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EU ENERGY CRISIS

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

VON DER LEYEN PRESENTS EU ENERGY PRIORITIES: On 14 September, the European Commission President Ursula von der Leyen delivered her ‘State of the European Union’ address during the Plenary session of the European Parliament in Strasbourg. She outlined the Commission’s priorities in response to the increasing energy prices and the difficult economic situation for citizens and businesses. The Commission aims to propose a cap on revenues of companies that produce electricity at a low cost, decouple gas and electricity prices and establish a more representative natural gas price benchmark that would reflect the switch to liquified natural gas (LNG). As regard the energy transition, President von der Leyen stressed the relevance of hydrogen to achieve the green transition, announcing the establishment of a European Hydrogen Bank. Furthermore, President von der Leyen highlighted the impact climate change has had on EU energy prices, such as the disruptions of nuclear and hydro plants during summer. Therefore, she emphasized the need to reach ambitious global deals for nature and the climate at the UN Biodiversity Conference in Montreal and COP27 in Sharm el-Sheikh. In the context of the twin transition, President von der Leyen underlined the significant role of critical raw materials and announced a European Critical Raw Materials Act, which would build up strategic reserves where supply is at risk and reduce the EU dependency on the refining of raw materials. Check out our article to learn more on the EU energy priorities for 2023. 

EUROPEAN COMMISSION PRESENTS MEASURES TO TACKLE ENERGY PRICES: Following the State of the Union address, Executive Vice-President Frans Timmermans and Energy Commissioner Kadri Simson presented three measures to tackle rising high energy prices. First, the European Commission proposes a mandatory electricity consumption reduction by at least 5% during peak price hours. In addition, Member States should reduce overall electricity demand by at least 10% until 31 March 2023. The second measure is a temporary revenue cap on ‘inframarginal’ electricity producers. Member States should use the revenues above the cap to help reduce the consumers’ energy bills. Finally, the Commission is proposing a temporary solidarity contribution on excess profits generated from activities in the oil, gas, coal and refinery sectors. 

EUROPEAN PARLIAMENT PLENARY DEBATE ON ENERGY PRICE CRISIS: On 13 September, the European Parliament Plenary session debated potential measures against the rising energy prices in the EU. Kadri Simson, European Commissioner for Energy, presented the measures that would officially be adopted by the Commission the following day. These measures include reducing electricity demand during peak price hours; limiting windfall profits of energy companies with cheap production costs and working with electricity market regulators to address liquidity problems on the market. To address rising energy prices, the EPP Group underlined the need for better energy infrastructure, fast-track investments, international energy alliances as well as use the funds from the Recovery Fund and RePowerEU to lower prices. The S&D Group called on the Commission and Council to take more far-reaching measures, such as a price cap on energy imports. It also stressed the need for fair redistribution of windfall profits. Renew Europe likewise expressed its support for a price cap and called for ambitious measures to reduce demand and improve energy efficiency. In addition, accelerated investments in renewable energy would help reduce the EU’s energy dependence.  

Highlights of the week

MEPS INCREASE ENERGY SAVINGS TARGETS IN THE ENERGY EFFICIENCY DIRECTIVE: On 14 September, the European Parliament adopted the report by Rapporteur Niels Fuglsang (S&D, Denmark) on the Energy Efficiency Directive (EED) with 469 votes in favour, 93 against and 82 abstentions. MEPs raised the EU target for reducing final and primary energy consumption. Member States should set national binding contributions to ensure a reduction at least of 40% by 2030 in final energy consumption and 42.5% in primary energy consumption compared to 2007 projections. The original Commission proposal indicated as target 36% and 39% for final and primary energy consumption, respectively. The additional reduction results in 740 Mtoe for final consumption and 960 Mtoe for primary energy consumption in 2030. In addition, the European Parliament’s text includes a trajectory with two milestones in 2025 and 2027 for Member States to notify their energy efficiency contributions to the European Commission. Following the adoption of the European Parliament’s position, the file will enter into interinstitutional negotiations.  

EUROPEAN PARLIAMENT VOTES TO RAISE THE RENEWABLE ENERGY TARGET IN THE EU: On 14 September, MEPs adopted the report by Rapporteur Markus Pieper (EPP, Germany) on the Renewable Energy Directive (REDIII). In line with the REPowerEU proposal, the final text increases the share of renewable energy in the EU’s final energy consumption to 45% by 2030. The European Parliament also outlines sub-targets for sectors such as transport, buildings, and district heating and cooling. For instance, deploying renewables in the transport sector should lead to a 16% reduction in GHG emissions, through the use of higher shares of advanced biofuels and a more ambitious quota for renewable fuels of non-biological origin such as hydrogen. Industry should boost its use of renewables by 1.9 percentage points per year, and district heating networks by 2.3 points. Notably, MEPs voted on a definition of green hydrogen, which disregards a controversial delegated act of the Commission defining green hydrogen and additionality. MEPs nonetheless included some of the delegated act’s provisions in the REDIII. In the next weeks, the first Trilogue meeting is expected to took place. 

EUROPEAN POLITICAL GROUPS REACT ON THE DEBATE AND VOTE ON EED AND RED: Following the vote on the Renewable Energy Directive (RED) and Energy Efficiency Directive (EED) in the European Parliament’s Plenary, Renew Europe voiced its support for the two texts adopted. In particular, it supports the new EED and RED targets in order to cut emissions, tackle energy poverty and move away from Russian fossil fuels. Ahead of the vote, the other groups had also highlighted their positions. For instance, the S&D Group underlined how the new EED target to reduce energy efficiency by 40% by 2030 would save on gas import the equivalent of three and a half times the capacity of Russia’s Nord Stream 1 pipeline. The EPP Rapporteur of the RED, Markus Pieper, highlighted the importance of investing in hydrogen and calls for an agreement with the Council of the EU on a hydrogen import strategy. MEP Ville Niinistö (Greens/EFA, Finland) also expressed his support for the reports on RED and EED table for vote. In particular, he stressed that his group would defend the new targets during Trilogue meetings with the Council of the EU, whose general approach retains the original and lower targets of the Commission’s proposals. 

What’s next?

From 26 to 30 September, the European Commission is organizing the EU Sustainability Energy Week during which the REPowerEU plan, energy efficiency and a fair energy transition for all will be discussed.

On 30 September, an extraordinary Energy Council will take place, to follow-up on the measures presented by the Commission on 14 September.  

On 3 October, the Committee on Transport and Tourism is expected to vote on the draft report on the Alternative Fuels Infrastructure Directive and FuelEU Maritime. 

On 18 October, the European Commission will present its Work Programme for 2023, presenting its upcoming policy initiatives.  

 

EU ENERGY CRISIS

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

VON DER LEYEN PROPOSES MEASURES TO COMBAT ENERGY CRISIS: On 7 September, President of the European Commission Ursula von der Leyen announced a package of immediate measures to combat rising energy prices, to be discussed with EU Member States during the extraordinary Energy Council on 9 September. The first measure is a mandatory target for reducing electricity consumption during peak hours. In addition, the Commission proposes to cap windfall profits, both by companies producing energy at low costs and by fossil fuel companies. Third, Member States should invest these revenues to support vulnerable households and companies as well as alternate home-grown energy sources, including renewables. Fourth, the Commission aims to support energy utility companies who are struggling due to the market’s volatility. The fifth and final measure proposed is a price cap on Russian gas. Ahead of the Energy Council on 9 September, Member States seem divided on the Commission package, with Member States such as Germany, Slovakia and Hungary being skeptical or against a price cap, while Italy and Poland would like to go further and cap the price of all gas imported into the EU.

POLITICAL GROUPS RESPOND TO ENERGY MEASURES: Reacting to von der Leyen’s plans, the EPP Group called for more concrete measures, such as the price cap. Other measures the group proposes are decoupling of electricity and gas prices, investments in EU energy infrastructure and zero VAT for basic food products. The S&D Group stressed the need to have a structural reform of the EU electricity market as well as limit profits of resellers. Similarly, the Greens reacted positively to von der Leyen’s plan to skim off windfall profits from energy companies, but also argued that clear and binding measures to protect households at risk of energy poverty were missing in the Commission’s proposals. The Renew Group welcomed the proposed price cap and called for an energy shield to safeguards citizens and businesses for this winter and redistribute extreme energy profits.

RUSSIA UNWILLING TO FULLY RESUME GAS SUPPLIES TO EUROPE UNLESS SANCTIONS ARE LIFTED: On 5 September, a spokesperson for the Russian government announced that Russia would not resume in full its gas supplies to Europe unless Western sanctions against the Kremlin were lifted. Spokesperson Dmitry Peskov blamed sanctions for Russia’s failure to meet its gas supply obligations. On 2 September, Gazprom had announced that the Nord Stream 1 pipeline to Germany, supposed to go back online after maintenance on 3 September, would be out of order indefinitely due to repair of faulty equipment, a move which further shot up European energy prices.

FRANCE AND GERMANY TO PROVIDE EACH OTHER WITH GAS AND ELECTRICITY: On 5 September, French President Emmanuel Macron announced that France and Germany agreed to support each other during the energy crisis. Notably, in case of need, France will send gas to Germany, while Germany will provide France with electricity supply. While France has usually been an exporter of electricity, the most recent technical problems at its nuclear plants mean that France might need to import electricity from its neighbors this winter. President Macron said that the infrastructure to deliver gas to Germany would be finalized over the coming weeks. Furthermore, he declared to be in favor of buying gas at a European level rather than a national level, in order to ensure the lowest possible prices.

G7 AGREES ON PRICE CAP ON RUSSIAN OIL: On 3 September, the G7 countries (the US, UK, Canada, France, Germany, Italy and Japan) agreed to impose a cap on Russian crude oil and petroleum. This should not only limit the financial profits Russia receives from its oil trade but could also help limiting the rise of global energy prices. The agreement entails that any participating country will only import Russian oil transported by sea that is put on the market under a certain price. Against this decision, Russia announced it would no longer sell any oil to countries which impose a price cap.

INDUSTRY COMMITTEE CALLS FOR FURTHER AMBITION OF THE WINTER PACKAGE: On 1 September, the Committee on Industry, Research and Energy (ITRE) discussed the proposal on Save Gas for a Safe Winter with Ms Mechthild Wörsdörfer, Deputy Director-General of DG ENER. Ms Wörsdörfer underlined that currently 13 Member States are experiencing partial of total disruption of gas supply from Russia. In this context, she mentioned that the EU average for gas storage was at 80% and the European Commission has been working to increase imports of gas and LNG from other countries (e.g., from Norway, United States, Azerbaijan and Algeria). Moreover, eight Member States signed solidarity agreements in case of energy disruption. On the proposal on Save Gas for a Safe Winter, which requires Member States to reduce their demand of gas voluntarily by 15%, MEPs raised criticism regarding lack of ambition for structural reforms. For instance, the MEPs from the EPP Group criticized the lack of trans-national energy projects and trans-national investments (e.g., on hydrogen). The S&D Group called for better transparency of the energy market and for a taxation of windfall profit of energy operators. This suggestion was supported also by the Greens. Further proposals came from the Renew Group, which proposed long-term measures, such as the decupling of the electricity and gas prices.

EEA SEES ROOM FOR CITIZENS TO CONTRIBUTE TO EUROPE’S ENERGY TRANSITION: The European Environment Agency (EEA) published a report on the role of renewable energy prosumers in Europe on 1 September. According to the EEA, Prosumption – the production of renewable energy by consumers – offers benefits to both individuals and society. The report finds that energy generation by prosumers is typically more expensive because of the smaller scale, but it allows for faster deployment in times of high or volatile energy prices. In addition, public support for renewable energy can increase when citizens actively engage with and profit financially from project. Still, there are several barriers for citizens looking to initiate a prosumer project, including start-up costs, national legislation and lack of expertise. The report argues that these could be reduced by effective implementation of the overall EU policy framework and targets, especially the REPowerEU plan.

Highlights of the week

TRILOGUES START ON SEVERAL FIT FOR 55 FILES: Following the first Trilogue on the Effort Sharing Regulation on 1 September, the European institutions met this week to kick off the interinstitutional negotiations on several Fit for 55 files. These concern the revision of CO2 emission performance standards for cars and vans and Land Use, Forestry and Agriculture, EU Emissions Trading Systems as regards aviation and CORSIA. Notably, the Vice Chairs of the Environment Committee in the European Parliament, Bas Eickhout (Greens/EFA, Netherlands) reported that the first meetings underlined the differences between the starting positions of the Council of the EU and the European Parliament. Hence, further technical meetings will take place in the next weeks to build a common ground ahead of the political Trilogues that are planned during autumn. A regards other Trilogues, the one on ReFuelEU Aviation took place on 8 September, while the next interinstitutional negotiations on the EU Emissions Trading System and Carbon Border Adjustment Mechanism files are expected to take place in October.

INDUSTRY COMMITTEE PUBLISHES DRAFT REPORT ON DIRECTIVE AMENDING RED, EPBD AND EED: The draft report by the Rapporteur Markus Pieper on the proposed Directive amending the Renewable Energy (RED III), Energy Performance of Buildings (EPBD) and Energy Efficiency Directives (EED) was published by the Committee on Industry, Research and Energy (ITRE) on 5 September. The draft report proposes several amendments to the European Commission’s proposal, specifically looking at the revision of the RED III. It proposes to increase biomethane production to 35bcm by 2030 as well as to ensure that EU environmental law is applied to the deployment of energy from renewable sources, the related transmission and distribution network elements and storage facilities. In addition, on the renewable infrastructure, the Rapporteur puts forward amendments to facilitate the construction of renewable energy plants and speed up the permitting procedures. The ITRE report will be voted on 26 October, as the ITRE Committee seeks to integrate the file into the interinstitutional negotiations on RED III.

What’s next?

On Friday 9 September, Energy Ministers will meet for an extraordinary Energy Council to discuss market interventions to in view of soaring prices. The Czech Council Presidency will notably put on the table a levy on excess profits, decoupling the electricity and gas prices, and price caps on gas. The next European Council summit, planned on 20-21 October, will also discuss the energy crisis.

The next European Parliament Plenary session will take place from 12 to 15 September. Votes on the Renewable Energy Directive and Energy Efficiency Directive are on the agenda.

On 14 September, European Commission President Ursula von der Leyen will deliver her State of the Union address, taking stock of the achievements so far and presenting policy priorities for the future. The speech will be followed by a plenary debate. The State of the Union address kicks off the dialogue with the European Parliament and the Council to prepare the Commission Work Program for the year 2023. 

EU ENERGY CRISIS

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

PARLIAMENT PUBLISHES BRIEFING ON SOLAR ENERGY IN THE EU: On 30 August, the European Parliamentary Research Service published a briefing outlining the advantages of solar energy. The briefing says that solar is a clean and affordable source of energy with plenty of growth potential which can help replace the EU’s energy imports with domestic production. Under the REPowerEU plan, solar energy should become a cornerstone of the EU energy supply: the European Commission’s solar energy strategy aims to bring about 320GW of solar photovoltaic by 2025 (doubling the current capacity) and almost 600GW by 2030. Together, these should replace the consumption of 9 billion cubic meters of natural gas annually by 2027. The briefing lists several challenges to be addressed if the Commission’s ambitious targets are to be met: reliance on solar producers outside of the EU, skills shortages, competition for land use, and technological challenges in terms of energy storage and conversion.

ENERGY COMMUNITY PUBLISHES GUIDELINES ON ADDRESSING ENERGY POVERTY: On 29 August, the Energy Community, an international organization bringing together the EU and neighboring countries, published a set of policy guidelines on how to address energy poverty effectively in line with global energy transition goals. Firstly, as short-term measures, the guidelines propose increasing total household income and protects households from utility disconnections such as gas, electricity, and/or district heating networks (e.g., direct financial support). Secondly, Energy Community sets out long-term measures focused on decreasing household energy consumption, such as improving the energy efficiency of dwellings and household appliances as well as heating systems. Moreover, it calls on support for renewable energy sources, like photovoltaic panels and solar-thermal collectors.

INCREASING SUPPORT FOR FOSSIL FUELS COULD HARM INTERNATIONAL CLIMATE GOALS, OECD AND IEA REPORT: The Organization for Economic Co-operation and Development (OECD) and the International Energy Agency (IEA) published on 29 August a new report highlighting the new and growing support for the production and consumption of fossil fuels in order to protect industries and consumers from the surging energy prices. The overall government and consumers support for fossil fuels almost doubled in 2021 in major economies worldwide compared to 2020 levels. The international organizations stress that the fossil fuels support is often inefficient to protect low-income households and call for measures that would re-direct public funding toward the development of low-carbon alternatives as well as improve energy security and energy efficiency.

SLOVAKIA AND POLAND INAUGURATE NEW GAS INTERCONNECTOR: On 26 August, Slovakia and Poland inaugurated the new Gas Interconnector Poland-Slovakia, which was financed by the Connecting Europe Facility Energy program with a total EU funding of over €100 million. The infrastructure will contribute to the security of gas supply for the two Member States as well as for Central and Eastern Europe as a whole. Moreover, as part of the North-South Gas Corridor in Central Eastern and South Eastern Europe, the pipeline is a new gas transport route, which will provide access to gas imports different from Russia (e.g. LNG terminals in the Baltic Sea). Notably, the interconnector is constructed also for a mixture of hydrogen and natural gas.

GAZPROM TO SHUT DOWN NORD STREAM 1 PIPELINE AGAIN: On 23 August, Gazprom announced that the Nord Stream 1 pipeline would be shut down between 31 August and 2 September for maintenance. The unscheduled maintenance works on the pipeline, which runs from Russia to Germany via the Baltic Sea, includes checks for cracks and leaks, cleaning and performance tests. Earlier supply disruptions by Gazprom already led to soaring gas prices earlier this summer. The Russian state-owned company maintains that Western sanctions are to blame for supply issues, notably bickering over the return of turbines under repair in Canada. On August 25, Canada confirmed that it would allow five remaining turbines to return to Germany, stating that it does not want to give Russia any excuse to continue weaponizing energy supplies.

