 

CO-LEGISLATORS REACH A POLITICAL AGREEMENT ON EU ETS AND SOCIAL CLIMATE FUND: On 18 December, negotiators of the European Parliament and the Council of the EU reached a political agreement on the revision of the EU Emissions Trading System (EU ETS). Co-legislators agreed that energy producers and heavy polluters covered by the ETS must reduce their pollution by 62% by the end of the decade. This is 1% more than originally proposed by the European Commission. In addition, the agreement specifies that all ETS revenues should be spent on climate measures. Free emission allowances for sectors covered by ETS will be phased out between 2026 and 2034. The agreement also provides for an extension of the ETS to road transport and buildings by 2027. As previously agreed, EU ETS will also be extended to the maritime sector. During the same ‘Jumbo Trilogue’ on 18 December, co-legislators reached an agreement on the establishment of a Social Climate Fund (SCF). The SCF should benefit vulnerable households, micro-enterprises and transport users affected by energy and transport poverty and protect them from the price effects of the revised EU ETS. EU negotiators agreed on a fund with a total value of €86.7 billion, starting in 2026 and running until 2032. This is considerably more than the €59 billion originally envisioned by the Council of the EU. The SCF should be mostly funded by the auctioning of EU ETS allowances, while 25% of the funding should be raised through co-financing by Member States. 

COUNCIL REACHES PROVISIONAL AGREEMENT ON REPOWEREU: On 14 December, the Council of the EU reached a provisional agreement on the REPowerEU proposal with negotiators from the European Parliament, which aims to strengthen the strategic autonomy of the European Union by diversifying energy supplies and boosting the independence and security of the Union’s energy supply. The deal provides that Member States applying to receive additional funds through an amended recovery and resilience plan will be required, after the entry into force of this proposal, to include measures to save energy, produce clean energy and diversify energy supplies, as foreseen in the EU’s REPowerEU plan. The agreed text is subject to formal approval by the Council of the EU and the European Parliament before the new rules enter into force. 

MEPS AGREE ON SPEEDING UP PERMITTING PROCEDURE FOR RENEWABLE ENERGY INSTALLATIONS:On 14 December, the European Parliament adopted its position on the proposal on permitting procedure for renewable energy installations. Notably, MEPs reduced the maximum permitting period from 12 to nine months in case the installation is located in ‘renewables acceleration areas’. Outside such areas, the process should not exceed 18 months. As regards the designation of ‘renewables acceleration areas’, Member States should avoid or limit any negative environmental impact and involve the public in the decision. The proposal also includes an obligation for Member States to ensure that permits to install solar energy equipment on buildings are delivered within one month, while for smaller installations a simple notification procedure would be sufficient. Following this vote, the European Parliament is ready to enter into interinstitutional negotiations with the Council of the EU. 

EU ENERGY CRISIS UPDATE

SWEDISH PRESIDENCY PRIORITIES ON GREEN & ENERGY TRANSITION: On 14 December, the Swedish government released the program detailing the priorities of the Swedish Presidency of the Council of the EU in the first half of 2023. The Swedish Presidency commit themselves to continue efforts to tackle high and volatile energy prices while addressing long-term energy market reform. Other priorities are the application of Fit for 55 files and the acceleration of energy transition. The Swedish Presidency also endeavors to provide the right regulatory framework and policies to attract major investments in innovative industries. 

COUNCIL POSTPONES POLITICAL AGREEMENT ON MARKET CORRECTION MECHANISM: On 13 December, during an extraordinary Energy Council meeting, the EU energy ministers discussed a proposal for a market correction mechanism  to protect citizens and the economy against excessively high prices The Council of the EU will seek a political agreement on the proposal at the next Energy Council on 19 December. Ministers will aim to formally adopt the proposed Regulation on enhancing solidarity through better coordination of gas purchases, exchanges of gas across borders and reliable price benchmarks and a Regulation laying down a temporary framework to accelerate the deployment of renewable energy. The content of these proposals was agreed during the Energy Council on 24 November 2022. 

