Janusz Wojciechowski, Frans Timmermans, Adina Valean, Ursula von der Leyen, Paolo Gentiloni, Kadri Simson, Virginijus Sinkevicius | Photo credit: European Commission Audiovisual
On 14 July 2021, the European Commission adopted the ‘Fit for 55’ package of legislative proposals, aimed at putting the European Union’s economy and society on the right trajectory for a 55% reduction in GHG emissions by 2030. This is arguably the most comprehensive set of proposals the Commission has ever presented on climate and energy, providing the basis for new jobs and a resilient and sustainable European economy for the future. It prepares the ground for a fundamental transformation of the EU economy in a fair, cost-efficient and competitive way (https://ec.europa.eu/commission/presscorner/detail/en/IP_21_3541).
Actions relating to the energy sector are key components of the package. In essence, there will be greater support for renewable energy use and energy savings, the stock of new energy vehicles will grow steadily and cleaner transport fuels will be given priority. Energy taxation will align with the EU’s climate and environmental objectives. Investment and innovation will receive a big boost, to enable transition in industry and other sectors.
The energy sector must be the first to transform, before decarbonisation kicks in across all sectors, and this calls for decisive action on four fronts:
- raising the levels of renewable electricity.
- replacing natural gas with renewable gases, such as hydrogen.
- ensuring a sustainable contribution of bioenergy.
- reducing the energy intensity of our economic activities.
The “Fit for 55’ package contains two energy proposals that are crucial to the success of this endeavour: implementation depends essentially on reshaping the EU’s entire energy system.
The first step is to revise the renewable energy directive, or RED (first enacted in 2009 and revised in 2018).
The following key provisions are to be added to the RED.
- There will be a new headline target – 40% of primary energy consumption must come from renewables. This may look very optimistic, but there is reason to believe that it merely reflects reality on the ground. In 2020, renewable power generation overtook fossil fuels in the EU. Wind and solar PV now account for 20% of power generation, compared to 13% from coal-fired power stations. The new EU target is complemented by specific indicative targets for each member state in line with the governance model from the clean energy package. Besides financing from existing instruments, reaching the target will be based on significant investment from the EU’s Post Covid Recovery Fund.
- The RED revision will stimulate a massive deployment of renewables by promoting corporate power purchase agreements, encouraging cross border cooperation and easing constraints on permits and authorisation. The European Commission intends to address the difficulties faced by member states when applying for permits for renewables projects. These can delay and restrict projects, thus undermining the ability to reach the climate targets. Work on a set of guidance for good practice is set to be finalised no later than 2022. The focus will also be on removing practical and legal barriers to investment and on promoting cross border cooperation.
- The proposal aims to promote integration of renewables in all sectors of the economy, especially those that are lagging behind, namely buildings, heating and cooling, transport and industry. Specific sub targets are set for these sectors.
- The revised RED will give an additional boost to the hydrogen industry. To this end, another set of sub targets will be set for the transport and industry sectors, while putting forward a clear definition for renewable hydrogen, rules for its certification, as well as for low carbon hydrogen.
- Because bioenergy is still an important renewable source for some EU member states, the RED revision will reinforce the sustainability criteria for biomass use. Only sustainably produced bioenergy can contribute to climate targets without creating additional unwanted pressure on our ecosystems, especially on our forests. Stricter sustainability criteria and the introduction of no-go areas will limit the risk of oversupply and safeguard our primary forest, peatland and grassland. Highly biodiverse forests will be protected. These criteria will apply to 90% of existing installations as well as all future heat and power installations larger than 5 MW. State aid for bioenergy will be subject to far more stringent rules: there is no point in allowing high quality feedstock or plants that are important for biodiversity to be used for energy. Last but not least, biomass-based electricity generation will not receive any more subsidies after 2026.
The Energy Efficiency Directive (EED), which was first established in 2012 and revised in 2018, is to be revised again to include the following provisions.
- It will set an explicitly binding target at EU level for both primary and final energy consumption by 2030. This target is 9% higher than it was in 2020, and will be complemented by indicative national targets. Furthermore, the energy savings requirement is to be increased to 1.5% per year for all member states, which is almost double the current target. Additional measures are planned that will improve energy efficiency in the public sector, including renovation of buildings and green procurement.
- Actions designed to increase energy efficiency will be geared towards alleviating the energy poverty that affects millions of EU citizens, by countering possible energy price increases on vulnerable households. Public authorities and fuel suppliers will have to act jointly and pay special attention to those in need, while direct financial support will be available from the newly established Climate Social Fund.
- The revised EED enshrines the Energy Efficiency First principle in EU law, making its application a legal obligation across the board.
Making EU energy ‘fit for 55%’ is not a cheap option : the projected cost stands at around 14 billion euros per year for solar PV, and 35 billion euros for wind. In addition, 61 billion euros/year will be required for grid expansions. Deployment of electrolysers for green hydrogen will probably cost an additional 40 billion euros over the period 2021-2030.
Despite the cost, the benefits are likely to be great. The EU will grow stronger and richer. With the creation of a large number of highly paid jobs; European industry will move into a new era and reassert its technological leadership, while other sectors will regenerate, based on cleaner and cheaper electricity.
In the end, Europe’s way of life will have changed for the better, and future generations will be grateful.
By Octavian Stamate, Counsellor Climate and Energy, EU Delegation to China