COUNCIL OF THE EU ADOPTS REGULATION ON REDUCING GAS DEMAND BY 15% THIS WINTER: On 5 August, the Council of the EU adopted the Regulation on reducing gas demand proposed by the Commission on 20 July. The purpose of the Regulation is to increase EU’s preparedness to disruptions of gas supplies from Russia. For the time being, the 15% reduction target is made voluntary. However, the Regulation foresees that, in case of major disruptions, the Council can trigger a “Union alert on security of supply”, which will make gas demand reduction mandatory. The Regulation also plans for certain partial and even full derogations so as to ensure that the gas demand reduction is effective in securing the EU’s energy security. Such derogations may apply to Member States whose gas networks are not interconnected with other Member States’ gas networks or whose electricity grids are not synchronized with the European electricity system. When choosing demand reduction measures, Member States agreed that they shall consider prioritizing measures that do not affect protected customers such as households and essential services for the functioning of society, notably critical entities, healthcare and defense. The formal adoption follows a preliminary political agreement reached by ministers at the Extraordinary Energy Council on 26 July.

Highlights of the week

URSULA VON DER LEYEN ANNOUNCES ACTIONS TO REFORM THE EUROPEAN ELECTRICITY MARKET: On 30 August, during the Bled Strategic Forum, European Commission President Ursula von der Leyen announced that the European Commission is working on an emergency intervention to limit surging energy prices, as well as a structural reform the European electricity market. Indeed, on 29 August, the wholesale day-ahead electricity prices were over €700 per MWh in multiple Member States. The European Commission aims to present an analysis of the possible option for a comprehensive reform of the electricity market in October while the final proposal could be published at the beginning of 2023. Possible EU-level measures to reform the energy market will be discussed by Member States’ ministers during the extraordinary Energy Council meeting on 9 September. According to officials, after initial skepticism, a price cap could be proposed as one of the possible solutions. In this regard, several Member States have already introduced a cap to natural gas prices, such as Spain, Portugal and France, while others, like Italy and Belgium, have been calling for a temporary cap on wholesale gas prices.

SEVERAL TRILOGUE MEETINGS ON THE FIT FOR 55 PROPOSALS ARE EXPECTED IN EARLY SEPTEMBER: Following the first Trilogue on the Effort Sharing Regulation on 1 September, next week will see interinstitutional negotiations regarding CO2 emission performance standards for cars and vans and Land Use, Forestry and Agriculture on 5 September.

In addition, on 6 September, Trilogues are expected on the Market Stability Reserve and EU Emissions Trading Systems as regards aviation and CORSIA. Finally, the Trilogue on ReFuelEU Aviation is planned on 8 September.

The next Trilogues on the EU Emissions Trading System and Carbon Border Adjustment Mechanism files are expected to take place in October.

EXTRAORDINARY ENERGY COUNCIL MEETING: Council activities will kick-off again on 9 September with an extraordinary Energy Council during which EU Energy Ministers are expected to discuss a structural reform of the electricity market. The next European Council summit, planned on 20-21 October, will also discuss the energy crisis.

The next European Parliament Plenary session will take place from 12 to 15 September. Votes on the Renewable Energy Directive and Energy Efficiency Directive are on the agenda.

STATE OF THE UNION: On 14 September, European Commission President Ursula von der Leyen will deliver her State of the Union address, taking stock of the achievements so far and presenting policy priorities for the future. The speech will be followed by a plenary debate. The State of the Union address kicks off the dialogue with the European Parliament and the Council to prepare the Commission Work Programme for the year 2023. 

EU ENERGY CRISIS

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

SPAIN ADOPTS MEASURES TO LIMIT ENERGY CONSUMPTION: Although not reliant on Russian energy supplies, Spain presented on 2 August a series of new measures to save energy, in line with the EU’s “Save gas for a safe winter” plan. These measures include limits on air conditioning (not below 27 degrees) and heating temperatures (not above 19 degrees) in public and large commercial buildings. Doors will also need to be closed, and lights in shop windows will have to be switched off after 22.00. The measures will come into effect on Monday 8 August and remain in force until November 2023, and will apply to public buildings, shopping centers, cinemas, theatres, rail stations and airports. Although the measures do not apply to the private sector, the Environment Ministry encourages companies and citizens to follow them as well. Companies are also asked to encourage their employees to work from home to save energy on transport.  

G7 FOREIGN MINISTERS CONSIDER PROHIBITION OF RUSSIAN OIL TRANSPORTATION SERVICES: On 2 August, the G7 Foreign Ministers and the High Representative of the European Union, Josep Borrell, issued a statement condemning the attempts of Russia to weaponize its energy exports and to use energy as a geopolitical weapon. Thus, G7 members are continuing to explore further measures to prevent Russia from profiting from the war, notably considering options for a comprehensive prohibition of all services that enable transportation of Russian seaborne crude oil and petroleum products globally, unless the oil is purchased at or below a price to be agreed in consultation with international partners. 

HUNGARY EXPECTS NEW GAS DEAL WITH RUSSIA THIS SUMMER: On 29 July, Hungarian Prime Minister Viktor Orban announced he expects to sign a new gas delivery deal with Russia this summer. The deal should guarantee an additional delivery of 700 million cubic meters of gas in order to guarantee the country’s internal energy security. The announcement is yet another episode in a longer series of public disagreements between the Orban government and other EU Member States over its treatment of Russian energy imports and sanctions on the Russian economy. The Hungarian economy is about 85% dependent on Russian gas, causing the government to take a more lenient approach towards Russian energy products. 

POLAND WANTS RIGHT TO BLOCK COMPULSORY EU GAS REDUCTIONS:On Thursday 28 July, Polish Prime Minister Mateusz Morawiecki stated that a decision on a compulsory reduction in EU countries’ gas reduction should be made unanimously. On 26 July, EU Member States had agreed that such a reduction could be triggered by qualified majority voting. Morawiecki told a Polish private broadcaster that he wanted to have the possibility to veto such a decision because it concerns the energy mix, and that Poland would strongly protest a qualified majority vote on compulsory gas reduction. In a separate interview, climate minister Anna Moskwa went even further, saying that Poland simply would not comply with a mandatory gas reduction. 

G7 LOOKING FOR PRICE CAP ON RUSSIAN OIL BY THE END OF THE YEAR: Certain members of the G7 want a price cap on Russian oil exports in place by 5 December, when EU sanctions on seaborne imports of Russian crude oil enter into force. Specifically, the US, France, Canada, Japan, Germany, France, Italy and Britain, want the price on Russian oil to be set at a level above Russian production costs, but much below current market prices. That way, Russia would be forced to choose between much lower, but continued oil revenues and almost no revenue at all if it decides not to export at the price cap. China and India, which already import Russian oil at a discount, are said to be interested in further minimizing the cost of their oil imports. Several other Asian countries have also expressed interest in the idea of a price cap.

Highlights of the week

EUROPEAN CENTRAL BANK (ECB) PUBLISHES ITS 2022 ENVIRONMENTAL STATEMENT: The statement, published on 1 August, describes the efforts and results made by the ECB to improve the sustainability of its internal functioning. As a European institution, the ECB has set forth ambitious climate commitments to reduce its own carbon emissions by 46.2% by 2030. The report is an initiative to increase its transparency with regards to environmental efforts and the carbon footprint of the ECB. Its most important new objectives are a 3% energy use reduction in its main building by 2023 and by 20% in all workplaces by 2030, reducing travel-related carbon emissions below 60% of 2019 levels and more eco-friendly use of materials and waste. Lastly it also fosters interinstitutional cooperation through network events. 

OECD DENOUNCES RICH COUNTRIES FOR NOT MEETING THEIR CLIMATE FINANCE PROMISES: An OECD report published on 29 July shows that high-income countries, which had pledged in 2009 to deliver $100 billion a year to poorer countries by 2020 to support them in efforts to reduce emissions, have failed to fulfill their promises. The report shows that by the 2020 deadline, only $83,3 million in annual contributions had been achieved. OECD Secretary-General Mathias Cormann stressed that reaching the objective by next year is crucial to foster trust between developing nations and developed nations and to guarantee a multilateral approach to climate change. The report shows that most of the contributions came in the form of loans, but also that despite not reaching the objective, the contribution did increase significantly from 2018 ($79.9 billion) to 2020 ($83.3 billion).  

What’s next?

The European Parliament is in summer recess from 25 July until 22 August, while the other European institutions will go to recess from the end of July until 29 August. The Environment Committee will hold its first post-summer meeting on 30 August with a report back on interinstitutional negotiations on the Carbon Border Adjustment Mechanism and EU Emissions Trading System. The Transport Committee will meet on 31 August, as well as the International Trade Committee, which will discuss trade aspects of the REPowerEU plan. The next plenary session will take place from 12 to 15 September.  

Council activities will kick-off again on 20 September with a General Affairs Council. The next European Council summit is planned on 20-21 October. 

EU ENERGY CRISIS

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

RUSSIAN ECONOMY SHRINKS BUT SURVIVES AS GAS REVENUES ARE UP: While Russian exports of oil, gas and metals are down significantly, rising commodity prices offset the impact on state revenues. Oil deliveries decreased by 13% between May and June, but revenues increased from €10.2 billion to €10.5 billion. Gas exports decreased by roughly a quarter in June compared to last year, but revenues were at €11 billion compared to €3.5 billion last year, thanks to the sixfold increase in gas prices during that period. Still, sanctions are affecting Russia’s economy significantly, as imports in April were down 80% compared to the year before. On 26 July, the International Monetary Fund (IMF) announced that the Russian economy is expected to shrink by 6% this year; a significant contraction, but also an upgrade of 2.5% compared to its previous prediction.  

GAZPROM FURTHER REDUCES DELIVERIES TO EUROPE, INCREASES PRESSURE IN UKRAINE:On 25 July, Gazprom announced that it would be reducing daily gas deliveries to Europe through the Nord Stream 1 pipeline to 33 million cubic meters per day, about 20% of the pipeline’s capacity, from 27 July onward. After ten days of maintenance, on 21 July gas had begun flowing again through Nord Stream 1 at a reduced capacity of 40%, but on 26 July, German gas importer Uniper reported that it was only getting 33% of the Russian gas it was ordering. Gazprom halted the operation of one of the last two operating turbines due to a technical issue, but according to the German government there was no technical malfunctioning which could explain a reduction in deliveries. To add to existing tensions, Ukraine’s state pipeline operator on 26 July said that Gazprom had unexpectedly increased pressure on the Urengoy-Pomary-Uzhgorod pipeline, which delivers Russian gas to Southeastern Europe. Such spikes could lead to pipeline ruptures. 

BELGIUM EXTENDS USE OF NUCLEAR POWER BY 10 YEARS: Despite having originally planned to exit nuclear power completely by 2025, the Belgium Federal Government announced on 22 July that it had signed a letter of intent with Electrabel to extend the lives of its two youngest reactors, Doel 4 and Tihange 3 by 10 years. Despite initial criticism that the  Belgium’s nuclear reversal had come too late, the Belgian Federal Government said that talks had been constructive, allowing the two reactors to restart in November 2026. While Belgium’s nuclear switch-off had relied on a shift to gas, Energy Minister Tinne Van der Straeten underlines that the Russian gas disruptions demonstrated how much energy is a matter of national security. Prime Minister Alexander de Croo announced on Twitter that the goal is to reach a definitive agreement by the end of the year. 

COUNCIL ADOPTS FURTHER ECONOMIC SANCTIONS AGAINST RUSSIA: On 21 July, Member States adopted new sanctions against Russia and strengthened the effectiveness of the measures adopted in the previous sanction packages. The “maintenance and alignment” package introduces a new prohibition to purchase, import, or transfer Russian gold. This prohibition also covers jewelry. The Council also extended the list of controlled military and technology related items, which could enhance Russian defense and security sector. Furthermore, Member States expanded the port access ban to locks as well as the prohibition on accepting deposits from Russian citizens. The Council decided to extend the exemption from the prohibition to engage in transactions with certain state-owned entities as regards transactions for agricultural products and the transport of oil to third countries. These decisions aim at avoiding any potential negative consequences for food and energy security. 

GERMANY PREPARES FOR WINTER, BAILS OUT GAS IMPORTER: To comply with the Commission’s plan of a 15% gas consumption reduction, the German government announced a new energy security package, on 21 July. According to Klaus Müller, President of the Federal Network Agency, Germany should target a reduction of 20% to be completely safe. The proposed package includes gas saving measures for companies and public buildings as well as stricter regulations for the level of gas storage tanks. Vice Chancellor Robert Habeck argued that Russia’s unreliability means that gas consumption must continue to decrease and storage facilities must fill up. Meanwhile, on 22 July, , Chancellor Olaf Scholz announced that Germany is bailing out Uniper, Germany’s biggest gas importer, which has been struggling amidst reduced Russian flows. In a €15 billion package, Germany acquires a 30% stake in Uniper for €7.7 billion and expands a credit line from the state-run investment bank from €2 billion to €9 billion. Scholz also announced that further relief measures would be taken to shield Germans from increasing energy prices caused by Russia’s invasion of Ukraine, although he did not provide further specifics. 

Highlights of the week

MEMBER STATES COMMIT TO GAS REDUCTION OF 15% NEXT WINTER: On 26 July, an extraordinary Energy Council convened to discuss the proposed ‘Safe Gas for a Safe Winter’ publication. The purpose of the Commission’s emergency plan is to anticipate possible disruptions of gas supplies from Russia and subsequently ensure energy security for the EU. During the meeting, Member States agreed to voluntarily reduce their gas demand by 15% compared to their average consumption in the past five years, between 1 August 2022 and 31 March 2023, through measures of their own choice. Member States also agreed to the possibility of triggering a ‘Union alert’ on the security of supply, in the instance of a substantial risk of a severe gas shortage, in which case the gas demand reduction would become mandatory.  

In the days ahead of the Council meeting, several Member States criticized the mandatory 15% reduction target. Some Member States, like Spain and Portugal, argued that they have little dependence on Russian gas and therefore do not want to force major cuts to their economies. Other countries, like Poland, felt uneasy about the European Commission controlling their gas usage.   Against this background, the Council introduced some exemptions and possibilities to request a derogation from the mandatory reduction target, to reflect the individual needs of the Member States and ensure that gas reductions are effective in increasing energy security.  

Member States which are not interconnected to other Member States’ gas networks (Cyprus, Malta and Ireland) or whose electricity grids are not synchronized with the European electricity system (the Baltic member states) are exempted from mandatory gas reductions. Derogations could be requested in a number of cases, for instance, if Member States overshot their gas storage filing targets, if they are heavily dependent on gas for critical industries or if their gas consumption has increased by more than 8% in the past year compared to the average of the past five years. Finally, Member States can also request a derogation to adapt their reduction obligations if they have limited interconnections to other Member States and can prove that their interconnector export capacities or their domestic LNG infrastructure are used to re-direct gas to other member states to the fullest. Member States should draw up national emergency plans before 22 September to show how they intend to meet the reduction target and decrease their gas demand.  

Following the publication of the Safe Gas for a Safe Winter, most stakeholders welcomed the Commission’s proposal. However, some raised concerns and criticism. For instance, energy stakeholders welcomed the Commission’s plan while stressing the need for market-based mechanisms to incentivize energy reduction by industry. Moreover, businesses underlined that forced reductions would have a disastrous economic effect and should only be considered as a last resort. The agri-food sector backed the plans, stating that a secure gas supply is crucial to maintaining food security. However, criticism was raised also by several NGOs. For instance, Greenpeace criticized the proposal, arguing that it facilitates a switch to non-renewable energy sources such as coal and oil. 

What’s next?

The European Parliament is in summer recess from 25 July until 22 August, while the other European institutions will go to recess from the end of July until 29 August. 

Highlights of the week

EUROPEAN COMMISSION PRESENTS GAS DEMAND REDUCTION PLAN: On 20 July, the European Commission presented the Communication on “Save Gas for a Safe Winter. In view of the upcoming winter season and the risk of further gas supply disruptions from Russia, the European Commission proposes a new Council Regulation on “Coordinated Demand Reduction Measures for Gas” with the aim to reduce gas use in the EU by 15% until next spring, as well as a “European Gas Demand Reduction Plan” to advise Member States on which measures to implement in order to reduce gas demand. 12 Member States already suffer from full or partial disruption of gas supply.  

The proposed Regulation sets a voluntary target for all Member States to reduce gas demand by 15% from 1 August 2022 to 31 March 2023. This should result in a 80% gas storage target by 1 November and ensure safe storage levels for the upcoming winter. Member States would be free to choose the appropriate measures to reduce gas demand. However, in case of an exceptional supply disruption, the Commission could declare a ‘Union Alert’, in agreement with Member States, imposing a mandatory gas demand reduction and make the 15% target mandatory. By the end of September, EU Member States must have updated their national emergency plans with measures to meet the target and update the Commission on a bi-monthly basis.  

The accompanying Action Plan provides guidelines for Member States on how to reduce gas demand and achieve the 15% target. The Action Plan sets voluntary measures, such as fuel switching measures from gas to alternative fuels, incentivizing consumption reduction from industries with market tools, and savings in heating and cooling. For instance, before considering curtailments, Member States should exhaust all fuel substitution possibilities (e.g., renewables, coal, oil or nuclear), launch awareness campaigns to promote reduction of heating and cooling, and incentivize energy reduction by industries. Moreover, the guidelines provide targeted obligations in case the ‘Union Alert’ would be triggered and indications on the most critical customers and installations to be prioritized in case of disruption. For instance, the Commission proposes targeted reduction of heating and cooling of temperature and water in public buildings, office buildings, shopping centers and public spaces. The Commission notes that specific consumer groups that do not have the means to ensure their own supply in case of shortages, such as private households and essential social services, are considered to be ‘protected consumers’. 

EU ENERGY CRISIS

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

EU AND AZERBAIJAN SEEK CLOSER ENERGY TIES: As part of the EU effort to move away from Russian fossil fuels and diversify its energy supplies, Commission President, Ursula von der Leyen, and Commissioner for Energy, Kadri Simson, visited Azerbaijan on 18 July. In Baku, Von der Leyen and President Ilham Aliyev signed a Memorandum of Understanding on a strategic partnership in the field of energy. Under the agreement, gas imports from Azerbaijan should increase from 8 billion cubic meters in 2021 to 12 billion cubic meters in 2023. By 2027, Azerbaijan should deliver at least 20 billion cubic meters per year through the Southern Gas Corridor. Imports of Russian gas, by comparison, amounted to 155 billion cubic meters in 2021. Under the agreement, Azerbaijan will also tap into its potential in renewable energy, particularly in the offshore energy sector. 