COMMISSION PRESIDENT VON DER LEYEN WORRIES ABOUT NEXT YEAR’S GAS SUPPLIES: On 12 December, President of the European Commission Ursula von der Leyen addressed the current European gas supply during a press conference together with the head of the International Energy Agency (IEA), Fatih Birol. She ensured that the gas supply is safe for this winter but indicated that the EU might face a severe shortfall of up to 30 billion cubic meters of gas next year. In her speech, President von der Leyen called on the Council of the EU to adopt the proposals on energy preparedness and she announced a European response to the US Inflation Reduction Act that will safeguard European industries competitiveness. These projections were included in a report by IEA on avoiding European gas shortages in 2023. The report finds that an overall supply-demand gap of 57 billion cubic meters (bcm) could arise in 2023, but 30 bcm is already covered by EU actions already in motion, such as measures targeting security of supply and accelerating permitting for renewables. To close the remaining gap of 27 bcm, IEA recommends expanding existing efforts on energy efficiency such as home renovations and efficient appliances, as well as to speed up the transition to renewables by significantly simplifying procedures and increasing funding. The report was also announced in the backdrop of strong political disagreements among Member States on a gas price cap, which they hope to resolve this month. 

EUROPEAN COMMISSION ADOPTED ITS ANNUAL CARBON MARKET REPORT: On 14 December, the European Commission adopted its annual Carbon Market Report which tracks the functioning of the EU Emissions Trading System (EU ETS) from the beginning of the fourth trading phase in 2021 up until to mid-2022. The report finds that ETS emissions from stationary installations (energy and carbon-intensive industry) increased in 2021, by 6.6% compared to 2020, but remained below the pre-pandemic 2019 levels. In the aviation sector, following a drop of some 60% in 2020, emissions increased in 2021 by 30%. The auctioning of allowances in the EU ETS, generated extraordinary annual revenues of €51.7 billion in the period January 2021 – June 2022. 76% of these revenues were used on climate and energy related project. 

EUROPEAN PARLIAMENT AND COUNCIL OF THE EU REACH AN AGREEMENT ON CBAM: On 13 December, co-legislators reached an agreement on the proposed Carbon Border Adjustment Mechanism (CBAM). According to the provisional agreement, CBAM will cover iron and steel, cement, aluminum, fertilizers, and electricity, and extended to hydrogen, indirect emissions under certain conditions, certain precursors as well as to some downstream products such as screws and bolts and similar articles of iron or steel. Before the end of the transition period, the European Commission should assess whether to extend the scope to other goods at risk of carbon leakage, including organic chemicals and plastics, with the goal to include all goods covered by the ETS by 2030. The new rules will apply from 1 October 2023 and the governance of CBAM will be centralized at EU level. The phasing out of free allowances for CBAM sectors still needs to be agreed in the context of the ongoing EU Emissions Trading System (ETS) negotiations. The deal is now subject to formal approval by the European Parliament and the Council of the EU before it enters into force. Commenting on the Trilogue negotiations, BusinessEurope called for a WTO-compatible CBAM and for a EU ETS that ensures European companies’ competitiveness. 

GERMAN CHANCELOR SETS OUT G7 GLOBAL CLIMATE CLUB: Chancellor Olaf Scholz presented the terms for the ‘climate club’ he already proposed in 2020 and was further discussed and approved on 12 December within the context of the G7 meeting. The initiative should serve as a cooperation between the most ambitious countries in terms of climate mitigation. The aim is to enable global climate action by supporting an industrial transition towards near zero emissions. The official launch of the initiative will be during de COP23 in December 2023, nine months later than expected. During the same period, American president Joe Biden announced a similar initiative to create a consortium to boost trade in more climate neutral metals.  

COMMISSION POSED TO UNVEIL EU RULES ON RENEWABLE HYDROGEN: The rules that will govern the requirements for hydrogen to be certified as renewable, so-called additionality rules, are expected to be unveiled by the European Commission on 15 December. By including a temporal and geographical component, the rules want to link actual renewable electricity production to nearby hydrogen production. This means that hydrogen production must be located as near as possible to a wind park and produce hydrogen when the wind is blowing. However, a draft shows that, until 31 March 2028, this approach will largely be discarded as demonstrating a quarterly overlap between renewable output and hydrogen production will suffice. The European Commission is looking to release the delegated act on 15 December for consultation that will be open for a four-week period.

