February 3, 2017
BRUSSELS INSIDER #1 by Sonja van Renssen
Energy Union: stuck in the middle
February 3, 2017
2016 was the year of delivery. 2017 will be the year of implementation. This was the message of European Commission Vice President for the Energy Union Maroš Šefčovič as he unveiled the EU’s second State of the Energy Union report on 1 February in Brussels. But the Energy Union is still very much a work in progress. Šefčovič’s second Energy Union Tour of all EU-28 capitals, which he will start on now, won’t be the last one.
As expected, it was a roundly positive verdict of what’s happened since the inaugural edition just over a year ago. The idea is that the report keeps tabs on EU energy policy. “What the Annual Growth Survey is for the European Semester, the State of the Energy Union report will become over time for the Energy Union,” Šefčovič said. “A powerful tool to monitor progress”.
We gave a few examples of that progress last week (or see here for a full listing of all the documents the Commission issued). But the Commission also picks out a few challenges for the future. The ones below caught our eye:
- A just transition
The Commission recognises that not everyone is a winner in the shift to clean energy. It is examining “how it can optimise its support to the structural transition in coal and carbon-intensive regions, in compliance with competition rules” (that last bit means don’t expect anything that smells like fresh fossil fuel subsidies). This is a subject that is likely to come up on the second Energy Union Tour of all EU-28 capitals that Šefčovič launches on Friday.
An expert group within the Commission is analysing the “specific cybersecurity needs of the energy sector”. The goal is to implement the Network and Information Security (NIS) directive – Europe’s main instrument for “cyber resilience” – and to promote synergies between the Energy Union and the Digital Single Market. In addition, the Commission says the energy sector needs to focus on “strengthening the physical protection of installations”.
- Stranded assets
Member states should only support energy infrastructure that is “in line with the long-term energy policy of the European Union, avoiding stranded assets and carbon lock-in”. At his press conference on Wednesday, Šefčovič highlighted this as something the Commission “will pay particular attention to”.
In addition, the Commission says that “greater efforts are needed to provide infrastructure for clean energy in transport”. Most member states have yet to submit national plans for alternative fuel infrastructure roll-outs (e.g. electric vehicle, hydrogen charging stations) despite an EU deadline last November.
The Commission is analysing, together with member states, the impact of public accounting rules on the market for energy performance contracting. It plans to update its guidance on the statistical treatment of such partnerships before “late spring 2017”. The idea is to remove one obstacle to the (energetic) renovation of public buildings (which suck up about €1 billion a year in energy costs) by not treating such investments as an increase in public debt.
In 2017, the Commission will launch a series of “sector-specific expert roundtables” to scope out how to use proceeds from a new Innovation Fund that is being designed as part of the current EU Emission Trading Scheme (ETS) reform. The roundtables will bring together representatives of energy-intensive industries, renewable energy project promoters, innovators and investors – the fund is designed to help both the power sector and industrials.
Perhaps the biggest challenge of all however, remains getting member states on board. As the Commission sees it, now that most of the Energy Union proposals are on the table, member states have all they need to start drawing up their national energy and climate plans for 2030 and beyond. In a world where nationally binding targets for renewables and energy efficiency are due to end in 2020, these plans take on a heightened importance. They become crucial to provide investor certainty. Yet only a “small number” of member states have really started on their plans, the Commission notes, hence the second Energy Union Tour.
At the same time, despite all the lofty talk of progress, the legislation that is the real substance of the Energy Union is also struggling to live up to its high aspirations. Two examples:
- In news on gas, member states finally finalised their position on a new gas security of supply regulation this Wednesday, opening up the door to trialogue negotiations with MEPs and the Commission that will start on 6 February. Yet member states are struggling to commit to a truly European approach. When the big political sticking points were resolved at the end of last year, they watered down the Commission’s attempt to impose regional responses to security of supply.
- In EU ETS news, it remains unclear whether member states will agree a common position in time for the next meeting of energy ministers, in Brussels, on 27 February. Until they do, trialogue negotiations with MEPs and the Commission cannot start. Then again, in the Parliament, energy-intensive lobby groups are reportedly tearing into the delicate compromise crafted by Scottish MEP Ian Duncan just before Christmas. The Parliament’s full plenary is due to vote on the compromise on 15 February.
Good luck to 2017.
BRUSSELS INSIDER #2 by Sonja van Renssen
EU States drag heels on national climate plans
February 3, 2017
EU member states are getting nervous about the national climate and energy plans for 2030 that a new regulation on governance proposes they have to draw up by 1 January 2018. The European Commission proposed the regulation as part of its Clean Energy Package on 30 November last year.
2018 is the deadline for the first draft. After that, the Commission gets to take a look and make recommendations on the level of ambition (especially when it comes to renewables and energy efficiency) and specific policies and measures in the plan. Other member states in the region can also have their say. Member states “shall take utmost account of any recommendations from the Commission” before the plan is finalised a year later.