REPORT FORESEES HIGH GAS PRICES UNTIL 2024: The EU Agency for the Cooperation of Energy Regulators (ACER) and the Council of European Energy Regulators (CEER) published the Gas Wholesale Volume of the Market Monitoring Report, which provides an overview of the EU gas markets in 2021 and first half of 2022. The report highlights the record of liquified natural gas (LNG) import in the EU (mostly for the United States) and the lower flow from Russian pipelines in 2022. Moreover, the report shows that the gas prices would remain high in the coming months due to supply concerns and they will remain high until 2024. Finally, the findings show that the EU gas market delivers benefits in terms of trade, innovation signals and security of supply. On the latter, it is crucial to find the most effective policy responses to secure supply (e.g. filling storage, diversification of supply etc.). 

GAZPROM DECLARES FORCE MAJEURE, RUSSIAN GAS SUPPLY TO EUROPE DRIES UP: In a letter dated July 14, Russia’s Gazprom informed customers in Europe that it cannot guarantee gas supplies through the Nord Stream 1 pipeline because of “extraordinary circumstances”. The company retroactively declared force majeure on supplies from June 14, arguing that it should not be held responsible for failing to meet contract terms. Major German gas importers, such as Uniper and RWE, were among the recipients of the letter. Gazprom states that it cannot guarantee the safe operation of the Nord Stream 1 pipeline because of doubts over the return of a turbine sent to Canada for maintenance. Despite Ukrainian objections, Canada returned the part to Germany on 17 July, and it should be operational from the end of July. The German Ministry has voiced doubts on the reasoning, stating that the turbine is a replacement part which should only be operational from September. While deliveries to the rest of the EU dry up, Russia continues to deliver gas to Hungary through the TurkStream pipeline. 

FOREIGN MINISTERS PREPARE UPDATED SANCTIONS AMIDST QUESTIONS ON UNITY: On 15 July, Hungarian Prime Minister Viktor Orbán claimed that EU sanctions against Russia are ‘killing off the European economy’. Speaking to reporters on 18 July after a meeting of the Foreign Affairs Council, High Representative Josep Borrell refuted Orbán’s claims, arguing that oil prices are at the same level as they were before the Russian invasion of Ukraine. During the Council Meeting, Borrell insisted that sanctions had so far been effective. Still, Member States worry about the effect rising inflation and energy prices could have on the EU’s unity, especially in the face of Russia’s disruption of gas deliveries. The proposed new EU sanctions package, meanwhile, aims at banning Russian gold imports and closing existing loopholes (e.g. export control). According to Borrell it is not so much a new package as an improvement to the implementation of existing sanctions. 

COMMITTEE OF THE REGIONS WARNS OF FEARS OVER SOCIAL AND ENERGY CRISIS: During the Committee of the Regions’ Environment and Energy (ENVE) commission meeting held on 15 July, EU local and regional authorities expressed major concern over the energy crisis and the potential ensuing social crisis, which are bound to worsen during winter. The ENVE commission nevertheless underlined that the economic recovery from the pandemic and the war in Ukraine should not come at the cost of jeopardizing long-term environmental and climate goals. Debating the priorities of the Czech Council Presidency, the Committee of the Regions underlined the need to achieve the right balance between the greater climate ambitions of the Fit for 55 package and the need to alleviate the negative impact of the current geopolitical situation on energy prices and the need to reduce the EU’s dependence on energy imports.  

ENERGY COMMUNITY AGREES ON 2030 TARGETS FOR ENERGY AND CLIMATE: During an informal Ministerial Council of the Energy Community held on 14 July, Ministers responsible for energy and climate reached an agreement on the level of ambition on targets for energy efficiency, renewables and greenhouse gas emission reduction. Ministers agreed on putting a cap on the amount of final and primary energy consumption, boosting renewables and reducing greenhouse gas emissions by 2030, in line with the commitment to achieve climate neutrality of their economies by 2050. The targets are expected to be formally adopted at the Energy Community Ministerial Council in December 2022. The Energy Community is an international organization which brings together the European Union and its neighbors to create an integrated pan-European energy market. The Ministerial Council is the highest decision-making body of the Energy Community.

What’s next?

On 26 July, the Czech Presidency will hold an extraordinary Energy Council most to discuss the proposal on Safe Gas for a Safe Winter. EU energy ministers are expected to approve the Commission's proposal during the meeting. 

The European Parliament will go to summer recess from 25 July until 22 August, while the other European institutions will go to recess from the end of July until 29 August. 

EU ENERGY CRISIS

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

MEMBER STATES SIGN ENERGY COOPERATION AGREEMENTS IN PREPARATION OF GAS DISRUPTIONS: Several Member States are signing agreements on solidarity measures in case of a gas shortage and disruptions in the coming months. For instance, on 11 July, Germany and Czech Republic announced the plan to sign a gas cooperation agreement to ensure that gas keeps flowing though by neighbors countries in case of disruptions. On 12 July, Germany and Austria signed a similar agreement stressing the need for European solidarity and including closer consultation and mutual support in using gas storage facilities. In the declaration, Germany and Austria also called on all Member States to conclude outstanding solidarity agreements before October 2022. 

EUROPEAN PARLIAMENT PUBLISHES REPORT ON CARBON NEUTRALITY: According to the report, the EU holds a key a role in mitigating energy relating risks by transforming the EU’s energy system through ambitious common action. Should the EU succeed, it is estimated that in 2050 it could bring gains equivalent to 5,6% of gross domestic product (GDP), equal to 1 trillion additional GDP per year. Yet, failure to reach a common approach to address volatile energy prices and systemic risks emerging from the energy dependency on Russia could result in the EU missing the opportunity to achieve carbon neutrality as well as face highly negative impacts in case fragmentation will drive low ambitions.  

ELECTRICITY AND GAS MARKET DEVELOPMENTS IMPACTED BY HIGH VOLATILITY AND GEOPOLITICAL TENSIONS: According to the European Commission quarterly gas market report, the European security of gas supply and price volatility on the gas markets will continue to be marked by uncertainty due to Russia’s military aggression on Ukraine. The EU spent an estimated €78 billion on gas imports in the first months of 2022 (of which €27 billion on Russian gas imports). The EU net gas imports rose by 10% during this period, whereas liquefied natural gas (LNG) imports were up by 72% year-on-year. LNG became the most important supply source during the first months of 2022, with 34% of the total extra-EU gas imports arriving in this form. Theelectricity market’s report shows how the impact of international sanctions to Russia and the fear of supply disruption have contributed for electricity prices to reach historical levels in the first quarter of 2022.  

THINK TANK’S REPORT FINDS THE TEMPORARY USE OF COAL WILL NOT HAVE LONG-TERM NEGATIVE IMPACT ON THE CLIMATE: The UK independent energy think tank Ember published a report analyzing climate impact of plans by Austria, Germany, the Netherlands and France to place coal-fired power plants on standby in case of a serious disruption to their gas supply from Russia. The report finds that these temporary measures would not jeopardize the EU’s longer-term climate commitments. It underlines that despite temporarily higher coal use in power generation, the climate ambition levels would be reached thanks to the REPowerEU’s investments in renewables and energy efficiency. According to Ember, Member States did not reverse their commitment to phase out coal by 2030 at the latest and the current crisis has acted as a catalyst for an accelerated European clean energy transition. 

Highlights of the week

INDUSTRY COMMITTEE RAISES ENERGY EFFICIENCY TARGETS TO 14.5% BY 2030: On 13 July, the Industry, Research and Energy Committee (ITRE) adopted the report by Rapporteur Niels Fuglsang (S&D, Denmark) on the revision of the Energy Efficiency Directive (EED) with 50 votes in favor, 7 against and 13 abstentions. MEPs voted to increase the ambition of the EED raising the energy efficiency target to 14.5% by 2030 compared to the 2020 reference scenario. Notably, this target is higher than the original European Commission’s proposal (9%) as well as the REPowerEU plan’s ambition (13%). This increase corresponds to a reduction of energy consumption of at least 40% by 2030 in final energy consumption and 42.5% in primary energy consumption compared to 2007 projections. In addition, the report establishes binding national targets on energy efficiency targets, a definition of energy poverty and energy savings obligations. The vote in the European Parliament is planned during the 12-15 September Plenary session in Strasbourg; following this vote, the European Parliament would be ready to start trilogue with the Council of the EU.  

INDUSTRY COMMITTEE VOTES TO INCREASE RENEWABLES USE TO 45% BY 2030: On 13 July, the ITRE Committee also adopted the report on the revision of the Renewable Energy Directive (RED III). The report, coordinated by Rapporteur Markus Pieper (EPP, Germany), was adopted with 54 votes in favor, 14 against and 6 abstentions. The ITRE Committee agreed on raising the renewable energy target to 45% by 2030, in line with the new target proposed by the European Commission in the REPowerEU plan. Furthermore, the ITRE report includes sector-specific targets. For instance, in the transport sector, the deployment of renewables should lead to a 16% reduction in GHG emissions (e.g., using more advanced biofuels and renewable fuels of non-biological origin, such as hydrogen). As regards the industry, MEPs included a 50% green hydrogen target, which will be mandatory by 2030. Moreover, Member State would need to establish two cross-border projects for the expansion of green electricity and set an indicative target for innovative renewable energy technology of at least 5% of newly installed renewable energy capacity. The European Parliament will vote on its position in September before entering into trilogue. 

FIRST TRILOGUE MEETING ON EU EMISSIONS TRADING SYSTEM: On 11 July, the European Parliament, the Council of the EU and European Commission kick-started the interinstitutional trilogue negotiations on the revision of the EU Emissions Trading System (ETS). Ahead of the meeting, the Rapporteur, Peter Liese (EPP, Germany), stressed the need for a rapid adoption of the proposal during the Czech Presidency of the Council of the EU. He underlined some converging points among the EU institutions, namely the inclusion of maritime in the EU ETS, the greater ambition of emissions reduction and the general agreement on ETS for heating and road transport. Nevertheless, Council and European Parliament positions are quite different in terms of ambition and targets. In contrast with the Council of the EU’s mandate, MEP Liese remarked that the European Parliament voted to raise the ambition of the revision accelerating the phase-in of maritime sector in the EU ETS and expanding the scope of the EU ETS for heating. The next meetings will take place in the next months with the aim to close the negotiations by the end of the year. 

CZECH PRESIDENCY OUTLINES PRIORITIES ON ENVIRONMENT: Anna Hubackova, Minister for the Environment in the Czech Republic, highlighted during a debate in the Environment, Public Health and Food Safety (ENVI) committee that she wants to bring citizens hope for a healthy environment. The Minister assured that the Presidency was ready to fulfil its ambitions and protect the most vulnerable citizens and ecosystems. She emphasized that it is important to support innovation and get rid of Europe's dependency on Russian fossil fuels. Among its priority files, the Minister listed the: Batteries and waste batteries proposal, the Industrial Emissions Directive, the Revisions of the F-Gas Regulation, Waste Shipments and Substances depleting the ozone layer.  

EUROPEAN ENVIRONMENT AGENCY REPORTS ON NATIONAL EMISSION REDUCTION COMMITMENTS: The report makes a first assessment of Member States’ progress towards their emissions reductions commitments under the National Emission reduction Commitments Directive. In 2020, 13 Member States met their respective 2020-2029 national emission reduction commitments for each of the five main pollutants. However, 14 Member States failed to meet their emission reduction commitments for at least one of the five main air pollutants. The biggest challenge for the period 2020-2029 is reducing emissions of ammonia, with 11 Member States needing to cut their emission levels. Reductions of sulfur dioxide over time have been considerable, and only one Member State needs to reduce emissions to meet the 2020-2029 commitment. Looking further ahead, two Member States have already achieved all their respective national emission reduction commitments for 2030 and beyond. Almost two thirds of Member States will need to reduce emissions of ammonia, nitrogen oxides and fine particulate matter to meet their 2030 commitments.  

What’s next?

On 20 July, the European Commission aims to publish a proposal as regards energy and winter preparedness – stay tuned for our analysis of this initiative in next week’s policy update. 

On 26 July, the Czech Presidency will hold an extraordinary Energy Council most to discuss the proposal on winter preparedness.  

The European Parliament will go to summer recess from 25 July until 22 August, while the other European institutions will go to recess from the end of July until 29 August. 

EU ENERGY CRISIS

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

CZECH PRIME MINISTER PRESENTS PRIORITIES OF THE PRESIDENCY: On 1 July, the Czech Republic took over from France the six-month Presidency of the Council of the EU. On 6 July, during the European Parliament’s Plenary session, Czech Prime Minister, Petr Fiala, presented the priorities of the Czech Presidency before the MEPs. He explained that the Russian invasion of Ukraine shaped the Czech Presidency’s program. In this light, the preparation of the post-war reconstruction of Ukraine as well as joint European projects, such as REPowerEU, aimed at ending the EU’s dependency on Russia, will be significant priorities for the Czech Presidency. Prime Minister Fiala highlighted the need to build EU's energy resilience through the development of energy infrastructure and support to domestic emission-free energy sources. In this regard, he called on MEPs to not object the EU Taxonomy complementary delegated act on nuclear and gas as they would be the only means for many Member States to reach their climate goals in the years to come. On behalf of the European Commission, President Ursula von der Leyen underlined the importance of investments in renewable energy and a common European action for energy security and solidarity. The European Commission aims for a rapid adoption of the REPowerEU plan during the Czech Presidency.

EUROPEAN COMMISSION ANNOUNCES A NEW PROPOSAL TO DEAL WITH ENERGY DISRUPTION IN WINTER: On 6 July, European Commission’s President Ursula von der Leyen announced that the European Commission is working on a new proposal as regards a European emergency plan in case of further gas supply disruptions. In her speech before MEPs in the European Parliament’s Plenary session, President von der Leyen explained that, currently, 12 Member States are directly affected by partial or total cut-off of Russian gas imports. Therefore, the proposal on winter preparedness will provide an emergency plan and the complementary instruments to deal with further and full disruptions of gas supplies from Russia. Following the announcement, the Council of the EU scheduled an extraordinary informal Energy Council on 26 July, most likely to discuss the Commission’s proposal.

EU BETS ON LIQUIFIED NATURAL GAS AND HYDROGEN AHEAD OF NEXT WINTER: According to the Gas Storage Regulation, Member States must have their gas stores 80% full by November. In order to achieve this target and keep reducing imports from Russia, many Member States are looking at liquified natural gas (LNG) supplies form the United States and Qatar. Therefore, Member States have been investing in LNG infrastructure, such as acquiring floating LNG terminals and supporting the construction of new gas import infrastructure. To address the long-term sustainability issues of new fossil fuels infrastructure and the risk of overcapacity, the European Commission and the gas industry aim at repurposing LNG infrastructure for hydrogen. Moreover, as regards hydrogen, the European Commission is working on a deal with Namibia to support the country’s green hydrogen sector and boost its own imports of the fuel.

Highlights of the week

EUROPEAN PARLIAMENT ADOPTS REFUELEU AVIATION POSITION: On 7 July, the European Parliament adopted its position on REFuelEU Aviation. In its report, the Parliament increases the Commission’s original proposal for the minimum share of a sustainable aviation fuel that should be made available at EU airports. From 2025, this share should be 2%, increasing to 37% in 2040 and 85% by 2050, taking into account the potential of electricity and hydrogen in the overall fuel mix. The Commission had proposed 32% for 2040 and 63% for 2050. MEPs also decided the amend the definition of sustainable aviation fuel to include, additionally to synthetic fuels and biofuels produced from agricultural or forestry residues, algae, bio-waste or used cooking oil as proposed by the Commission, certain recycled carbon fuels produced from waste processing gas, and exhaust gas deriving from production process in industrial installations. However, MEPs excluded feed and food crop-based fuels, and those derived from palm oil, soy-derived materials and soap stock, because they do not align with the proposed sustainability criteria. Finally, the Parliament proposed the creation of a Sustainable Aviation Fund from 2023 to 2050 to accelerate the decarbonization of the aviation sector and support investment in sustainable aviation fuels, innovative aircraft propulsion technologies, and research for new engines.

EUROPEAN PARLIAMENT DOES NOT OBJECT TO INCLUDE GAS AND NUCLEAR ACTIVITIES IN THE EU TAXONOMY: On 6 July, the European Parliament voted down an objection to the Taxonomy complementary climate Delegated Act, which would include gas and nuclear activities in the list of environmentally sustainable economic activities covered by the EU Taxonomy. 278 MEPs voted in favor of the resolution, 328 against and 33 abstained. An absolute majority of 353 MEPs was needed for Parliament to veto the European Commission’s proposal. The Plenary’s decision overturned the vote in Committee on 14 June, by which MEPs objected to the Delegated Act. Following the vote, the S&D and Greens/EFA groups, who voted in favor of the objection, voiced their criticism towards the European Parliament’s decision, arguing that the Delegated Act would risk jeopardizing the energy transition and having unreliable and greenwashed conditions for green investments in the energy sector. The European Commission welcomed the outcome of the vote. If the Council of the EU does not object to the proposal before 11 July, the Delegated Act will enter into force from 1 January 2023.

EUROPEAN PARLIAMENT PUBLISHES BRIEFING ON ENERGY POVERTY: According to the Parliament’s briefing published on 4 July, in 2020, about 36 million Europeans were unable to keep their homes sufficiently warm due to a combination of factors, such as low income, high energy prices as well as poor energy efficiency in buildings. The issue is being addressed by the EU through various measures, notably the Gas and Electricity Directives, that call for the protection of vulnerable consumers, and the Energy Efficiency and Energy Efficiency of Buildings Directives, which lay out measures to alleviate energy poverty alongside efficiency efforts. However, there is currently no binding streamlined definition for energy poverty at EU level or monitoring of EU poverty indexes. Yet, the Parliament’s briefing finds that several possible policy options exist to address energy poverty under the EU’s energy policy, social policy, or a mix of various regulatory solutions. Specific measures range from price regulation and tax breaks, to limits on grid disconnection, to social tariffs, energy efficiency improvements, and energy savings. The Parliament expects that, considering the EU’s ongoing energy transition to climate neutrality and increasing energy prices, energy poverty will be a central topic in the EU’s agenda for the near future.