EIB SIGNS PARTNERSHIP WITH CAISSE D’EPARGNE, INVESTS IN BATTERY PRODUCTION: On 7 December, the European Investment Bank (EIB) announced the signing of a €350 million financing package with the French bank Caisse d’Epargne. The package is exclusively dedicated to financing of solar and wind projects. In addition, the EIB is providing a €36.7 million loan to Königswarter & Ebell, a German subsidiary of Australia’s Pure Batteries Technologies. The loan should help finance a commercial and environmentally friendly demonstration plant for precursor cathode active material (pCAM), which is used to produce advanced lithium-ion cells.

EU ENERGY CRISIS UPDATE

CZECH PRESIDENCY AIMS TO LOWER GAS PRICE CAP THRESHOLDS: On 6 December, the Czech Presidency of the Council of the EU has circulated a new price gas cap proposal. The original European Commission proposal for a price cap came under fire after its publication in November, as thresholds for triggering a price cap were considered too high. The revised proposal significantly lowers these. The price trigger at the TTF gas trading hub has been lowered from €275 per megawatt hour in the European Commission proposal to €220 per megawatt hour in the Czech Presidency’s proposal. In addition, the timeframe in which the price needs to exceed the cap level to trigger the cap has been reduced from two weeks to five days. Finally, the difference between the TTF and the global LNG price has to be more than €35 – this was €58 in the original proposal. The Czech Presidency text is set to be discussed at the extraordinary Energy Council on 13 December.

NETHERLANDS PROPOSES OWN GAS PRICE CAP PLAN:Ahead of the Extraordinary Council of 13 December, the Netherlands has come up with its own initiative to prevent gas price spikes in the EU. The plan aims to limit the cost of gas purchases for “price insensitive” buyers, such as those supported by governments or those legally obliged to buy supplies to fill up storage for winter. According to the Netherlands, demand from Member States aiming to fill up their storages was one of the main factors in pushing up gas prices during summer.

COUNCIL DECIDES TO SET PRICE CAP FOR RUSSIAN OIL: As part of the EU eight sanction package  following Russia’s military aggression against Ukraine, 3 December, the Council of the EU set an oil price cap for crude oil and petroleum oils and oils which originate in or are exported from Russia, at $60 per barrel. The level of the cap was established in close cooperation with the Price Cap Coalition and became applicable as of 5 December 2022, the price cap was furthermore also coordinated in the context of the G7. The Council of the EU also introduced an “emergency clause” which allows the transport of oil beyond the price cap or the provision of technical assistance, brokering services or financing or financial assistance related to the transport, when these are necessary for the urgent prevention or mitigation of an event likely to have a serious and significant impact on human health and safety or the environment, or as a response to natural disasters.

PARLIAMENT, COUNCIL AND COMMISSION REACH DEAL ON EU CARBON TAX TO FLIGHTS WITHIN EUROPE: On 7 December, the co-legislators struck a deal regarding the EU Emissions Trading System (ETS) as regards aviation. The provisional deal  ensures that the price on aviation carbon emissions will continue to apply only to flights within Europe. Flights travelling to or from outside of the European Economic Area (EEA) will be covered by the United Nation’s CORSIA, an offsetting scheme that places a substantially lower price on emissions than the EU ETS. However, under the agreement, the European Commission must assess by 1 July 2026 whether the CORSIA system is an effective tool to cut global flight emissions. If the EU executive finds this is not the case, the European Commission will present a proposal to apply ETS to all flights departing from an airport located in the EEA. Flights to countries not applying CORSIA will also fall under the scope of the ETS from 2027. This provisional agreement will be subjected to a formal adoption during the jumbo Trilogue meeting on 16 December.

COUNCIL AND PARLIAMENT REACH PROVISIONAL DEAL ON DEFORESTATION AND FOREST DEGRADATION REGULATION: On 6 December, the Council of the EU and the European Parliament reached a provisional deal on a proposal for a regulation to minimize the risk of deforestation and forest degradation associated with products that are imported into or exported from the European Union. The provisional agreement sets mandatory due diligence rules for all operators and traders who place, make available or export the following commodities from the EU market: palm oil, beef, timber, coffee, cocoa, rubber and soy. The rules also apply to a number of derived products such as chocolate, furniture, printed paper and selected palm oil based derivates (used for example as components in personal care products). A review will be carried out in two years to see if other products need to be covered. The co-legislators set the cut-off date of the new rules on 31 December 2020, meaning that only products that have been produced on land that has not been subject to deforestation or forest degradation after 31 December 2020 will be allowed on the Union market or to be exported.