There are several potential problems with this. One is timing. The Czech Republic is probably not the only country thinking that a draft in one year is unrealistic. Or that they would prefer to do this draft once the regulation on governance has been discussed and finalised by member states, MEPs and the Commission – rather than just being a Commission proposal. Energy Post understands that the Czechs also worry that regional consultation could be a very laborious exercise. France, meanwhile, is reportedly saying it would prefer to do its plan when national planning tools come up for review at the end of 2018.
Generally, it seems likely that many member states will oppose the level of detail required in the plans, even if their energy ministers pretty much signed that off in late 2015 and the proposal is basically a streamlining of existing planning and reporting requirements.
Such practical problems aside, there is a deeper resistance to the Commission’s idea. An EU observer told Energy Post that France is worried too that the Commission will use the iterative process around the plans to start interfering in national energy policies. Take regulated electricity prices. The French government was reportedly “shocked” when the Commission suggested the country should address these in its “country file” on France ahead of the first Energy Union tour back in 2015. Of course EU law requires France to deregulate, but why give the Commission another route to push this?
Guy Lentz at the permanent representation for Luxembourg meanwhile, which had the EU presidency in 2015, said he missed the concept of an “iterative dialogue” between member states and the Commission in the proposal, which would help build visibility and public support both for the energy transition and the role of Brussels in it.
Another EU observer sees problems around the suggestion for national low-emission strategies for 2050 (even if they are required by the Paris Agreement). Is a country like Poland ready to show how it intends to bring its power sector emissions down to zero? Is Germany ready to confront negative emissions? (Assuming this will be a must for its power sector for other sectors such as agriculture to continue to emit.) How many Central and Eastern European states will rail against the emphasis on climate, renewables and energy efficiency in the plans, rather than solidarity and security of gas supplies?
Member state experts are meeting today, Friday, to get started on governance. In a document circulated to other member states ahead of the meeting, Germany raises questions about a different aspect of the proposal: the gap-filler mechanism. It wants to know how the Commission intends to assess whether member states are on track to EU-level targets for 2030 on energy efficiency and renewables, and if not, how it will decide what additional measures are needed. (Germany’s questions at this stage relate to energy efficiency since the Maltese EU presidency intends to prioritise this file for discussion.)
It remains unclear exactly when and how member states and MEPs will discuss governance, but a source in the European Parliament suggests that these bits at least would be discussed in parallel to the proposals they relate to on energy efficiency and renewables respectively.
The source added that at least some MEPs may yet again call for binding national targets (although EU heads of state and government have explicitly rejected this). Perhaps national targets could be self-set and then become binding? In any case, even with binding national targets, there would be room for an ex-ante gap filler mechanism, the source said – though it would clearly be much tougher in their absence. MEPs are likely to want to reinforce the local voice in governance and regional cooperation.
If all this sounds like a lot of interference from Brussels, it is a simple consequence of member states’ rejection of nationally binding targets for 2030 so far, the Parliament source concluded: “Member states cannot dismantle everything. If they dismantle binding targets, then they need to accept tough governance.”
BRUSSELS INSIDER #3 by Sonja van Renssen
Interview: MEP Gerben-Jan Gerbrandy
“I cannot say Member States radiate the sentiment that climate change is urgent”
February 3, 2017
The European Parliament has kicked off debate on an “effort sharing regulation” proposed by the European Commission last July that effectively complements the EU Emission Trading Scheme (ETS) by setting national emission reduction targets for non-ETS sectors for 2030. In practice, this means buildings, agriculture and transport.
On 9 January 2017, the MEP who will steer this file through Parliament, liberal Gerben-Jan Gerbrandy from the Netherlands, announced what changes he wants to make to the Commission’s proposal. In the interview below, Gerbrandy explains to Energy Post how he wants to make it both more ambitious – saving an extra 500 million tonnes of CO2 and requiring member states to think ahead to 2050 – and more palatable – for example by offering Central and Eastern European states extra funds to modernise their building sectors.
The EU ETS and non-ETS files will ultimately be negotiated as a single package, Gerbrandy says (so note that Central and Eastern Europe are also the biggest troublemakers on EU ETS reform). He worries about the lack of ambition of many member states on climate change.
At a first debate on Gerbrandy’s proposals in the Parliament’s environment committee on 24 January, opposition to his greater ambition came (no surprises there) primarily from the Parliament’s largest political group, the centre-right EPP. A day later however, NGOs Carbon Market Watch and Transport & Environment warned that the EU may be headed for just 23% emission cuts in non-ETS sectors (the target is 30% for 2030) due to various “flexibilities” such as access to land use, land-use change and forestry (LULUCF) credits, proposed by the Commission. They praise Gerbrandy for tightening these up. You can see the NGOs’ emissions calculator here.