EUROPEAN COMMISSION LAUNCHES NEW REGIONAL TASK FORCE OF THE EU ENERGY PLATFORM: On 1 July, the European Commission announced the creation of a new regional task force under the EU Energy Platform. It includes nine Member States: Austria, Czechia, Germany, Croatia, Hungary, Italy, Poland, Slovenia, and Slovakia, as well as Ukraine and Moldova. The task force was launched after several EU Member States in the Central- Eastern region saw important reductions in Russian gas exports to their markets. It will concentrate on implementing the REPowerEU plan in the region. The aim is to reduce dependency on Russian fossil fuels, fill storage ahead of next winter and further accelerate the decarbonisation of the energy sector.

EUROPEAN PARLIAMENT OUTLINES PRIORITIES FOR 2023: On 30 June, leaders of the political groups in the European Parliament outlined in joint statement the Parliament’s priorities for 2023. The MEPs call for sound impact assessments for upcoming policy initiatives and emphasize that 2023 will be the year preceding the next European Parliament elections and thus a crucial one to deliver on citizens’ expectations. Among central priorities for the Parliament, the statement lists the reconstruction of Ukraine, building up stronger foreign, defense and security cooperation and capacity, supporting the EU’s strategic autonomy in industrial and defense policy and achieving energy independence and food security, while preserving an open economy. At the same time, the Parliament demands that the Commission Work Programme for next year, which will be presented on 18 October, addresses the cumulative effect of the economic and social challenges for citizens, businesses and jobs resulting from the COVID-19 pandemic, Russia’s war of aggression on Ukraine, and climate change and environmental degradation.

What’s next?

On 13 July, the Committee on Economic and Monetary Affairs plans to vote on the report on Energy Taxation Directive.

On 13 and 14 July, the Committee on Industry, Research and Energy aims to vote on its reports on two Fit for 55 files, namely the Energy Efficiency Directive and the Renewable Energy Directive.

On 20 July, the European Commission aims to publish a proposal as regards energy and winter preparedness. On 26 July, the Czech Presidency will hold an extraordinary Energy Council most likely to discuss the proposal on winter preparedness.

The European institutions will then go to summer recess until 29 August.

Highlights of the week

ENVIRONMENT COUNCIL ADOPTS POSITION ON EU EMISSIONS TRADING SYSTEM: On 29 June, following almost 12 hours of negotiations, the Environment Council adopted its general approach on the EU Emissions Trading System (ETS). Member States agreed to retain the 61% emissions reduction target by 2030 and to strengthen the Market Stability Reserve as well as the Modernization Fund and the Innovation Fund. The general approach includes a one-off reduction of the overall emissions ceiling by 117 million allowances and the increase in the annual reduction rate of the cap by 4.2% per year. As regards the sectors covered by the Carbon Border Adjustment Mechanism, the Council agreed on a progressive phase out of free allowances from 2026 until 2035. Moreover, first maritime and later road transport and buildings will be included in the EU ETS. On ETS for maritime, the Council agreed to redistribute 3.5% of the ceiling of the auctioned allowances to Member States that are dependent on this transport mode. The general approach proposes to delay by one year the inclusion of buildings and road transport sectors (auctioning of allowances is proposed to start in 2027). With the adoption of this general approach, the Council and the European Parliament are ready to start interinstitutional negotiations with the European Commission.

ENVIRONMENT COUNCIL ADOPTS POSITION ON EU EMISSIONS TRADING SYSTEM FOR AVIATION: On 28 June, the Environment Council adopted also the general approach on the EU Emissions Trading Systems (ETS) for aviation. The Council of the EU agreed to gradually phase out free allowances for the aviation sector by 2027 and to retain the scope to intra-European flights (including the United Kingdom and Switzerland). To take into account and compensate the price difference between sustainable aviation fuels (SAF) and kerosene, from 2024 until 2030, 20 million of free allowances should be allocated to cover 70% of the price difference. The general approach also aligned the EU ETS proposal with the global Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). In addition, the Council position takes into account specific geographical circumstances and, in that context, proposes limited transitional derogations for outermost and peripheral regions. The general approach constitutes the Council’s negotiating mandate for upcoming trilogues with the European Parliament and European Commission.

ENVIRONMENT COUNCIL ADOPTS GENERAL APPROACH ON CO2 EMISSIONS PERFORMANCE STANDARDS FOR CARS AND VANS AND EFFORT SHARING REGULATION: Following the vote on the EU ETS, the Environment Council also adopted its position on other Fit for 55 files, namely the CO2 emissions performance standards for cars and vans and the Effort Sharing Regulation (ESR). On the CO2 emissions for new cars and vans, the Council agreed to introduce a 100% CO2 emissions reduction target by 2035 for new cars and vans and to raise the targets to 55% for cars and to 50% for vans by 2030. The general approach also proposes to phase out the regulatory incentive mechanism for zero-and low-emission vehicles by 2030. Furthermore, Member States called on the European Commission to assess the progress made towards achieving the 100% emission reduction targets in 2026 and, if needed, to review the targets. As regards the ESR, the Council agreed to an EU-level GHG emissions reduction target of 40% compared to 2005 for those sectors that are not covered by the EU ETS (e.g. agriculture and waste). The Member States included also reference to the need to converge all together towards the objectives and the possibility to adjust linear emissions trajectories in 2025. Flexibility has been introduced also regarding the use of ETS allowances to offset emissions and the transfer of emission quotas between Member States (raised to 10% from 2021 until 2025 and 20% from 2026 until 2030). The European Parliament and the Council of the EU are now ready to start trilogue negotiations with the European Commission.

ENERGY COUNCIL ADOPTS POSITION ON RENEWABLE ENERGY DIRECTIVE: On 27 June, the Energy Council adopted its general approach on the Renewable Energy Directive (RED). The Council agreed to set a binding EU-level target of 40% of energy from renewable sources in the overall energy mix by 2030, lower than the European Parliament’s target of 45%. The Council’s general approach also increases sector-specific targets. On transport, Member States have the possibility to choose between a binding target of 13% greenhouse gas intensity reduction in transport by 2030 or a binding target of at least 29% renewable energy within the final consumption of energy in the transport sector by 2030. On heating and cooling, the Council decided on a gradual increase in renewable targets, with a binding increase of 0.8% per year at national level until 2026 and 1.1% from 2026 to 2030. Finally, the Council sets an indicative target of a 1.1% annual average increase in renewable energy use for industry and at least 49% renewable energy share in buildings in 2030. The adoption of the general approach paves the way for the Council to start negotiations with the European Parliament, after it adopts in its own position in September.

ENERGY COUNCIL ADOPTS POSITION ON ENERGY EFFICIENCY DIRECTIVE: On 27 June, the Energy Council also adopted its general approach on the Energy Efficiency Directive (EED). The Council agrees to reduce energy consumption at EU level by 36% for final energy consumption and 39% for primary energy consumption by 2030. All Member States will contribute to achieving the overall EU target through indicative national contributions and trajectories, set by the Member States in their integrated national energy and climate plans (NECPs) to be updated in 2023 and 2024. The general approach also includes a gradual increase of the energy savings target for final energy consumption. Member states will need to ensure savings of 1.1% of annual final energy consumption from 1 January 2024; 1.3% from 1 January 2026; and 1.5% from 1 January 2028 to 31 December 2030, with the possibility to carry over a maximum of 10% of excess savings to the following period. The general approach constitutes the Council’s negotiating mandate with the European Parliament. The interinstitutional negotiations will start once the Parliament has adopted its own position in September.

TRAN COMMITTEE ADOPTS REPORT ON REFUELEU AVIATION: On 27 June, the Transport and Tourism Committee voted and adopted the report by Rapporteur Søren Gade (RE, DK) on the proposal for ReFuelEU Aviation. The report was adopted with 25 votes in favor, 6 against and 3 abstentions. The report increases the minimum share of synthetic aviation fuels (SAFs) that should be made available in EU airports. Specifically, from 2025, this share should be 2%, increasing to 37% in 2040 and 85% by 2050, taking into account the potential of electricity and hydrogen in the overall fuel mix. MEPs agreed to include in the definition of SAF synthetic fuels or certain biofuels, which are produced from agricultural or forestry residues, algae, bio-waste or used cooking oil. In particular, the definition covers recycled carbon fuels produced from waste processing gas and exhaust gas deriving from production process in industrial installations. However, MEPs excluded feed and food crop-based fuels, and those derived from palm oil. Moreover, the report includes additional provisions to support the uptake and development of SAFs, such as a SAF flexibility mechanism, a Sustainable Aviation Fund and a EU labelling system for the environmental performance of aviation. The European Parliament aims to vote on the report during the next plenary sitting on 7 July.

EU ENERGY CRISIS

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

G7 MEMBERS AGREE ON POTENTIAL PRICE CAP ON RUSSIAN OIL: On 28 June, Members of the G7, meeting in Germany, reached an agreement to explore potential ways to impose a price cap on Russian oil. The price cap was notably strongly pushed for by France. The goal of a cap would be to address the countereffects of recent embargoes declared by occidental countries, which have led to a global oil price increase, finally providing more revenues for Russia. The cap could notably be introduced by setting purchase under a certain price as a condition to operate transportation services of Russian seaborne crude oil and petroleum.

INDUSTRY, RESEARCH AND ENERGY COMMITTEE DEBATES EU SOLAR ENERGY STRATEGY: On 27 June, the Commission presented the EU Solar Energy Strategy to the ITRE Committee.  The Strategy, which was proposed by the Commission on 18 May as part of the REPowerEU plan, aims at strongly boosting the EU’s solar energy production capacity. The Commission has ambitions for solar energy to become a cornerstone of the European energy mix. The Strategy combines four initiatives: the rooftop initiative, planning to gradually provide all commercial and public buildings and all new residential buildings with rooftop solar panels; the permitting initiative, to stimulate Member States to streamline their permitting procedure for renewable energy generation and designate go-to-areas for that purpose; the skills partnerships, to develop the right competencies to develop the EU’s solar industry; and an Industry Alliance for Solar Power, to streamline cooperation within the industry. MEPs showed general support for the Strategy, but questions were asked on the financing of large-scale production within the EU. MEPs also questioned why hydro-energy was not included REPowerEU.

TRANSPORT COMMITTEE DEBATES REPOWEREU PLAN: On 27 June, the Transport (TRAN) Committee held an exchange of views with the Commission on the REPowerEU plan. The Commission stressed that at least ten Member States faced significant reductions of energy supply due to Russian cuts. To face these reductions and avoid shortages, the Commission proposes two solutions short to medium-term solutions: diversifying oil and gas supplies via partnering third countries and increasing energy saving efforts to decrease demand. Several actions related to household energy and smaller missing links in networks could already improve energy savings. On the medium to long-term, effects of the Fit for 55 package and the RePowerEU plan would jointly increase energy efficiency and phase out dependency on imports of fossil fuels. MEPs asked whether the short-term solutions would not harm the long-term goals of the Fit for 55 package (transition to a carbon neutral economy). The Commission stressed that the RePowerEU plan was designed to complement the Fit for 55 package, and it would actually accelerate reaching the package’s end goals. However, the Commission still admitted that in the short-term, fossil fuels would still play a role in diversifying energy sources to reduce reliance on Russian imports.

COMMITTEE ON INDUSTRY, RESEARCH AND ENERGY DISCUSSES THE EU EXTERNAL ENERGY ENGAGEMENT STRATEGY: On 27 June, the Industry, Research and Energy (ITRE) Committee debated the EU External Energy Engagement Strategy with the Commission. Presented on 18 May, the strategy aims at supporting the clean energy transition at global level. During the ITRE meeting, the Commission stressed the need for an international strategy to cope with issues related to security of supply, energy prices and climate change. At EU level, the Commission’s REPowerEU plan is an essential tool, cooperation with third countries will be necessary to diversify import, promote the sustainable transition globally, support Ukraine and other Eastern neighbors and to strengthen partnerships in the long run. The Commission particularly underlined the need to strengthen supply partnerships with the US and with African countries, as well as the need to increase global hydrogen capacities. MEPs welcomed the inclusion of hydrogen in the EU’s foreign energy policy, but many MEPs asked how the Commission planned to cope with the current lack of sufficient infrastructure with regards to LNG and hydrogen storage and transport from, to and throughout the EU. Some MEPs from The Left and The Greens flagged the need to be careful not to create new dependencies on third countries, especially with countries that do not align with international human rights standards.

ENERGY COUNCIL ADOPTS GAS STORAGE REGULATION: On 27 June, the Energy Council formally adopted the Gas Storage Regulation. Proposed by the Commission on 23 March 2022, the Regulation revises two existing regulations on security of gas supplies and access to natural gas transmission networks. The adopted legislation, which is based on the compromise reached between the Council of the EU and the European Parliament on 19 May, aims to ensure that gas storage capacities in the EU are filled before next winter. The regulation provides that underground gas storage on Member States’ territory must be filled to at least 80% of their capacity before the winter of 2022/2023 and to 90% before the following winter periods. Overall, the EU will attempt collectively to fill 85% of the total underground gas storage capacity in the EU in 2022. As gas storage capacities and national situations vary greatly, depending on their situation, Member States will be able to partially meet the storage target by counting stocks of liquefied natural gas (LNG) or alternative fuels. Storage capacity filling obligations will come to an end on 31 December 2025. Since the European Parliament already adopted the legislation on 23 June, adoption by the Council closes the procedure. The Regulation will shortly be published in the Official Journal and will enter into force the day after its publication.

EUROPEAN COMMISSION PRESIDENT AND US PRESIDENT ADDRESS EU EFFORT TOWARDS ENERGY INDEPENDENCE: On 27 June, European Commission President Ursula von der Leyen published a joint statement with US President Joe Biden on ongoing actions to end the EU’s reliance on Russian energy. Important actions already taken include the creation of a Task Force on European Energy Security and the adoption of measures to decrease gas demand and improve energy efficiency. The statement highlights the cooperation between EU Member States, the US and EU companies to develop new energy saving technologies such as heat pumps and smart thermostats. Diversification of energy supply is also being promoted through cooperation and increased American LNG exports to Europe while increased efforts on curbing methane emissions are also on-going. President von der Leyen had previously addressed the energy crisis and the EU’s efforts to prepare for disruptions in gas deliveries during the European Council summit on 23-24 June.

EU BROKERS TENTATIVE AGREEMENT ON MODERNIZATION OF ENERGY CHARTER TREATY: On 24 June, the European Commission announced it had contributed to finding a tentative agreement between the 53 Contracting Parties of the Energy Charter Treaty (ECT) on its modernization. The ECT, signed in 1994, creates a forum for East-West cooperation in the fields of investment protection, trade and transit of energy. Contracting Parties to the ECT notably include all EU Member States except Italy. Since 2020, negotiations have been ongoing to revise the Charter to align it with the demands of the clean energy transition. The agreement plans to reform investment protection standards, notably by allowing Contracting Parties to exclude new fossil fuel related investments from investment protection and to phase out protection for the already existing investments 10 years after entry into force of the modernized Charter The agreement also introduces technologies that were not previously covered, including hydrogen and synthetic fuels. The participation of the EU in the ECT had been increasingly controversial, with MEPs voting to leave the Charter and Spain also calling for the EU’s exit just prior to the deal’s announcement. All were denouncing the Charter as protecting investments in fossil fuels that are incompatible with the Paris Agreement.

NORWAY AGREES TO INCREASE GAS DELIVERIES TO EU: On 23 June, following a meeting of Commission Vice-President Frans Timmermans with the Norwegian energy minister, the European Union and Norway announced they have agreed to step up cooperation in order to increase gas supplies from Norway, in the short and long term (beyond 2030). The EU is already Norway’s main export market for oil and gas, and Norway has increased production in anticipation of energy shortages in the EU. The European Commission estimates that Norway’s increased production capacities could bring about 100 TWh of extra energy to the EU market. The partners have also identified potential for increased long-term cooperation on offshore renewable energy, hydrogen and carbon capture and storage.

What’s next?

On 1 July, the Czech Republic will take over the Council of the EU rotating presidency. From 4 until 7 July, the European Parliament will hold its plenary sitting in Strasbourg, during which the Czech Presidency will present its program for the upcoming six months (6 July). On 7 July, MEPs will vote on their position on ReFuelEU Aviation.

During its meeting on 11 and 12 July, the Transport and Tourism Committee aims to vote on the report on FuelEU Maritime.

On 13 July, the Committee on Economic and Monetary Affairs plans to vote on the report on Energy Taxation Directive.

On 13 and 14 July, the Committee on Industry, Research and Energy aims to vote on its reports on two Fit for 55 files, namely the Energy Efficiency Directive and the Renewable Energy Directive.

The European institutions will go to summer recess as of 18 July until 29 August.

Highlights of the week

EUROPEAN PARLIAMENT ADOPTS POSITION ON PREVIOUSLY REJECTED FIT FOR 55 FILES: After a failed vote during the 7 June European Parliament plenary session, the Parliament finally adopted its position on EU Emissions Trading System (EU ETS) and the Carbon Border Adjustment Mechanism (CBAM) on 22 June. A major point of contention was the duration of the transition periods for the industries, on which an agreement was finally struck between the EPP, S&D and Renew Europe groups. With regards to ETS, the adopted position plans to gradually decrease allowances until 2029 and to increase the 2030 emission reduction target for the ETS sectors from 61% to 63%. Furthermore, shipping will now be included in ETS, covering 100% of the emissions from intra-European connections and 50% for routes connecting the EU to third countries. Two last sectors to be incorporated into ETS are commercial buildings and road transport, for which a system shall be proposed by the European Commission on 1 January 2024 to be introduced no sooner than 2029. With regards to the more carbon intense CBAM sectors, free allowances will end by 2032 while the scope is to be extended to organic chemicals, plastics hydrogen and ammonia.

