Major energy and climate law reforms are imminent as Member States agree on Fit for 55 proposals

The Council of the European Union this week agreed its positions on several legislative proposals aimed at reducing greenhouse gas emissions by 55% by 2030 compared to 1990 (known as the Fit for 55 package of proposals) . We have previously described the main tranche of proposals in our briefing here.

This signals a strong political will among member states to quickly enact these ambitious proposals. The rapid delivery of the European Green Deal has always been a top priority for the EU, but events this year make it increasingly critical for the security of energy supply. The Council will also have been seized of last month’s REPowerEU proposals, aimed at accelerating the energy transition following the invasion of Ukraine. We reviewed REPowerEU’s proposals in our briefing here. These proposals so far seem to have been incorporated to a limited extent.

Here is an overview of some of the key developments:

  • Reduction of emissions: The Board agreed on its bargaining position on the extension Fit for 55 and the strengthening of the EU emissions trading system; introduction of a new emissions trading system for fuels used in buildings and road transport; phasing out free emission allowances for aviation; the strengthening of the regulation on effort sharing concerning the contributions of Member States to the reduction of emissions; changes to regulations on emissions and removals related to land use, land-use change and forestry; and revised emissions performance standards for cars and vans. The Council approved the creation of a Social Climate Fund with a maximum amount of €59 billion to address the impact of carbon pricing on vulnerable citizens. Earlier this year, the Council agreed to its general approach the carbon border adjustment mechanism to prevent carbon leakage (i.e. the import of carbon-intensive products into the EU that compromises the effectiveness of emission reductions within the EU EU). Parliament has also given its consent posts on these proposals.
  • Renewable energy: The Board agreed on its bargaining position a proposal to amend the Renewable Energy Directive, adopting the “Fit for 55” target of reaching 40% of gross final energy consumption from renewable sources by 2030, as well as specific targets for transport and heating and cooling, and a target of at least 49% share of renewable energy in buildings. In particular, the Council states that it has included the REPowerEU proposals on accelerated authorization procedures for renewable energy projects, which we have examined here. That of the Council compromise text indicates that some of REPowerEU’s proposals have been included: the presumption that carrying out renewable energy projects would be in the “overriding public interest” is addressed; however, the elaboration of the full concept of “renewable energy hotspots” does not yet appear in the text. Parliament is expected to vote its position in the Industry and Energy Committee in July and in plenary in September, with final negotiations potentially starting in the fall.
  • Energetic efficiency: The Board agreed on its bargaining position for a proposal to amend the Energy Efficiency Directive, adopting the Fit for 55 proposal to reduce energy consumption at EU level by 36% for final energy consumption and 39% for primary energy consumption by 2030 (compared to 2007 consumption projections for 2030). Parliament is expected to vote its position in the Industry and Energy Committee in July and in plenary in September, with final negotiations potentially starting in the fall.
  • Energy performance of buildings: Work is ongoing to prepare the Council’s position on the proposed amendment to the Energy Performance of Buildings Directive, as indicated here.
  • Transportation: The Board agreed on its general approach on the proposed revision of the infrastructure regulation for alternative fuels as well as the ReFuelEU Aviation and FuelEU Maritime initiatives. Council approves target to reduce emissions in the transport sector by 90% by 2030 compared to 1990 levels and underlines the intention to ensure that the public has access to charging and refueling infrastructure sufficient. Parliament adopted its negotiating plan position on ReFuelEU aviation for the vote during the July plenary session.

Once the Council and the Parliament have agreed on their positions on the proposed texts, they start negotiations to agree on the final texts. Many expect the current momentum to continue with the prospect of a significant volume of new legislation coming into force, if not by the end of this year, early 2023.

Ireland’s success story is that renewable energy already covers around 40% of energy consumption. However, much more needs to be done to decarbonise other sectors of the economy and the Irish government’s target for 2030 is to meet 80% of energy demand from renewable sources. One of the real challenges now is to make the necessary changes to market rules and regulatory instruments to faithfully implement these changes, including creating the economic signals and incentives needed to provide the infrastructure needed for the energy transition. This is unfortunately an area in which Ireland unfortunately lags behind, with regulators facing a number of legal challenges over failure to comply with EU law, a distraction that we cannot not allow us at this critical stage.