It’s early days yet. MEPs will next discuss the proposal on 27-28 February and a vote on Gerbrandy’s report is due on 30 May. A plenary vote would follow in July. At the European Council meanwhile, discussions on the non-ETS proposal have yet to really get going under the Maltese EU presidency as it is focusing on getting a common position on the EU ETS reform first. Nevertheless, a spokesman for the Presidency said it aims to reach a position on the non-ETS file by June.
Gerbrandy explains his proposals.
Q: What are the biggest changes you want to make to the Commission’s proposal for the non-ETS sector?
A: First, I want to anchor long-term  planning in the regulation, also to really align it with the Paris Agreement. We need to be careful that we don’t agree rules that work for 2030 but then have [carbon] lock-in effects that make it harder to continue after.
Second, by changing the reference year [from 2020 to 2017, for the emissions trajectory to 2030] I’m not adjusting the rules for 2030 but the trajectory to that becomes tougher so that especially in the first years, member states have to do more than in the Commission’s proposal. Climate change is one of the biggest challenges we face and we have to keep the pressure up. In the Commission’s proposal, in the early years, some member states can emit more than they do today. That’s really the wrong signal.
Third, I reduce the ceiling on using land use, land-use change and forestry (LULUCF) as a way to offset actual emission reductions. I do that on the basis of the Commission’s own impact assessment. My justification is that the EU’s energy efficiency goal is raised to 30% in the Clean Energy Package, while the non-ETS proposal is still based on a 27% goal. That shift also affects CO2 emissions in the built environment. In addition, we know that in the long term we will need maximum use of LULUCF sinks so we shouldn’t use them too much already now.
Finally, I introduce a green investment fund especially for Central and Eastern Europe, which still has big problems with the built environment. I wanted to create a fund of 150 million allowances that can act as a lever to drive investments in for example better insulation.
Q: How significant is the change in reference year that you propose for the trajectory out to 2030?
A: Thomson Reuters did a good analysis. In my proposal, 500 million tonnes less CO2 is emitted. The biggest difference is in 2020, after which the two trajectories slowly but surely come together. Of course I give away 150 million tonnes again through my green investment fund, but I feel okay about this because I also make it 500 million tonnes stricter. I think it’s unacceptable that in the first years, member states could start to emit more [than they do today]. Also in the EU ETS, the emissions cap reduces a little bit every year.
Q: Why reduce the ceiling for access to LULUCF credits rather than EU ETS credits? [These are two sources of flexibility for member states in the Commission’s proposal.]
A: We wondered about this, but found the access to EU ETS credits less problematic. It’s also considered as very important by some member states. We have to realise it’s only the richest member states that have access to this and they are already facing some pretty tough measures. From conversations I’ve had I know that if I start to fiddle with this, things will get very difficult.
LULUCF credits also have the problem of temporariness. You can plant lots of new forests but if you chop them down after a while and burn all the wood then the CO2 goes into the atmosphere after all. Another disadvantage is that the agriculture sector is being completely shielded from any emissions cuts also thanks to the LULUCF credits. I think also agriculture has to do its share.
Q: Will the EU ETS and non-ETS proposals be negotiated as a package?
A: Completely. Especially in the European Council they are completely connected. That will ultimately happen in the Parliament too. I am very concerned by the Council. I cannot say that member states radiate the sentiment that climate change is one of the most urgent problems confronting us. The first reactions to the Commission’s climate proposals – take EU ETS or non-ETS – were for a large part negative. Although we all know that if we look at the Paris Climate Agreement, we will ultimately have to do more.
Q: How do you see the non-ETS debate developing in the Council? Do you think member states will challenge their national emission reduction targets?
A: No, I think also they agree it’s a Pandora’s Box that should stay closed. The Commission didn’t happen upon those targets by chance. It’s a zero sum game – as soon as you make a change for one country, you have to make a change for the others. It will be difficult enough to see how to adjust them for Brexit. Will the UK stay in or will the 40% greenhouse gas emission reduction target for 2030 become a goal for the EU-27? There are big question marks hanging over this. It looks like [UK Prime Minister] Teresa May wants a pretty clean break.
Q: Do you think the climate and clean energy proposals are getting enough attention at the highest political level?
A: I’m not so worried about that. It’s also very technical. Sometimes it’s better if heads of state don’t get involved. I have a problem with a Council that steers in too much detail what Europe should do. The October 2014 conclusions [on the 2030 climate and energy package] already went very far. Those are not general guidelines. Those are pretty detailed mandates.
The Council is one of the co-legislators; the Parliament is another. I don’t see Council conclusions as set in stone. If we can stay within them, great, but we also need to be ambitious enough to meet another goal signed up to by our heads of state and government – the Paris Climate Agreement.