FRENCH COUNCIL PRESIDENCY PUBLISHES DRAFT GENERAL APPROACH ON RENEWABLE ENERGY DIRECTIVE: In preparation of the Energy Council on 27 June, the French Council Presidency published the draft general approach on the revision of the Renewable Energy Directive (RED III). Notably, the draft retains the 40% renewable energy target by 2030, diverging from the European Commission’s REPowerEU plan, which proposes to increase the renewable energy target to 45%. It also suggests moving to a dual counting system for the transport-related target, taking into account both greenhouse gas emissions reduction and energy content. Moreover, it proposes to make indicative the hydrogen target in the transport sector and to increase it to 5.2% and to include electricity generated from heat pumps in the heat and cooling target. It also wants to allow Member States to set higher limits on biofuels depending on their availability. The French Presidency draft also includes additions on the principles of sustainable forest management and clarifies that international shipping should be included in the transport sub-targets, but not fall under the overall 40% target. The draft general approach will be discussed and (most likely) adopted during the Energy Council on 27 June.

CZECH COUNCIL PRESIDENCY PRESENTS ITS ENVIRONMENT PRIORITIES: During a press conference on 21 June, the upcoming Czech Council Presidency further presented its program, and notably its environmental priorities. The Czech Presidency will focus on the Fit for 55 package, adaptation to climate change, biodiversity conservation and restoration, circularity management and pollution reduction, and light pollution. Specifically, they aim to advance several interinstitutional negotiations on key Fit for 55 files such as the EU Emissions Trading System (ETS), the Carbon Border Adjustment Mechanism (CBAM), the Effort Sharing Regulation (ESR) and the CO2 emissions from cars.

FRENCH COUNCIL PRESIDENCY PUBLISHES UPDATED DRAFT GENERAL APPROACH ON ENERGY EFFICIENCY DIRECTIVE: On 20 June, the French Presidency published a new draft general approach on the revision of the Energy Efficiency Directive (EED). The document includes additional elements compared to the previous draft. Notably, it includes a larger percentage of flexibility in the calculation of national contributions and revises the possibility for the European Commission to revise Member States’ contribution. Furthermore, the French Presidency clarifies that social housing and district heating should be excluded from the scope and that Member States should have the possibility to not renovate a building towards near-zero emissions under certain technical, economical and functional conditions. On 27 June, the Energy Council is expected to adopt the general approach on the EED.

EU ENERGY CRISIS

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

CZECH COUNCIL PRESIDENCY TO PRIORITIZE ENERGY SECURITY DURING ITS TERM: In its program published on 21 June, the upcoming Czech Presidency detailed its main priorities for its upcoming six-month Presidency of the Council of the EU, starting on 1 July. One of Czechia’s main priorities will be ensuring European energy security, specifically breaking its dependence on Russian gas, oil and coal. In order to achieve this objective, the Czech Presidency will emphasise EU’s energy security issues and accelerate the implementation of the REPowerEU plan. Among the priorities are the diversification of energy sources, energy savings and acceleration of the transition to low-emission and renewable energy sources as well as the implementation of the regulation of gas reserves. With regards to the Fit for 55 package, the Czech Presidency will focus on advancing interinstitutional negotiations on the Energy Efficiency Directive (EED) and the Renewable Energy Directive (RED III). Finally, the development of energy infrastructure will be one of the main goals of the Presidency, as well as assessing the role of nuclear energy and hydrogen in ensuring energy security. The Czech Presidency will also work on implementing measures to reduce the negative economic and social impact of the energy crisis.

COUNCIL OF THE EU APPROVES CONCLUSIONS ON STRATEGIC PARTNERSHIP WITH THE GULF REGION: On 20 June, the Council of the EU approved conclusions regarding a strategic partnership with Gulf countries. The conclusions state that building a strategic partnership with the Gulf Cooperation Council and its Member States, as part of enhancing EU engagement in the broader region, is a key priority for the European Union. The conclusions underline the necessity for the parties to cooperate to achieve a strong economic recovery and sustainable, affordable and secure energy supplies for European consumers. At the same time, A stable secure, green and prosperous Gulf region is a shared strategic priority and fundamental interest for both the EU and its Gulf partners. Promoting peace and stability and achieving de-escalation of tensions in the wider Gulf region as well as in the broader Middle East are high on the EU’s agenda and constitute a shared interest with Gulf partners. Involvement of other key Gulf countries in the partnership may also be considered as relations develop and mature.

MEMBER STATES CONTINUE TO FACE RUSSIAN GAS CUTS: Following both countries publicly supporting Ukraine’s candidacy to the EU, Russian gas company Gazprom has cut its gas deliveries to Italy and France from 16 June. Germany has also announced that its supplies from the Nord Stream pipeline are reducing sharply, and Slovakia warned Gazprom cut its gas export by half since 19 June, despite the country continuing to pay for the deliveries in ruble. This decrease in supplies could affect the build-up of gas reserves towards the winter, a priority announced by the European Commission as part of the REPowerEU plan. In that context, Germany and the Netherlands launched their plans to cope with gas shortages, which included more use of coal as a power resource. German Minister for Energy Robert Habeck said the situation is serious and created a temporary necessity to increase the use of coal plants in order to decrease gas use. In the Netherlands, a cap of 35% capacity on coal-fueled electricity plants has been lifted as an emergency measure to prepare for gas shortages. Austria, who had completely phased out coal since 2020, is also planning to reactivate some of its coal plants.

What’s next?

On 27 June, the Energy Council is set to adopt the Council’s General Approaches on the Energy Efficiency Directive and the Renewable Energy Directive.

Still on that date, the Industry, Research and Energy Committee will start its examination of the EU Solar Energy Strategy, and the Transport Committee will vote on its draft report on REFuelEU Aviation.

On 28 June, the Environment Council will gather in Luxembourg, and is due to adopt the Council’s General Approaches on the EU ETS, the Effort Sharing Regulation, the LULUCF and the CO2 standards for cars and vans.

Highlights of the week

POLITICAL GROUPS REACH COMPROMISE ON EU ETS AND CBAM: On 15 June, the S&D, the EPP and Renew Europe announced they have found an agreement within the Environment (ENVI) Committee on the EU ETS and CBAM. The two files had been sent back to Committee during last week’s European Parliament plenary session. The agreement includes the phasing out of free allowances in sectors covered by the CBAM between 2027 and 2032, from 93% in 2027 to 0% in 2032. The three groups also agree to extend the scope of CBAM to polymers, organic chemicals and hydrogen. The deal also suggests the inclusion of an export rebate for EU production subject to carbon pricing and intended for export markets, although the Commission still needs to assess the WTO compliance of this measure. Finally, the three groups agreed on a slight raise of the annual reduction rates of carbon credits from 4.5% to 4.6% in 2029. The EU ETS and CBAM proposal will be voted again in Plenary session on 22 June.

MEMBER STATES RAISE CONCERNS OVER REDUCING AMBITIONS OF FIT FOR 55 PACKAGE: On 15 June, ten Member States shared a letter calling for higher climate ambition in negotiations on the Fit For 55 package. The letter underlines the need to reach ambitious agreements on the files, as this would support the phasing-out of Russian energy supply as well as address the climate crisis. In this regard, the Member States raise concerns over the attempt to water down ambition across the files in the package in the negotiations in both the European Parliament and Council of the EU. The letter stresses the concessions made during the negotiations might build up and risk diluting the climate ambition of the package. Specifically, it urges to “not let the sense of urgency or the current situation overshadow our climate commitments”. The letter was signed by Austria, Germany, Denmark, Spain, Finland, Ireland, Luxembourg, the Netherlands, Sweden and Slovenia.

FRENCH PRESIDENCY PRESENTS GENERAL APPROACH ON ENERGY EFFICIENCY DIRECTIVE: On 10 June, the French Council Presidency published the draft General Approach on the Energy Efficiency Directive. The Presidency proposes to raise the threshold for large-scale investments above which energy efficiency must be considered in the project. On energy efficiency targets, the General Approach aligns with the Commission proposal in suggesting that Member States should collectively ensure a reduction of energy consumption of at least 9 % in 2030 compared to 2020 reference scenarios but provides more flexibility for implementing the directive, adding a phasing-in trajectory for municipalities and the public sector as well as for taking into account energy savings from fossil fuel combustion technology in the industrial sector. The General Approach is expected to be adopted during the Energy Council on 27 June.

FRENCH PRESIDENCY PUBLISHES PROGRESS REPORT ON ENERGY PERFORMANCE OF BUILDINGS DIRECTIVE: In preparation of the Energy Council planned on 27 June, the French Presidency published a progress report on the negotiation developments as regards the revision of the Energy Performance of Buildings Directive (EPBD). The document underlines that Member States support measures to address energy performance of buildings. However, many delegations questioned the ambition of the proposal and requested more flexibility and less administrative burdens. Specifically, some issues for discussion have concerned Annex III, which provides for an energy consumption threshold, and the definition of zero-emissions buildings (e.g., considering renewable energy from national grids or produced nearby). Therefore, the French Council Presidency proposes a new definition of zero-emissions buildings as buildings that consume very little energy, do not emit GHG on site due to fossil fuels and produce very little operational GHG emissions. It also proposes that Member States can define maximum energy consumption thresholds. As regards, minimum energy performance standards, Member States want more flexibility. Finally, the document underlines the criticism of many Member States on the imposed distribution of energy performance certificate classes.

FRENCH PRESIDENCY PUBLISHES PROGRESS REPORT ON THE PROPOSAL TO REDUCE METHANE EMISSIONS: Still in preparation of the 27 June Energy Council, the French Council Presidency published a progress report on the Regulation to reduce methane emissions. During negotiations, Member States underlined the need to limit additional administrative and financial burdens that could arise from the new provisions, such as reporting obligations. The negotiations revolve around several topics, inter alia the definition of inactive wells, the international aspect (access to data and risk of unfair competition), the methodologies chosen for MRV (measurements, reporting, verification) as well as the emission thresholds.

EU ENERGY CRISIS

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

ENVI AND ECON MEPs VOTE AGAINST INCLUDING GAS AND NUCLEAR IN EU TAXNONOMY: On Tuesday 14 June, MEPs from the Environment (ENVI) and Economic and Monetary Affairs (ECON) Committees adopted an objection to the Commission’s proposal to include nuclear and gas activities in the list of environmentally sustainable economic activities covered by the EU Taxonomy, as proposed by the Commission in the complementary Taxonomy Delegated Act on Nuclear and Gas. MEPs consider that the technical standards proposed by the Commission in the delegated act, which would be the basis to classify an activity as sustainable, do not respect the criteria for environmentally sustainable economic activities as set out in the Taxonomy Regulation. The resolution adopted by MEPs also requests that any new or amended delegated acts should be subject to a public consultation and impact assessments, as they could have significant economic, environmental and social impacts. The Greens and S&D welcomed the vote, but the ECR called on the plenary to reject the resolution for objection, stating that nuclear power is necessary for a quick transition to climate neutrality while ensuring energy security. The resolution is scheduled for a vote during the European Parliament’s plenary session of 4-7 July 2022. The European Parliament and the Council of the EU both have until 11 July 2022 to decide whether to veto the Commission’s proposal. If an absolute majority of MEPs (353) objects to the Commission’s proposal, the Commission will have to withdraw or amend it.

EUROPEAN PARLIAMENT PUBLISHES REPORT ON THE ENERGY SITUATION IN THE EU: The report, published on 13 June, provides an overview of eight energy indicators, such as gas and oil prices in the EU, which both spiked in mid-2021.  It also shows that the EU as a total LNG operational capacity of 160 billion m3, with Spain being the Member States with the highest individual capacity. With regards to gas storage, the overall filling rate was 39% as of May 2022, with Portugal and Poland having the highest filling rate, at 89% and 87% respectively. The report additionally finds that in 2020, renewable energy represented 22.1% of the energy consumed in the EU, around 2 percentage points above the 2020 target of 20%. The report also provides data on EU energy import dependency from Russia, for natural gas, crude oil and hard coal.

EUROPEAN COMMISSION PUBLISHES REPORT ON POLICY SUPPORT FOR HEATING AND COOLING DECARBONISATION: On 10 June, the European Commission published a report on the policy support needed to decarbonize the heating and cooling (H&C) sector. This sector is responsible for a central part of the EU’s energy demand, representing roughly half of the EU’s final energy consumption. As such, the decarbonisation of the H&C sector is crucial for a successful transition to a carbon-neutral energy system by 2050. The report states that most of the energy demand for H&C is related to heating purposes, although the demand for cooling is increasing. Space and water heating needs in buildings represent over 60% of the demand for heating, followed by industry, which represents a further 32% of heating needs, the remainder is related to agriculture and both building and industry related cooling applications. The decarbonisation rate and uptake of renewables in the H&C sector has been relatively slow, as more progress is needed in the adjustments to heating equipment, heat delivery systems, building envelopes/industrial processes, required infrastructure and energy supply, and paying attention to vulnerable consumers.

ENERGY EFFICIENCY GAINS RECOGNITION WORLDWIDE: Following the 7th Global Conference on Energy Efficiency hosted by the International Energy Agency (IEA), an unprecedented number of governments signed a joint statement internationally acknowledging the importance energy efficiency holds for reducing emissions and energy security. The signatories commit to working to implement and increase energy-efficient solutions and technologies globally. It signed not only by the US and the EU, but also by countries such as Mexico, Chile, Panama, Turkey and even the African Union. Within the EU, Spain did not sign the statement, but Hungary, Poland and Czechia did.

What’s next?

Following the agreement found between political groups, the European Parliament will vote again on the CBAM and EU ETS on 22 June.

On 23 and 24 June, the European Council summit will address the energy crisis in Europe.

On 27 June, the Energy Council is set to adopt the Council’s General Approaches on the Energy Efficiency Directive and the Renewable Energy Directive.

On 28 June, the Environment Council will gather in Luxembourg, and is due to adopt the Council’s General Approaches on the EU ETS, the Effort Sharing Regulation, the LULUCF and the CO2 standards for cars and vans.

Highlights of the week

EUROPEAN PARLIAMENT FAILS TO ADOPT POSITION ON KEY FIT FOR 55 FILES: On 8 June, the European Parliament held a vote on key legislations under the Fit for 55 package during its Plenary session in Strasbourg. In a surprising turn of events, a majority of MEPs rejected the Parliament’s position on the revision of the EU Emissions Trading System. The report was notably voted against by the Greens/EFA and the S&D, who refused the inclusion of last-minute amendments by the EPP and the ECR, that would have slowed the pace of emissions reduction targets and postponed the end of free allocations to 2034 instead of 2032. As the reports on the Carbon Border Adjustment Mechanism and the creation of a Social Climate Fund are closely related to the EU ETS, all three files have been sent back to the Environment Committee for further negotiations. Even if it had been voted on, the CBAM report was not expected to be adopted as MEPs had previously announced they had not managed to reach an agreement between political groups. On the EU ETS, the Chair of the ENVI Committee MEP Pascal Canfin announced MEPs will aim to find a new agreement in the next 15 days and vote on the revised proposal during the next Plenary session on 23 June.

EUROPEAN PARLIAMENT ADOPTS POSITION ON EU ETS FOR AVIATION, EFFORT SHARING REGULATION, CO2 PERFORMANCE STANDARDS AND LULUCF: The European Parliament did manage to adopt on 8 June its positions on other Fit for 55 files. Firstly, the Parliament adopted its report on the revised EU ETS rules for aviation. The adopted text proposes that the EU ETS should apply to all flights departing from an airport located in the European Economic Area (EEA) and that free allocations to the aviation sector should be phased out by 2025. A derogation from the EU ETS should be provided for emissions from flights between airports located in an EU outermost region and airports located in another EEA region, and flights between airports located within the same outermost region. MEPs want, as well, that 75% of the revenues generated from the auctioning of allowances for aviation are used to support innovation and new technologies. The Parliament also adopted its position on the Effort Sharing Regulation, increasing the EU-wide 2030 emissions reduction targets from 30 to 40%. All EU Member States would have to comply with national targets ranging between 10 and 50%. Additionally, MEPs adopted the report on CO2 standards for cars and vans, maintaining the end of sale of combustion engines vehicles in 2035. Finally, the Parliament adopted its position on the Land Use, Land Use Change and Forestry Regulation (LULUCF). The adoption of the Parliament’s position on these files opens the way to interinstitutional negotiations with the Council of the EU.

VICE-PRESIDENT TIMMERMANS CALLS ON MEPs TO MAKE THE GREEN TRANSITION HAPPEN: On 7 June, in its introductory speech opening the European Parliament’s Plenary session, European Commission Vice-President Frans Timmermans called on MEPs to make the green transition happen. Reminding on the climate urgency as well as the need to reduce dependence on Russia, EVP Timmermans urged MEPs to vote for a consistent and ambitious package that would allow the EU to reach its climate targets. He specifically underlined certain parliamentary positions that caused him worry, notably on the inclusion of road transport and buildings in the scope of the EU ETS.

TRANSPORT COUNCIL ADOPTS GENERAL APPROACHES ON FIT FOR 55 FILES: On 2 June, the Transport Council adopted general approaches on three Fit for 55 transport-related files: the Alternative Fuels Infrastructure Regulation (AFIR), FuelEU Maritime and ReFuelEU Aviation. As regards AFIR, the Council agrees on more flexibility on timelines. For instance, it proposes a gradual process of infrastructure deployment for electric heavy-duty vehicles starting in 2025 and covering all TEN-T roads by 2030. Moreover, the General Approach focuses also on the deployment of gaseous hydrogen refueling infrastructure. As regards FuelEU Maritime, Member States revised the scope of the requirements regarding on-shore power supply to extend obligations to ships anchored in ports. Additionally, the Council strengthens the governance system (e.g., monitoring, reporting and auditing procedures provisions). Finally, on ReFuelEU Aviation, the Transport Council amended the Commission’s proposal including the possibility for Member States to apply the legislation to airports below a certain traffic threshold, to increase national sub-mandate on synthetic fuels as well as to grant an exemption from the tankering provisions for certain flights. In addition, Member States propose an extension of the scope of eligible sustainable aviation fuels and synthetic aviation fuels complying with the Renewable Energy Directive (RED) sustainability and emissions saving criteria.