COMMISSION ADOPTS HORIZON EUROPE WORK PROGRAMME 2023-2024: On 6 December, the European Commission approved the Horizon Europe 2023-24 work program, with about €13.5 billion to support researchers in Europe to find breakthrough solutions to environmental, energy, digital and geopolitical challenges. As part of the EU’s broader €95.5 billion Horizon Europe research and innovation program, this funding will help the EU meet its climate goals, increase energy security and develop key digital technologies. It will contribute to a stronger European research and innovation ecosystem, including through wider participation of researchers across Europe, as well as increased mobility and funding for world-class research infrastructure. The first calls for proposals opened on 7 December on the EU Funding & Tenders Portal. Horizon Europe information days for potential applicants will take place between 6 December 2022 and 16 February 2023. During a speech on 29 November, European Commissioner for Innovation and Research Mariya Gabriel stated that the Horizon Europe work program will help EU missions in 2023 find concrete solutions to some of the biggest challenges, such as improving cities to meet anti-pollution targets.

PUBLICATION OF STUDY ON THE ROLE OF FINANCIAL OPERATORS IN THE ETS MARKET:On 6 December, the Directorate-General for Internal Policies of the European Parliament released a study on the role of financial operators in the ETS market, as requested by the parliamentary Industry, Research and Energy (ITRE) Committee. This study investigates the role of financial actors, such as banks and investors, in the EU Emissions Trading System and their role in determining price dynamics and volatility. It concludes that activities on the market should be further monitored and data availability and quality improved. While further regulation of market participants may become necessary in the future, it is, at this stage, more important to focus on improving the Market Stability Reserve (MSR).

NEW BENEFICIARIES OF THE JUST TRANSITION FUND (JTF) ANNOUNCED: On 5 December it was announced five Polish regions will receive a tot of €3.85 billion in order to help them pursue a just transition towards a climate neutral economy. The projects will make part of the EU Cohesion Policy and will focus on Poland’s coal regions of Silesia, Malopolska, Wielkoposlka, Lower Silesia and Lodzkie. The fund will focus mostly on diversifying local economies towards small and medium sized businesses and renewable energy. Furthermore, projects to restore environmental damage caused by mining activities will also receive funding. Furthermore, Croatia will also receive €179 million from the JTF to support the counties of Istria and Sisak-Moslavina. The fund will contribute to their effort to transition away from coal-generated electricity and polluting industries.

COUNCIL ADOPTS POSITION ON TEN-T REGULATION: On 3 December, the Council of the EU adopted its common position regarding the proposal for a regulation on Union guidelines for the development of the trans-European transport network. The proposal sets clear deadlines for the completion of the trans-European transport network: the core network should be completed by 2030, the newly added extended core network by 2040 and the comprehensive network by 2050. Despite the considerable differences in terms of transport infrastructure between Member States, the Council of the EU’s General Approach preserves an appropriate level of ambition, which is sufficiently high and realistic. The Council’s text also takes into account the available financial resources of the Member States, as well as the investment needs for the development of the trans-European transport network. Regarding the development of inland waterway transport (NAIADES III), the Council of the EU focuses on the cornerstones of effective inland waterway transport and the need for further development and coordination in the areas of fleet renewal, reliable and sustainable well-maintained infrastructure, safe and secure workplaces and digitalization.

COMMISSION MAKES €623 AVAILABLE FOR JUST TRANSITION IN THE NETHERLANDS: On 2 December, the Commission adopted the Dutch Territorial Just Transition Plan (TJTP) making €623 million available under the Just Transition Fund (JTF) to support a fair transition to a climate-neutral economy. The JTF will invest in green technologies for industry, as well as renewable hydrogen in the electrification of industrial processes and further innovation in circularity for industry. The JTF will also support energy efficiency in housing, the production of renewable energies as well as climate-neutral logistics.

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.

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.