Update on Fit for 55 and REPowerEU: Renewables, Gas Reform, and Emissions Trading
As significant EU legislation nears finalisation, we look at latest progress.
Accelerating & Mainstreaming Renewable Energy
- The Emergency Regulation laying down a framework to accelerate the deployment of renewable energy is in force from 30 December 2022 for 18 months. It is intended to bridge the gap until the revised Renewable Energy Directive is transposed in national law. We looked at it previously here. A statement by Ireland was recorded, requesting the Commission to issue guidance on how the Regulation interacts with the other EU environmental Directives to avoid any legal issues arising in implementation.
- REPowerEU amendments to the Renewable Energy Directive: The Council agreed its general approach to negotiations (here, with corrigendum here). The next step is informal trialogue negotiation. Member States would adopt plans designating ‘renewables go-to areas’ which would generally be subject to an environmental impact assessment at area level, rather than project level, and mean a swifter permit-granting process. Though the permit-granting process includes grid connection permits, a new amendment seeks to carve out building related grid infrastructure and significant grid upgrades “except when it coincides with other administrative stages of the permit-granting process”. The proposal to require the planning, construction and operation of renewable projects and the grid to be considered as being in the overriding public interest is included in the four column document (see below at next bullet). Further information is available here.
- Fit for 55 amendments to the Renewable Energy Directive: As we indicated here, the four column document setting out positions of the institutions was published, the next stage being informal trialogue negotiations on final text. This represents a more wide-ranging review of the Renewable Energy Directive, including through amendments to mainstream renewable energy in buildings, transport and industry and to remove barriers to renewables power purchase agreements.
Political agreement was reached on the mechanism requiring Member States to submit a chapter on REPowerEU in Recovery and Resilience Plans to receive relevant funding. Scope of the chapter includes deployment of renewable energy and addressing internal and cross-border transmission and distribution bottlenecks. Further information is available here and here.
The Commission and other stakeholders have launched the European Solar PV Industry Alliance to mitigate supply risk including by boosting manufacturing capacity.
Gas – Internal Markets
The Council published a progress report on the proposed Regulation and Directive on the internal markets in renewable and natural gases and hydrogen. It summarises issues raised so far including unbundling of hydrogen network operators, hydrogen market design and timing of the end of the transition phase, tariff discounts, and requirements around blending. The Parliament ITRE Committee report is awaited.
Gas – Methane Emissions Reduction
The Council agreed its general approach to negotiations on the proposed Regulation to reduce methane emissions in the energy sector. The Parliament’s ENVI and ITRE Committees are expected to adopt their report on 1 March 2023, following which it will be considered at a plenary session of the Parliament. Further information is available here.
Gas – Market Intervention
Ministers formally adopted the Council Regulation on enhancing solidarity through better coordination of gas purchases, exchanges of gas across borders and reliable price benchmarks, which we looked at previously here. Further information is available here.
Ministers reached political agreement on the Council Regulation establishing a market correction mechanism to protect citizens and the economy against excessively high prices. It will be published in the OJEU and enter into force on 1 February 2023 (with the dynamic bidding limit applying from 15 February 2023) and apply for one year. Further information is available here.
Revision of the EU Emissions Trading Scheme
Revisions to the EU ETS Directive were politically agreed by the institutions. The intent is to reduce emissions in EU ETS sectors by 62% by 2030 compared to 2005. (Current legislation was based on a 43% reduction.) The EU ETS will also be expanded to shipping and aviation.
From 2027, a new, separate emissions trading system will apply to suppliers of fuel to buildings and transport.
Carbon Border Adjustment Mechanism
The CBAM has been politically agreed. It is meant to complement the EU ETS by requiring companies importing goods from outside the EU to purchase CBAM certificates. The certificates will reflect the difference between the carbon price in the country of production and the price of carbon allowances in the EU ETS.
In scope goods include cement, iron, steel, aluminium, fertilisers, electricity and hydrogen but there is a longer term goal of including all goods by 2030. A final text is not yet available, but presumably applicability of the CBAM to goods imported from the UK to Ireland will require consideration.
A transitional phase, starting on 1 October 2023, imposes reporting obligations on direct emissions embedded in certain imported goods. Phasing in of the CBAM will coincide with phasing out of the allocation of free allowances under the EU ETS, which is intended to curb carbon leakage. A full implementation phase will impose obligations to purchase CBAM certificates and will include indirect emissions.
Relevant to the aviation sector is formal adoption of the Decision on the notification of CORSIA offsetting requirements. The Decision inserts a temporary mechanism in the EU ETS Directive to facilitate Member States’ notifications of offsetting requirements for 2021, pending implementation of the above updates to the EU ETS. Further information is available here.
The proposal for a Regulation concerning batteries and waste batteries has been politically agreed. Further information is available here.
The Commission approved Ireland’s Territorial Just Transition Plan, facilitating Just Transition Fund investment in the Midlands for several purposes including diversification away from peat production and peat electricity generation. Approval also allows for financing under InvestEU and the Public Sector Loan Facility for Just Transition.