EU ENERGY CRISIS

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

INTERNATIONAL ENERGY AGENCY PRESENTS POLICY FRAMEWORK BASED ON ENERGY EFFICIENCY: On 8 June, the International Energy Agency (IEA) presented a policy framework that could make Russian fossil fuels obsolete entirely. This framework proposes energy efficiency as solution to the current energy crisis, as it could simultaneously make energy supplies more affordable, more secure and more sustainable. The analysis carried out by IEA underlines how massive energy savings could be achieved by the end of the decade thought increased ambition while reducing CO2 global emissions by 5 billion tons a year by 2030. The amount of natural gas that the world would avoid using as a result of energy efficiency would be equal to four times what the European Union imported from Russia last year, while the reduced oil consumption would be almost 30 million barrels of oil per day, about triple Russia’s average production in 2021.

MEPs DIVIDED OVER SUSTAINABILITY OF GAS AND NUCLEAR ACTIVITIES: On 8 June, the main groups within the European Parliament (EPP, S&D, Greens, Renew Europe and The Left) held a public hearing on the EU Taxonomy complementary Delegated Act on nuclear and gas, which would classify certain nuclear and gas-related activities as sustainable. The Economic and Monetary Affairs Committee and the Environment Committee will jointly vote on a resolution for objection on the Delegated Act on 14 June. In general, MEPs oppose the text, which was presented by the Commission on 2 February. The Greens are fully against the inclusion of both nuclear and gas in the Taxonomy. S&D considers the delegated act “legal greenwashing” and denounces the fact that the Parliament has been sidelined during the process of drafting the act. Over 80% of the groups will vote against the Delegated Act. Renew Europe and The Left both warned that although their groups as a whole would not object the Delegated Act, several individual members are signatory of the resolution for objection and will vote against the Delegated Act. Only the EPP is more divided on the issue, especially in the context of the war in Ukraine which has affected the relationship towards gas and nuclear activities.

MEPs WELCOME FURTHER SANCTIONS AGAINST RUSSIA: On 8 June, the European Parliament discussed the conclusions of last week’s European Council summit, during which Member States approved a sixth sanctions package against Russia. Although MEPs welcomed the unity of Member States and the additional sanctions, numerous MEPs warned that not enough attention had been paid to addressing the negative effects of the war on the daily lives of EU citizens, notably due to sharp increases in energy prices. Many MEPs called for this to be properly addressed at the next European Council Summit which will take place on 23 and 24 June. A number of MEPs also warned against shifting energy dependency from one region of the world to another, saying that this would only be repeating the mistakes of the past.

THE NETHERLANDS AND GERMANY ANNOUNCE JOINT NORTH SEA DRILLING OPERATION: On 2 June, the Dutch Government announced a joint drilling operation together with Germany of the coast of The Netherlands, expected to start in 2024. A pipeline is also being constructed to transport the gas onto shore. Both governments are pressing to speed up operations following Gazprom’s announcement on 31 May that it would be cutting gas supplies to The Netherlands.

What’s next?

With three key Fit for 55 files sent back to the ENVI Committee for renegotiations, the expected timelines for adoption have been upset, and the agendas of upcoming might be subject to change. On EU ETS, MEPs will aim to find a new agreement in the next 15 days and vote on 23 June.

On 14 June, Commissioner for Energy Kadri Simson, will present the RePowerEU Plan to the Industry, Research and Energy Committee (ITRE). Still on 14 June, the Environment and Economic and Monetary Affairs Committees will vote on a resolution to exclude nuclear and gas from being considered sustainable under the EU Taxonomy.

On 23 and 24 June, the European Council summit will notably address the energy crisis in Europe. On 27 June, the Energy Council is set to adopt the Council’s General Approaches on the Energy Efficiency Directive and the Renewable Energy Directive. On 28 June, the Environment Council will gather in Luxembourg, and is due to adopt the Council’s General Approaches on the EU ETS, the Effort Sharing Regulation, the LULUCF and the CO2 standards for cars and vans.

EU ENERGY CRISIS

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

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

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

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

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

Highlights of the week

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

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

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

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

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

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

What’s next?

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

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

EU ENERGY CRISIS

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

COMMISSION PRESIDENT VON DER LEYEN ADDRESSES RUSSIAN SANCTION NEGOTIATIONS AT WORLD ECONOMIC FORUM: On 24 May, during the World Economic Forum in Davos, Commission President Ursula von Der Leyen was asked about the ongoing negotiations on the sixth sanction package against Russia, which includes a ban on Russian oil. After statements made by the Hungarian government stating it would not discuss Russian sanctions during the European Council meeting on 30 and 31 May, von Der Leyen stated that she does not expect an agreement to be found during the meeting. Hungary has been blocking the oil ban since the Commission proposed the sixth package of sanctions on 4 May, demanding considerable financial guarantees before it is willing to recommence to negotiations. Von Der Leyen indicated that such negotiations are too technical to take place at European Council level, but she still expressed the hope for a breakthrough to be made in the coming days.

EU MEMBER STATES ADVISED TO PREPARE FOR POTENTIAL GAS CUT FROM RUSSIA: According to leaked draft conclusions of the upcoming European Council meeting, Member States expect major Russian gas supply disruptions. The draft conclusions highlight the need to prepare for those disruptions through a coordinated contingency plan for gas cut-offs, bilateral solidarity agreements and a quick filling of gas storage before next winter. The draft conclusions also emphasize the short-term need to diversify supply sources and routes as well as secure Europe’s energy supply at affordable prices. However, this is expected to be difficult as alternative supplies, such as liquified natural gas (LNG) from the US, has historically been more expensive than cheap pipeline gas coming from Russia. The draft conclusions do not include any mention to the EU-wide ban on the import of Russian oil proposed by the European Commission.

EU COMMISSION AND UNITED STATES ISSUE JOINT STATEMENT ON EU ENERGY SECURITY: On 24 May, the European Commission and the United States issued a joint statement condemning Russia's use of energy blackmail and reaffirming their commitment to strengthening Europe's energy security. The European Commission and the US understand the urgency of taking decisive action to reduce energy imports from Russia, which is why they are partnering to address these challenges under the joint Task Force on Energy Security announced by Presidents Biden and Von der Leyen on March 25.  Through the Task Force, the US and the EU will continue working to diversify Europe's supply of natural gas while accelerating the deployment of energy efficiency and smart technologies, electrify heating, and ramp-up clean energy output to reduce demand for fossil fuels altogether. As an important step towards realizing the goals of the Task Force, the European Commission and the United States welcome Finland's contract to lease a floating LNG import terminal from a U.S. provider that will be operational before the end of this year.

EUROPEAN COMMISSION AND INTERNATIONAL ENERGY AGENCY JOIN FORCES TO REDUCE EU RELIANCE ON RUSSIAN FOSSIL FUELS: On 24 May, the Commission and the International Energy Agency (IEA) announced they are joining forces to help EU countries reduce their reliance on Russian fossil fuels. By strengthening investments in clean energy and energy efficiency, the project aims to mitigate the impact of Russia’s invasion of Ukraine on the EU energy sector. In the framework of this common endeavor, the Commission is offering support to Member States to reduce their dependence on Russian fossil fuels through the Technical Support Instrument. 17 EU countries have already joined the project. This support is in line with the REPowerEU Plan presented by the Commission on 18 May, outlining how to phase out EU dependence on Russian fossil fuels and accelerate the clean energy transition. The cooperation with the IEA will cover seven areas: supply and diversification of liquefied natural gas; production of biomethane; stepping up international trade in hydrogen; acceleration of rooftop solar and heat pumps roll-out; demand-side measures and energy efficiency; faster permitting of renewable projects; innovative hydrogen and renewables solutions for industry. It will include workshops, meetings, analysis, and data tracking by the International Energy Agency.

RUSSIA CUTS GAS SUPPLY TO FINLAND: On 21 May, Russian gas supplier Gazprom announced that it had shut off its gas export to Finland. The announcement comes shortly after Finland announced its intention to join the NATO defense alliance. Gasum, Finland’s gas supply, confirmed that Russia had halted supplies to Finland and announced that the company would supply natural gas from other sources, including through the Balticonnector pipeline, which runs between Finland and Estonia. Russia had already halted electricity deliveries to Finland on 14 May due to Finland’s intention to join NATO.

 

Would you like to know more about the impact of the energy crisis and sanctions on Russia on your organization? Dr2 Consultants’ European Green Deal & Fit for 55 Impact Scan offer targeted solutions to understand and anticipate the impact of the EU’s climate initiatives, as well as the EU’s countermeasures to mitigate the impact of the energy crisis and its sanctions on Russia. Don’t hesitate to contact us for more information.

Highlights of the week

EUROPEAN COMMISSION PUBLISHES DRAFT DELEGATED ACT ON METHODOLOGY FOR DETAILED RULES FOR THE PRODUCTION OF RENEWABLE TRANSPORT FUELS: This delegated act comes in the context of the revision of the Renewable Energy Directive, which introduces new provisions to promote the use of renewable liquid and gaseous transport fuels of nonbiological origin. The delegated act will set out the requirements for renewable electricity used to produce these renewable transport fuels so they can be counted as fully renewable. Its objective is to strike a balance between the needs in renewable electricity to produce renewable liquid and gaseous transport fuels of non-biological origin, most notably green hydrogen, and availability of renewable electricity for other uses (e.g. for industry or electric vehicles). Through its draft, the Commission wants to ensure that power installations providing electricity to produce green hydrogen are “additional” to other uses of electricity. It stipulates that, to ensure that the renewable hydrogen is produced from renewable electricity, the production of renewable electricity should happen at the same time as the use of said electricity for the production of renewable hydrogen. Environmental groups expressed skepticism in reaction to the draft, specifically due to a so-called ‘grandfathering clause’ which could allow hydrogen producers to contract for existing renewable capacity up to 2027. A public feedback period on the draft has been opened until 17 June.

ENERGY COMMUNITY DISCUSSES IMPLICATIONS OF CBAM: On 23 May, the Energy Community, which gathers the EU and neighboring countries to create an integrated pan-European energy market, held a high-level event to discuss the implications of the Carbon Border Adjustment Mechanism (CBAM) on its Contracting Parties. Participants recognized the beneficial role that CBAM could have on incentivizing increased decarbonization efforts and compliance with the Energy Community emission reduction rules. The event underlined that several pilot projects and initiatives related to carbon pricing were under way in the Contracting Parties. However, these efforts must be sped up in order to comply with the requirement of having an emission trading system in place by 2030 and thus qualify for an exemption from the CBAM levy on power exports to the EU.

TRANSPORT COMMITTEE PUBLISHES RENEWABLE ENERGY DIRECTIVE OPINION: On 19 May, the Transport (TRAN) Committee published Rapporteur Barbara Thaler’s opinion on the revision of the Renewable Energy Directive, which was adopted by the Committee on 17 May. The opinion states considerable investments into transmission grids within and between Member States need to be made and incentives need to be given for Member States to develop more joint projects. Additionally, the opinion reiterates the technology neutrality principle, in order not to limit research and development in certain sectors and for certain applications and to ensure a level playing field between all energy carries and technologies. On renewable fuels and gases of biological origin, the TRAN Committee rejects further tightening of available bio feedstock, since conventional biofuels are the only affordable option to replace conventional fuels in sufficient quantities for the time being. On Renewable Fuels of Non-Biological Origins, TRAN MEPs agreed that only sub-targets for hydrogen should be introduced in the revision, and should be postponed until 2030 and linked to a possible phasing out of low-carbon gases and fuels, plans for the caps for conventional biofuels and feedstocks proposed by the Commission to be abolished and for the only limitation to fuels and gases to be based on a sustainability criteria.

ENVIRONMENT COMMITTEE DISCUSSES ENERGY PERFORMANCE OF BUILDINGS REVISION: On 17 May, the Environment (ENVI) Committee gathered to discuss the revision of the Energy Performance of Buildings Directive, which sets measures to achieve energy efficient buildings throughout the EU. Rapporteur Radan Kanev (EPP, Bulgaria) indicated that he largely left intact the Commission’s high ambitions in his draft report. He is open to further amendments to realistically increase the existing ambitions where possible. He however warned that agreeing on high targets would not mean that they would be achieved, especially considering that previously agreed targets were met with significant difficulty. He stated that despite the existence of a large Social Climate Fund, large national budgets and a lot of other national and European support measures, public financing could not allow to achieve the objectives set for 2030 and 2050. He also emphasized the need to give enough consideration to low-income households. Shadow Rapporteur Marcos Ros Sempere (S&D, Spain) echoed the Rapporteur’s concern for low-income households and stated that they should not spend public money only on increasing energy efficiency, but also on improving quality of life in buildings. Shadow Rapporteur Claudia Ramon (RE, Austria) stated it was time to set the right incentives to give building renovations the strong push needed to reduce energy consumption, energy bills and greenhouse gas emissions and to increase the EU’s independence from fossil imports. Bas Eickhout (Greens/EFA, Netherlands) stressed the importance of the energy efficiency of buildings was consensual, and he warned that the legislation should also be assessed in conjunction with the Commission’s new REPowerEU plan.

What’s next?

On 30 and 31 May, the European Council will meet for an extraordinary meeting, in which EU leaders are expected to discuss the sixth sanction package and the energy crisis.

On 2 June, the Industry, Research and Energy (ITRE) Committee will adopt its opinions on the Renewable Energy Directive and FuelEU Maritime. On the same date, the Transport, Telecommunications and Energy (TTE) Council will meet to adopt the Council’s General Approaches on the Alternative Fuel Infrastructure Regulation (AFIR), RefuelEU Aviation and FuelEU Maritime.

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

All throughout June, the Council of the EU is due to continue adopting its positions on the Energy Efficiency Directive, Renewable Energy Directive, CO2 emission standards for cars and vans, Effort Sharing Regulation and EU ETS.

On 1 July, France will leave the Council Presidency, succeeded by Czech Republic.

EU ENERGY CRISIS

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

POLITICAL STANDSTILL ON SIXTH SANCTION PACKAGE: After three weeks, Member States have not yet succeeded in finding an agreement on the sixth package of sanctions on Russia proposed by the Commission on 4 May. As previously reported in this update, the objective of this sanction package is to remove Russian oil products from the EU’s energy market. Hungary continues to block the proposal as it wants more substantial concessions to take into account its dependency of pipeline-imported Russian oil. Furthermore the Hungarian government has indicated a preference for the decision to be taken at the highest political level, which means that the sixth sanction package will likely be decided upon during the Special European Council Meeting of 30—31 May.

EUROPEAN COMMISSION PUBLISHES REPOWER EU PLAN:  On 18 May, the European Commission presented the REPowerEU plan, which includes an extensive set of priorities, recommendations and proposals to rapidly shift the European energy market away from Russian supply and towards renewable energy. The plan consists of three main pillars covering the plan’s core objectives and policy framework: first, to save more energy and promote energy efficiency; second, to substitute fossil fuels by accelerating the EU’s clean energy transition; and third, to diversify the European energy supply by seeking new import markets and rely less on import from Russia. In terms of energy savings the most significant developments are the presentation of the EU Save Energy Communication which builds further on the Fit for 55 package and an increase of targets within the Energy Efficiency Directive from 9% to 13%. In order to accelerate the energy transition, REPowerEU proposes to raise the 2030 goal to 45% renewable energy by drastically increasing investments in hydrogen and biomethane and boosting solar energy production through a new Solar Strategy. Within its effort to diversify away from the Russian market, the Commission focusses on the voluntary EU Energy Platform for Member States to jointly negotiate deals on the purchasing of energy. The Commission hopes to deepen this cooperation through a ‘Joint Purchasing Mechanism’ where it could negotiate on behalf of the members.

EUROPEAN PARLIAMENT POLITICAL GROUPS WELCOME THE REPOWEREU PLAN: In response to the presentation of the REPowerEU plan, political groups within the European Parliament voiced their support for the proposals announced by the European Commission. The EPP group underlined the need to develop long-term partnerships with non-EU countries to secure sustainable, secure and affordable energy. In particular, the EPP group strongly supports developments in solar energy and stressed the need to simplify rules on permits and make rooftop solar panels mandatory for all new buildings. The S&D group called for a new recovery plan to finance the energy transition and accelerate the phase out of fossil fuels. In this regard, MEP Dan Nica (S&D, Romania) underlined the need for a ‘a shock plan to boost renewables and energy efficiency measures’. However, he criticized the absence of a clear timeline for stopping energy dependency on Russia. Renew Europe strongly welcomed the proposals to speed up renewables permits and grid infrastructure improvements as well as to deploy a resilient renewable hydrogen market. The Greens/EFA group welcomed legal and binding measures for more renewable energy and energy efficiency, as well as the proposed legal obligation to install solar panels. Greens MEPs call on the European Commission to protect low-income households and to find new revenues to finance this transition moving away from Emissions Trading System certificates.

EUROPEAN COMMISSION PROPOSED SOLAR ENERGY STRATEGY: Within the context of REPowerEU published on 18 may, the commission also proposed a first Strategy for Solar Power. The objective is to more than double the current production of solar energy towards 320 Gigawatt by 2025, and further increase it towards 600 Gigawatt by 2027. The strategy consists of a European Solar Rooftops Initiative, which aims at making the installation of rooftop solar panels compulsory for new commercial and public buildings larger than 250 m² by 2026 and for all existing ones over that size by 2027. New residential buildings should be equipped with solar panels by 2029. The strategy additionally proposes a simplification of the current procedures for permits and calls for large-scale partnerships among stakeholders to share and develop skills with regards to onshore renewables including solar. Lastly, it aims at bolstering innovation in the field as well as strengthening the industrial sector by launching a European Solar PV Industry Alliance.

EUROPEAN COMMISSION PRESENTS EXTERNAL ENERGY STRATEGY: Together with the REPowerEU, the European Commission presented the EU External Energy Strategy, which aims to facilitate the diversification of energy supply and build long-term partnerships. To reduce the pressure on prices, the Strategy prioritizes the green energy transition, increasing energy savings and efficiency. Moreover, it plans to boost the global development of renewables and hydrogen as well as step up energy diplomacy. As regards hydrogen, the Strategy proposes actions to facilitate the import of hydrogen into the EU, for instance developing major hydrogen corridors in the Mediterranean and North seas as well as concluding hydrogen partnerships with hydrogen suppliers. A first step with regards to the hydrogen ambitions is a mapping of the current hydrogen infrastructure to be finished by March 2023. Regarding the relation with international partners, the EU aims at supporting Ukraine, Moldova, the Western Balkans and Eastern Partnership countries in ensuring energy supply. The Strategy also includes actions to promote and support the energy transition with EU partner countries.

EUROPEAN COMMISSION AIMS TO BOOST ENERGY PARTNERSHIP WITH GULF COUNTRIES: In line with the EU’s ambition to engage in international partnership in the field of energy, the European Commission also presented on 18 May a Joint Communication on a Strategic Partnership with the Gulf. The Communication underlines that the Gulf countries play a key role in the field of energy security as world's largest producers of fossil fuels, reliable liquefied natural gas (LNG) providers as well as producers of renewable energy, such as hydrogen, solar and wind power. Against this background, the EU aims to set up a dedicated EU-Gulf energy and climate expert group to intensify policy dialogue on green transition at regional and bilateral level, develop and improve infrastructure interconnections and promote the creation of competitive markets enabling trade in renewable energy.

EUROPEAN COMMISSION SETS NEW MEASURES TO TACKLE HIGH ENERGY PRICES: Still on 18 May, the European Commission presented a Communication on “short-term energy market interventions and long term improvements to the electricity market design”. The Communication puts forward a series of measures to tackle high energy prices and address the possible gas supply disruptions from Russia. Specifically, as short-term intervention measures, Member States could temporarily extend end-consumer price regulation and use emergency liquidity measures in the gas market. Moreover, the Communication sets intervention options in the electricity markets to support consumers next winter. The European Commission announced also that it would investigate the electricity market in order to make it future-proof and resilient to possible future shocks. As regards possible gas disruption from Russian, the Communication invites Member States to update their contingency plans. Furthermore, the European Commission is ready to facilitate a coordinated the EU response, for instance with a EU demand reduction plan and a price cap on gas.

VON DER LEYEN EMPHASIZES IMPORTANCE OF HYDROGEN IN EU’S ENERGY SECURITY: Speaking at the Central European Hydrogen Technology Forum on 17 May, European Commission President Ursula von der Leyen stated that green hydrogen is essential to end the EU’s dependence on unreliable and dangerous suppliers such as Russia. That is why the Commission’s new energy plan, REPowerEU, has doubled the 2030 target to produce annually ten million tons of renewable hydrogen in the EU, and plans for the EU to import another 10 million tons from abroad. This could replace up to 50 billion cubic metres per year of imported Russian gas.  

 

Would you like to know more about the impact of the energy crisis and sanctions on Russia on your organization? Dr2 Consultants’ European Green Deal & Fit for 55 Impact Scan offer targeted solutions to understand and anticipate the impact of the EU’s climate initiatives, as well as the EU’s countermeasures to mitigate the impact of the energy crisis and its sanctions on Russia. Don’t hesitate to contact us for more information.

Highlights of the week

ENVIRONMENT COMMITTEE MEPS VOTE TO RAISE THE EU ETS CLIMATE AMBITION: On 17 May, the Environment (ENVI) Committee adopted Rapporteur Peter Liese’s (EPP, Germany) report on the revision of the EU Emissions Trading System (ETS). Voting on the amendments, MEPs agreed upon strengthening the Innovation Fund and rewarding best-performing companies in decarbonization through a bonus-malus system. MEPs also voted to include waste in the ETS scope starting from 2026 (following an impact assessment) and to support companies covered by the ETS dealing with international competition. In addition, the report aims to include maritime from 2024 with full auctioning, to allocate 75% of the ETS revenues to finance innovation in ships and harbors and 25% to pay back NextGenerationEU. The scope of the ETS concerns 100% of intra-EU trips and 50% of international shipping (departing/arriving in the EU). A 100% of international shipping should be included as of 2027. On ETS for road transport and buildings, MEPs agreed to include them in the scope already in 2025 for commercial operations, while the private sector could only be included as of 2029, after an impact assessment on energy and mobility poverty in the EU and through a co-decision procedure involving the European Parliament and Council of the EU. Rapporteur Liese expressed criticism on adopted amendments that were supported by Greens, Renew, S&D and the Left (and not the EPP), which would raise the ETS climate ambition (e.g., the phase-out of free allowances for sectors covered by CBAM in 2030). The Rapporteur expects these amendments to be challenged by the EPP and ECR during the European Parliament plenary session in June, during which the report is to be adopted. Indeed, both groups proposed the phase out of free allowances in 2034 (in line with the Industry, Research and Energy (ITRE) Committee’s opinion).  

ENVI COMMITTEE VOTES TO SPEED UP AND INCREASE THE SCOPE OF CBAM: On 17 May, the ENVI Committee adopted the report by Rapporteur Mohammed Chahim (S&D, Netherlands) on the Carbon Border Adjustment Mechanism (CBAM) with 49 votes in favor, 33 against and 5 abstentions. MEPs voted to expand the scope of CBAM including aluminum, hydrogen, polymers and organic chemicals in addition to the products proposed by the Commission (iron and steel, refineries, cement, organic basic chemicals and fertilizers). Furthermore, the report aims to include indirect emissions in the scope, to create a centralized CBAM authority and to phase out free allowances under the EU ETS in 2030. MEPs also voted in favor of anti-circumvention measures and extra financial support for least developed countries using CBAM revenues. According to the report, the CBAM would apply from 1 January 2023 with a transitional period until the end of 2024 and it must be fully implemented for all sectors of the EU ETS by 2030 (five years earlier than proposed by the European Commission). The report is scheduled for a vote at the plenary session on 6-9 June after which the European Parliament will be ready to start negotiations with the Council of the EU.

MEPS IN ENVIRONMENT COMMITTEE AIM FOR A FASTER DECARBONIZATION OF THE AVIATION SECTOR: On 17 May, the ENVI Committee adopted its position on the revision of the EU Emissions Trading System (ETS) for aviation. The report by Rapporteur Sunčana Glavak (EPP, Croatia) aims to raise the ambition of decarbonizing the aviation sector by proposing the phase out of free allocation already in 2025 (two years ahead than the original proposal), with an accelerated phase out of 50% in 2024. In addition, MEPs voted to expand the scope by including in the EU ETS all flights departing from airports located in the European Economic Area (EEA). To support innovation and new technologies to decarbonize the sector, the report proposed to allocate 75% of ETS aviation revenues to fund innovative projects and solutions. The European Commission should also improve transparency, for instance by publishing all emissions data related to aircraft operators and a list of aircraft operators from countries that do not apply CORSIA. The report is scheduled for a vote during the European Parliament plenary session on 6-9 June.

TRANSPORT COMMITTEE DEBATES AMENDMENTS TO FUELEU MARITIME REPORT: On 17 May, the Transport (TRAN) Committee held a debate on the amendments to Rapporteur Jorgen Warborn’s (EPP, Sweden) draft report on FuelEU Maritime. The Rapporteur welcomed the agreement between most MEPs on the need for technological neutrality, saying that this was the best way to ensure that the energy transition was designed in a cost-effective way. He also called for binding limits on greenhouse gas (GHG) intensity and using them as tools to push the maritime sector in the right direction. Shadow Rapporteur Vera Tax (S&D, Netherlands) said her party sought 100% reduction in the maritime sector’s GHG emissions by 2050, which was essential to keeping the climate goals within reach and accused the rapporteur of not taking into consideration a majority of MEPs’ concerns. MEP Else Katainen (Finland), Shadow Rapporteur for Renew Europe, called for moderated ambition, citing the need to ensure competitiveness in the shipping sector as well as a level playing field in the Single Market all the while reducing emissions. Shadow Rapporteur Jutta Paulus (Greens/EFA, Germany) stressed the importance of attaining climate neutrality by 2050 and explicitly incorporating this target into the legislation. In response to the MEPs, a representative of the Directorate-General for Mobility and Transport (GD MOVE) in the European Commission commented that all elements and targets of the Fit for 55 package, were modelled on the EU’s broader climate target plans and reflected the most cost-effective scenario combining the effects of various elements in the package, notably EU ETS, the Renewable Energy Directive and the Alternative Fuels Infrastructure Regulation.

What’s next?

On 30 and 31 May, the European Council will meet for an extraordinary meeting, in which EU leaders are expected to discuss the sixth sanction package and the proposed oil embargo.

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

All throughout June, the Council of the EU is due to adopt its positions on FuelEU Maritime, ReFuelEU Aviation, Energy Efficiency Directive, Renewable Energy Directive, CO2 emission standards for cars and vans, Effort Sharing Regulation and EU ETS.

EU ENERGY CRISIS

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

EU GAS DEPENDENCY COULD COST €250 BILLION BY 2030: A report published on 11 May by environmental think-tanks found that, despite the measures planned in the Fit for 55 package, forecasted gas consumption in 2030 could cost the EU €250 billion more than anticipated by the European Commission in its impact assessments when drafting the package. This is because the high and volatile gas prices, caused by shortages coupled with the war in Ukraine, are expected to last for at least three years. The EU’s REPowerEU Communication, which proposes a path towards independency from Russian supplies, is expected to decrease this cost by only €47 billion. The report finds that the only way to considerably reduce this cost is to roll-out renewable energies more rapidly and on a larger scale than planned in the package, as well considerably increase energy efficiency.

RENEWABLE ENERGY GENERATION CAPACITY REACHED RECORD HIGH IN 2021: According to a press release published on 11 May by the International Energy Agency (IEA), global renewable energy generation capacity has known an unprecedented growth in 2021, with the addition of a record 295 gigawatts of new renewable power capacity, mainly from solar energy. The growth is notably driven by strong policy support in the EU, but also in China and Latin America. The IEA expects that this growth will continue in 2022 as governments increasingly seek to take advance of renewables’ energy security and climate benefits. Global capacity additions are expected to rise this year to 320 gigawatts – equivalent to an amount that would come close to matching the European Union’s total electricity generation from natural gas.  However, the IEA warns that, based on the current policy setting, renewable energy’s global growth is set to lose momentum in 2023. In the absence of stronger policies, the amount of renewable power capacity added worldwide is expected to plateau next year.

EU COMMISSION CONSIDERING FUNDING FOR EASTERN MEMBER STATES’ ENERGY INFRASTRUCTURE: Following Commission President Ursula von der Leyen’s trip to Hungary on 9 May, EU officials revealed that the Commission is considering offering certain eastern Member States (Hungary, Slovakia and Czech Republic) additional funding to improve their oil infrastructure and connections with other Member States, as a way to convince them to endorse a ban on Russian oil. The ban on Russian oil imports was proposed by the Commission as part of the sixth sanctions package proposed by the Commission last week. The three countries are landlocked and have therefore less options than other Member States for alternative supplies. The sanctions package, which must be approved unanimously by Member States, is currently being tweaked by the Commission to address their various concerns and gain approval. The Commission has already agreed to grant Hungary, Slovakia, Czech Republic longer transition periods for phasing out crude oil and refined oil imports, and a new revision of the text is expected to remove the ban on EU tankers from carrying Russian oil after pressure from Greece, Cyprus, Malta.

 

Would you like to know more about the impact of the energy crisis and sanctions on Russia on your organization? Dr2 Consultants’ European Green Deal & Fit for 55 Impact Scan offer targeted solutions to understand and anticipate the impact of the EU’s climate initiatives, as well as the EU’s countermeasures to mitigate the impact of the energy crisis and its sanctions on Russia. Don’t hesitate to contact us for more information.

Highlights of the week

ECONOMIC COMMITTEE DEBATES AMENDMENTS TO ENERGY TAXATION DIRECTIVE: On 11 May, the Economic and Monetary Affairs Committee debated the 409 amendments submitted to Rapporteur Johan Van Overtveldt's (ECR, Belgium) draft report on the Energy Taxation Directive. MEP Overtveldt underlined that there is still a disagreement within the Committee on the taxation approach to adopt in the legislation: he is in favour of a technology-neutral approach, whereas other political groups favour the Commission’s approach based on environmental impact. However, MEPs agree on the need for a global impact assessment of the Fit for 55 package to assess its impact on citizens and industry. MEPs also disagree on the inclusion or not of automatic indexation of taxation rates on inflation, as well as on the date of entry into force of the new legislation. However, they agree that double taxation must be avoided, especially with regards to energy used in installations covered by the EU ETS. The minimum and maximum taxation rates for various energy sources, notably electricity, transitional fuels and sustainable fuels, also still cause disagreement between MEPs.

ENVIRONMENT COMMITTEE ADOPTS CO2 STANDARDS FOR CARS AND VANS REPORT: On 11 May, the Environment Committee (ENVI) adopted the report by Rapporteur Jan Huitema (RE, Netherlands) on the CO2 emission performance standards for cars and vans.  The report was adopted with 46 votes in favor, 40 against and 2 abstentions. Proposed measures include the removal of the incentive mechanism for zero- and low-emission vehicles (‘ZLEV’) and a gradual reduction of the cap for eco-innovation, in line with the proposed stricter targets (the existing 7g CO2/km limit should remain until 2024, followed by 5g from 2025, 4g from 2027 and 2g until the end of 2034). MEPs agreed upon the establishment of a common EU methodology by the Commission, by 2023, for assessing the full life cycle of CO2 emissions of cars and vans placed on the EU market, as well as for the fuels and energy consumed by these vehicles. Furthermore, the report calls on the Commission to work on reports covering the impact on consumers and employment, the level of renewable energy use, information on the market for second-hand vehicles, and targeted funding to boost the green mobility transition. The ENVI report will be voted on during the June Plenary sitting.

ENVIRONMENT COMMITTEE REACHES MAJORITY AGREEMENT ON EU ETS: On 11 May, the Rapporteur on the EU Emissions Trading System (ETS), MEP Peter Liese (EPP, Germany) announced the Environment Committee reached an agreement on the proposal. This comes a day after MEP Michael Bloss (Greens/EFA, Germany), Shadow Rapporteur for the EU ETS, announced that the Committee had reached a majority agreement supported by the S&D, Greens/EFA, Renew Europe and The Left,  but not EPP. MEP Liese explained that the Shadow Rapporteurs accepted the inclusion of the ‘bonus-malus-system’, according to which companies that are emitting much less than others in their sector will get additional allowances, while those that are emitting much more and do not do efforts to decarbonize, will have to pay a much higher bill in the next years. In addition, companies that meet the emissions reduction benchmark will be rewarded with longer free allowances and be exempted from the correction factor. MEPs also agreed on increasing the Innovation Fund with additional 50 million more allowances and to direct 75% of the ETS’s revenues for shipping to an ‘Ocean Fund’ (support for the decarbonization of shipping industry). As regard the expansion of the scope of the EU ETS, MEP Liese explained that maritime transport will be included from 2024 while the ETS II for road transport and heating has some differentiation. Specifically, MEPs agreed that ETS II for commercial operators will be introduced as soon as possible, while for private sector it will start only from 2029 (subjected to an impact assessment by the Commission of energy and mobility poverty in the EU).

COMMISSION TO SHORTEN RENEWABLE ENERGY PERMIT PROCEDURE: According to a leak of the Commission’s REPowerEU plan, to be published on 18 May, the European Commission will propose to allow certain renewable energy projects to receive permits within a year. Member States would have to designate “go-to- areas” where renewable energy projects would have a low environmental impact. For new projects in such areas, permit granting process should not exceed one year. Normal permitting procedures for renewable energy usually take years, dependent on the Member States’ bureaucracy. The Commission’s proposal would accelerate the process as the overall “go-to area” would be subject to an environmental assessment, but individual projects would no longer need one. Also according to the REPowerEU leak, the EU renewable energy target should be increased compared to the Renewable Energy Directive proposal, but the number is not yet specified. Finally, the REPowerEU plan will include a strategy for solar power, to make it a significant part of the EU’s power and heating systems.

TRANSPORT COMMITTEE AGREES ON THE INCLUSION OF MARITIME IN THE EU ETS BUT NOT OF ROAD TRANSPORT AND BUILDINGS: On 10 May, the Committee on Transport and Tourism (TRAN) published its opinion on EU ETS, which was adopted on 28 April. The Rapporteur for opinion Andrey Novakov (EPP, Bulgaria) underlines his concerns over the lack of a synergistic economic impact assessment covering the entire Fit for 55 package. The opinion supports the inclusion of the maritime sector in the scope of the EU ETS, but calls for a coordinated approach with the International Maritime Organization (IMO) towards a global market-based instrument. The opinion also extends the phase-in period from 20% of verified emissions for 2026 to 100% for 2029, to mitigate the negative effects of COVID-19 pandemic and leave time for the sector to adapt. The TRAN opinion proposes the establishment of a Maritime Transition Fund funded by ETS revenues, which would finance decarbonization projects and boost the development of transitional fuels and new technologies. On the inclusion of building and road transport in the scope, the TRAN Committee rejected this option, highlighting that it is premature as it would have negative effect on end-consumer costs, citizens and business. A comprehensive impact assessment indicating the real burden to citizens and thoroughly analyzing the risk and scale of energy and transport poverty, is needed before a final decision on the new ETS can be made.

EUROPEAN PARLIAMENT PUBLISHES STUDY ON PRICING INSTRUMENTS ON TRANSPORT EMISSIONS: The study was published on 10 May on the request of the TRAN committee to support its work on key legislative proposals such as the Energy Taxation Directive (ETD) and the EU Emissions Trading System (EU ETS). The study explains that pricing instruments on CO2 emissions from road transport are used widely across the EU, but not in a coherent way. As a result, different tax levels and structures are in place across the EU. The Commission has attempted to harmonize these policies through the EU ETS and ETD. The report does however show that pricing instruments seem successful in reducing CO2 emissions, as well as in generating taxation income. It must be taken into account that distributional impacts also occur: households of low-income experience a larger impact than other groups. The report therefore recommends a balanced mix of pricing instruments and to integrate these into broader emission reduction policies. Carefully exploring social acceptance and openness to adjusting the instruments are also important.

What’s next?

On 16 and 17 May the TRAN Committee will vote on its opinions on the Renewable Energy Directive and the Energy Taxation Directive, and debate amendments to the FuelEU Maritime report.

On 16 and 17 May, the ENVI Committee will vote on its reports on the Carbon Border Adjustment Mechanism (CBAM), EU ETS, Land Use, Land Use Change and Forestry Regulation (LULUCF) and Effort Sharing Regulation, as well as its opinions on the Renewable Energy Directive.

On 7 June, the European Parliament Plenary will hold a joint debate on the Fit for 55, focusing on the CBAM, the EU ETS, the Effort Sharing Regulation, the LULUCF and the CO2 emissions performance standards for cars and vans.

All throughout June, the Council of the EU is due to adopt its positions on FuelEU Maritime, ReFuelEU Aviation, Energy Efficiency Directive, Renewable Energy Directive, CO2 emission standards for cars and vans, Effort Sharing Regulation and EU ETS.

EU ENERGY CRISIS

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

EUROPEAN COMMISSION ANNOUNCES SIXTH SANCTION PACKAGE ON RUSSIA: On 4 May, during the European Parliament’s Plenary session, European Commission President, Ursula von der Leyen, announced the sixth sanction package on Russia. Most significantly, the package targets imports of Russian oil. The Commission aims at a complete ban on Russian oil products within a time period of 8 months, both on import by sea or through pipelines. In six months, a full ban on the import of Russian crude oil is to be in place, to be extended to two months later to refined oil products. The proposal was welcomed by the Greens/EFA, the EPP and Renew Europe, although they ask for a total embargo on coal and gas as well. The S&D group, while supporting the measure, asked for an urgent plan to cope with the economic and social impact of the oil ban. The package first needs to be unanimously approved by Member States. It is expected that Member States highly dependent on Russian oil will express resistance to the package. Hungary has already warned it would not support the package “in its current form”, while Slovakia wants an even longer transition period, although the Commission has already granted an exemption to both Member States, allowing them until 2023 to phase out their import of Russian oil. The European Foreign Affairs Council is set to meet on 16 May and has the war on its agenda, while a special European Council meeting is scheduled on 30 May.

MEPs STRESS THE STRATEGIC IMPORTANCE OF RENEWABLES AND ENERGY INTERCONNECTIONS AND EFFICIENCY: On 3 May, Commissioner for Energy, Kadri Simson, joined the European Parliament’s Plenary session to discuss the EU’s energy autonomy. During the discussion, MEPs called for more investments in renewables and support to projects improving energy interconnections in the EU, including for LNG, to ensure the EU’s energy autonomy. Greens MEPs called for a European Solar Act, similar to the European Chips Act, that would support the autonomy of the EU’s solar energy sector. They also stressed the importance of energy saving and energy efficiency in reducing prices for consumers and reducing reliance on energy imports. EPP MEPs stressed that accelerating the energy transition was core to protecting energy security both in the short and long run, also stressing the important role hydrogen can play. S&D MEPs highlighted the need to take accompanying measures to shield consumers from high energy prices.

MEMBER STATES VOW TO ENSURE SECURITY OF ENERGY SUPPLY: On 2 May, the Energy Council gathered in Brussels to address the situation of energy supplies and other energy developments in the EU, in the context of Russian company Gazprom halting gas deliveries to some Member States. Ministers, together with Energy Commissioner, Kadri Simson, reviewed the preparedness of the EU, underlining that there is no immediate risk of gas disruptions to consumers and industry. Nonetheless, they reiterated their readiness to offer all necessary assistance to affected Member States. Commissioner Simson also highlighted that energy projects within the EU, such as gas interconnectors between Lithuania and Poland and between Greece and Bulgaria, were starting to operate or nearing completion and would play a crucial role in ensuring the EU’s security of supply. EU Energy Ministers stressed that they would continue to work with the Commission to ensure the security of energy supply of all Member States at all times, including by reaching the best possible storage levels across the EU, by securing alternative deliveries from reliable suppliers and by continuous monitoring of the preparedness of the EU’s energy systems, including exchanging information on gas savings.

 

Would you like to know more about the impact of the energy crisis and sanctions on Russia on your organization? Dr2 Consultants’ European Green Deal & Fit for 55 Impact Scan offer targeted solutions to understand and anticipate the impact of the EU’s climate initiatives, as well as the EU’s countermeasures to mitigate the impact of the energy crisis and its sanctions on Russia. Don’t hesitate to contact us for more information.

Highlights of the week

WIND ENERGY PRODUCTION IN THE EU STILL SHORT OF REACHING 2030 TARGET: On 4 May, WindEurope, the association representing the EU’s wind energy sector, reported that €41.4 billion had been invested in wind farms in Europe in 2021, financing a record increase in new production capacity of 25 Gigawatt. Despite this increase, the sector still falls short of reaching the yearly EU target of 35 Gigawatt necessary to reach 2030 climate and energy security targets. In fact, Europe invested 11% less in wind energy compared to 2020. WindEurope warns that this underinvestment is harming the competitiveness of the sector. WindEurope therefore calls upon the EU and national governments to remove barriers towards the expansion of renewables.

TRANSPORT COMMITTEE ADOPTS OPINION ON EU ETS FOR AVIATION: On 28 April, the Committee on Transport and Tourism (TRAN) voted and adopted the opinion by Rapporteur for opinion Jan-Christoph Oetjen (Renew, DE) on the proposal for an EU Emissions Trading System (ETS) for aviation. The MEPs adopted it with 37 votes in favor, 6 against and 5 abstentions. MEP Oetjen proposes to introduce free allocation of allowances to aircraft operators to incentivize the uplifting of sustainable aviation fuels (SAFs), including synthetic aviation fuels, in line with the objectives of the proposal of ReFuelEU Aviation. He suggests that these ETS credits should come from the pool of total allowances available and proposes to reserve a total of 20 million for this purpose up to 2030. Moreover, Rapporteur Oetjen proposes the earmarking of revenues from EU ETS allowances purchased by aircraft operators for R&D investment exclusively in the aviation sector. In order to ensure a level playing field, the opinion suggest that the European Commission should be able to impose an EU ETS on third-country carriers in case of distortion of competition or a threat of injury to the European aircraft operator as a result of this non-compliance. Finally, to avoid high fluctuations in carbon price, current rules safeguarding the market against any future speculation should be revised.

TRANSPORT COMMITTEE ADOPTS OPINION ON CO2 EMISSION STANDARDS: On 28 April, the TRAN Committee adopted the opinion by Rapporteur Karima Delli (Greens/EFA, France) on the proposed revision of CO2 emission standards for cars and vans. The final vote on the opinion was adopted with 27 positive votes, 14 against and 7 abstentions. MEPs voted in favor of recognizing the contribution of sustainable renewable fuels for compliance with the targets. Furthermore, they call for reducing the CO2 emission reduction target for 2035 from 100% to a 90% target (compared to 2021 levels), while retaining the proposed targets for 2025 and 2030. Moreover, the opinion proposes the amounts of the excess emissions premium to be considered as revenue assigned to the Social Climate Fund to mitigate any negative employment impact of the transition in the sector. MEPs also agreed to consider different technologies to achieve the zero-emissions goal.

ENVIRONMENT COMMITTEE ADOPTS OPINIONS ON REFUEL AVIATION AND ENERGY EFFICIENCY DIRECTIVE: On 28 April, the Committee on the Environment, Public Health and Food Safety (ENVI) voted and adopted the opinion by Rapporteur Nicolás González Casares (S&D, ES) on the proposal for ReFuelEU Aviation. The draft opinion was adopted with 46 votes in favor, 14 against and 26 abstentions. Notably, the opinion raises the target to 100% sustainable aviation fuels (SAFs) by 2050, includes hydrogen and electricity in the scope, and ensures that all EU airports would provide SAFs by 2035 (by 2025, only airports with more than 750.000 passengers would have to provide SAFs). As regards biofuels covered under the Renewable Energy Directive, the opinion establishes a cap of 1.7% for the total SAFs supplied to aircrafts. Moreover, MEP Casares proposes that the European Commission puts forward legislation to reduce the non-CO2 effects of aviation (e.g., aromatics and sulfur) and works on a report evaluating the environmental impacts and technical viability of a SAF mandate for short-haul flights. During the same ENVI meeting, MEPs adopted the draft opinion on the Energy Efficiency Directive (EED) by Rapporteur Eleonora Evi (Greens/EFA, Italy) with 47 votes in favor, 30 against and 9 abstentions.

What’s next?

On 10 May, the Committee on Women’s Rights and Gender Equality will adopt its opinion on the Energy Efficiency Directive. On 11 May, ENVI MEPs will vote on MEP Jan Huitema (Renew, The Netherlands)’s draft report on the CO2 Emission Standards for Cars and Vans.

Furthermore, on 11 May the Committee on Economic and Monetary Affairs (ECON) will discuss the revision of the Energy Taxation Directive, which will also be voted upon by TRAN MEPs on 16 May.

Lastly, the ENVI committee will be handling several proposals with regards to the EU ETS: on 11 May it considers its draft report on ETS as regards notification on the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), and on 16 may it votes on ETS maritime and operation of a market stability reserve as well as ETS aviation.

EU ENERGY CRISIS

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

GERMANY PLANS EXTRAORDINARY MEASURES TO DECREASE DEPENDANCE ON RUSSIAN GAS: On 28 April, Germany’s Vice-Chancellor and Climate and Economy Minister, Robert Habeck, outlined the plans for speeding up the country’s independence from Russian gas, which is planned to be achieved mid-2024. One of the measures taken is the construction of a Liquified Natural Gas (LNG) terminal in ten months’ time. The project is highly ambitious and will require unprecedent efforts to speed up the process (e.g. start construction before receiving permits). Finance Minister, Christian Lindner, already made €3 billion available to support the leasing of floating LNG terminals, which would receive shipments for instance from the United States and Qatar. In the meantime, Germany has also successfully worked to drastically decrease its reliance on Russian oil by diversifying supplies, notably through a tight partnership with Poland for deliveries. Robert Habeck stated on 26 April that Germany was “very, very close” to stop needing to rely on Russian oil imports, which constituted 35% of the country’s oil consumption in 2021.

PORTUGAL AND SPAIN WANT THE GAS STORAGE REGULATION TO INCLUDE LNG FACILITIES: On 27 April, Portugal and Spain issued a joint statement outlining their position regarding the proposal for a Gas Storage Regulation. The two Member States highlight the prominent role of Liquified Natural Gas (LNG) in the Iberian Peninsula and the several LNG facilities currently operating in Portugal and Spain. In this regard, they underline the resilience of their storage levels during winter 2021/2022 thanks to LNG stocks. Against this background, Portugal and Spain stress the gas storage regulation should include LNG facilities, and not only underground storage. Both countries ask for the Iberian Peninsula to be explicitly recognized as a region with distinctive circumstances, and as such, Spain and Portugal should have specific targets of 80% storage capacity for 2022 onwards, allowing LNG stocks to count towards the fulfilment of the 90% target.

RUSSIA STOPS DELIVERIES OF GAS TO POLAND AND BULGARIA: In response to the countries refusal to pay supplies of gas in rubles, Russia’s state-owned Gazprom halted gas deliveries to Poland and Bulgaria from 27 April. The Member States reported that they would not suffer disturbance and customers would not face shortfalls in deliveries, thanks also to the high level of gas storage. European Commission President, Ursula von der Leyen, voiced her criticism against Gazprom’s announcement and Russian attempt to use fossil fuels as a political weapon. She announced that Poland and Bulgaria would continue receiving deliveries from other Member States. Moreover, as regards the diversification of energy supplies, President von der Leyen mentioned that the EU reached an agreement with the US to provide additional Liquified Natural Gas (LNG) imports and that the European Commission would present its detailed plan to speed up the green energy transition on 18 May.

EUROPEAN UNION TO INCLUDE OIL IN THE SIXTH SANCTIONS PACKAGE: Commissioner Vice-President Valdis Dombrovskis revealed on 25 April that the EU is working on a sixth sanctions package against Russia that would include “some form of oil embargo”. The measure, which has not been agreed yet, could include a granular phasing-out of Russian oil or the imposition of tariffs on exports beyond a certain price cap. Indeed, a full embargo on gas and oil would unlikely find support among Member States. Notably, the most vocal opponents to the embargo, Germany and Hungary, are softening their position. Germany has been working to end its dependency from Russian oil in the past weeks, and the visit of the German Climate and Economy Minister, Robert Habeck, in Poland could hint at a softer position on sanctions. Meanwhile, the Hungarian Prime Minister’s chief of staff, Gergely Gulyás, opened up to discussing alternatives on an oil embargo. According to Commissioner for Energy, Kadri Simson, the package would be presented soon to EU diplomats. Nevertheless, High-Representative Josep Borrell clarified that the package still requires further negotiations, and it is unlikely that a final decision would be taken before the next European Council at the end of May. Beside the embargo, the sanctions package is expected to target the largest Russian bank, Sberbank, through which Member States make payments for Russian gas and oil.

 

Would you like to know more about the impact of the energy crisis and sanctions on Russia on your organization? Dr2 Consultants’ European Green Deal & Fit for 55 Impact Scan offer targeted solutions to understand and anticipate the impact of the EU’s climate initiatives, as well as the EU’s countermeasures to mitigate the impact of the energy crisis and its sanctions on Russia. Don’t hesitate to contact us for more information.

Highlights of the week

NEW REPORT FROM EUROPEAN COMMISSION SHOWS INCREASE IN GHG EMISSIONS FROM OPERATORS COVERED BY EU EMISSION TRADING SYSTEM: According to a new report published on 25 April by the European Commission, greenhouse gas emissions from operators covered by the EU Emissions Trading System (EU ETS) increased by 7.3% in 2021 compared with 2020 levels. The increase results from an 8.3% increase in emissions from the power sector, an increase of 5.2% from main industrial sectors and an increase of 8.7% from aviation. Compared with 2019 emissions, emissions from the power sector have, however, decreased by 7.3%, while for main industrial sectors they have decreased by 1.9% and by 61% for aviation. Under the EU ETS, all operators (stationary installations and airlines) were required to report their verified emissions for the year of 2021 by 31 March 2022. Reporting has been above 95% for most sectors and countries.

REGIONAL AND INDUSTRY COMMITTEES ADOPT DRAFT OPINIONS ON DEPLOYMENT OF ALTERNATIVE FUELS INFRASTRUCTURE REGULATION: On 21 April, the Regional (REGI) Committee adopted the draft opinion on the Alternative Fuels Infrastructure Regulation, with 18 votes in favor casted by MEPs from the Renew, S&D, Greens and the Left, 15 votes  against casted by ECR, ID and EPP MEPs and 7 abstentions. In the Industry, Research and Energy (ITRE) Committee, the opinion was adopted on 20 April with 59 votes in favor with the support of MEPs from Renew, S&D, Geens, EPP and ID groups; 9 votes against from ECR, ID and The Left as well as 8 abstentions from ECR and ID.

INDUSTRY COMMITTEE PUBLISHES OPINION ON THE REVISION OF THE EU EMISSIONS TRADING SYSTEM: The ITRE Committee published its opinion on the EU Emissions Trading System (EU ETS) on 21 April. The report references the Glasgow Climate Change Conference which demonstrated that it will be impossible to limit global warming to around 1.5 degrees with the current measures in place. The opinion states that the scope of the Innovation Fund should be extended to cover innovative breakthrough technologies to reduce carbon dioxide emissions from maritime transport and to support the production of low- and zero-carbon fuels and zero-emission fuels for aviation, road and rail transport. Yet, the specific details of the new forms of support will have to be examined carefully before they are adopted. There is some concern regarding the Commission’s proposal that there should be an obligation to conduct energy audits. The issue is the equal treatment of operators from the perspective of the content and quality of reports. A more viable alternative that the opinion proposes would be to require operators to establish an energy management system and follow the recommendations specified in it. The calculation of the amount of free allocation must also in future be based on product-specific benchmarks, set according to what is seen as best in the sector. These calculation rules would permit technological development and ensure technological neutrality.

INDUSTRY COMMITTEE PRESENTS FINAL OPINION ON CARBON BORDER ADJUSTMENT MECHANISM: Following its adoption on 20 April, the ITRE Committee published Rapporteur Izabela-Helena Kloc's (ECR, Poland) opinion of the Carbon Border Adjustment Mechanism (CBAM). In her opinion, MEP Kloc highlights the interlinkage between the EU Emissions Trading System and the CBAM and underlines that the newly established mechanism can complement the existing carbon leakage prevention mechanisms under the EU ETS. However, the withdrawal of free allowance under the EU ETS risks reducing EU export competitiveness, resulting in a drop of EU exports for CBAM sectors. Therefore, the phase out of free allowances under ETS should start only once the Commission establishes a mechanism to prevent such carbon leakage on export markets. Additionally, the opinion also calls for an implementation timeframe between 2023 and 2025, but emphases the need for an assessment of the impact of the CBAM on the downstream sector, as well as for an impact assessment on the extension of the scope to indirect emissions. Finally, the opinion underlines the importance of avoiding circumventions and proposes to strengthen the system for registration of third country installations. The plenary vote on the CBAM is scheduled on 6 June.

INDUSTRY COMMITTEE DEBATES COMMISSION’S PLAN FOR SECURITY OF GAS SUPPLY: On 20 April, the Industry, Research and Energy (ITRE) Committee in the European Parliament debated the Commission’s proposal on the revision of the Gas Storage Regulation. ITRE Chair Cristian-Silviu Busoi (EPP, Romania) informed that ITRE coordinators have requested the European Parliament to apply an urgent procedure to the examination of the file, which was approved in Plenary this month. Rapporteur Jerzy Buzek (EPP, Poland) emphasized the urgency of the proposal and informed that the negotiating team was ready to start the trialogue already in May. He also underlined that the upcoming winter will be the most critical one, calling for 2022 gas storage filling targets to be set at 90%. He also proposed the set-up of a voluntary mechanism for the joint procurement of gas. Shadow Rapporteur Patrizia Toia (S&D, Italy) added that the aim of the proposal was not to be exhaustive and other provisions, such as general policies and support measures, were needed in addition to address the energy crisis. The security of supply was particularly important, and the EU should use its infrastructure’s full potential and improve interconnection given that the proposal discussed the sharing of storage facilities. Klemen Groselji (Slovenia) on behalf of the Renew Group pointed that market impacts require very thorough considerations in this case, as filling up storages will inevitably increase prices. The Greens expressed their strong support for ensuring the EU’s gas independence from Russia and called for an obligation to decrease gas consumption.