In just over a month, the Commission will present what will probably be its last energy and climate policy milestone in this legislative period: its communication on the greenhouse gas target for 2040. It will mark the start of the legislative cycle for the period after the Green Deal. My colleague Lukas Scheid analyzes how the co-legislators could position themselves ahead of the European elections.
The impact assessment of various climate targets will be even more important for energy policy than the actual communication. This will reveal possible long-term targets for renewables and energy efficiency – long before any legislative proposals follow. In my analysis, I explain why, in addition to the 2040 targets, the topics of infrastructure, gas-fired power plants and governance will shape energy policy this year – and why the future of European industry could depend on the latter.
The adoption of the numerous Green Deal laws in the European Parliament was made possible by a comfortable majority of those parties that seriously wanted to make a difference in terms of climate policy. The EPP, Social Democrats, Liberals and Greens were rarely in complete agreement. Compromises were usually hard-won and not accepted by everyone, but they were possible. However, this fundamental consensus began to crack last year when the EPP vehemently opposed new nature conservation laws and found majorities to its right.
In 2024, it is unlikely to be any easier to organize majorities for more climate protection. In the European elections in June, the right-wing side of the Parliament is likely to grow. Although the Von-der-Leyen coalition of the EPP, S&D and Renew could still retain a narrow majority, it would need support from other groups if there were just a few dissenters from its own ranks.
This could have an impact on the EU climate target for 2040 in particular. On Feb. 6, the EU Commission will present its proposal for a new CO2 reduction target – including an impact assessment. The EU Climate Council recommended 90 to 95% compared to the 1990 level. According to the announcements by Climate Commissioner Wopke Hoekstra, the target will most likely be set at 90%. However, this is only the so-called “communication” of the numerical target. Although it is binding for the next Commission, it is not yet a legislative proposal.
The current Parliament therefore still has no say and can only adopt a non-legally binding resolution. The Commission’s legislative proposal to implement the defined target is not expected to follow until the end of the year under the new Commission. This means that only the new EU Parliament will be able to adopt its own negotiating position.
Peter Liese, climate policy spokesman for the EPP, has already indicated that his group could also envisage a lower target than 90 percent. It remains to be seen whether this is an election tactic to avoid committing himself too early or whether he is already trying to push the target down. What is clear, however, is that it amounts to confrontation. The Greens in the EP would prefer to set the target at the upper end of the Climate Council’s recommendations, at 95%.
Which target the individual groups want to commit to also depends directly on how many greenhouse gas emissions can be avoided through carbon capture and storage (CCS). Together with the communication for the 2040 climate target, the Commission is presenting its CO2 management strategy. This defines the role of CCS for the EU’s future climate targets in more detail.
The Greens and Social Democrats only want to allow CCS in a narrowly defined area – in sectors that cannot be decarbonized without CCS, or only with great difficulty. In the electricity sector in particular, they want investment to flow into renewables and electrification instead. The EPP is campaigning for the widespread use of CCS, far beyond the so-called “hard to abate” sectors, in order to protect a larger number of economic sectors from high transformation costs.
It refers to the reports of the Intergovernmental Panel on Climate Change (IPCC), which describes CCS as a necessity for achieving climate targets. However, the IPCC also states that CCS must be used as a priority where other decarbonization options are not sufficient.
This creates a dilemma: The Greens and Social Democrats are strictly opposed to a high individual target for CCS, but could persuade the EPP to agree to a higher CO2 reduction target. An EU Parliament that is further to the right could exacerbate this dilemma if it no longer needs compromises from both camps to find a majority.
Unlike Parliament, which can only seriously address the 2040 target after the election, the member states already have the opportunity to anticipate the decision-making process. The Danish government has already gone ahead and backed a 90 percent target. Other countries could soon follow suit. The new Belgian Council Presidency could also put the issue on the agenda at the Environment Council in March to gauge the mood for the next EU climate target.
The summit of EU heads of state and government at the end of June, at which the Council’s Strategic Agenda 2024-2029 will be defined, could take a further step. In the energy section of the long-term strategy paper, the Council could already agree on a long-term greenhouse gas reduction path, including a target for 2040, possibly also in anticipation of an EU Parliament that is further to the right and more opposed to climate policy. The meeting will take place shortly after the elections. At this point, it is up to Council President Charles Michel to put the issue on the agenda.
Linda Kalcher, Director of the Brussels-based think tank Strategic Perspectives, also sees an opportunity for the current parliamentary groups to intervene in the decision-making process of the next parliament before the election. However, they would have to commit to a target for 2040 now: “If the parties write a figure in their election manifestos for the European elections, then this will also apply to the MEPs in the next parliament”, says Kalcher.
The foundations should now be in place for the rapid expansion of renewable energies, lower electricity prices and the development of the hydrogen economy. The Belgian Council Presidency and the Parliament still have to get the trilogue results on the electricity market, the gas package and buildings through the final votes. Then, apart from the tax directive, all energy issues from the Green Deal will be ticked off. However, the first stumbling blocks are already awaiting implementation this year. And after that, the path to the period after the Fit for 55 package is already opening up.
When the Commission makes its first formal statement on a new greenhouse gas target for 2040 at the beginning of February, energy experts will be studying the accompanying material in particular. This is because the Commission is unlikely to communicate milestones for renewable energies and energy efficiency this early on. However, the accompanying impact assessment should contain scenarios for various CO2 reduction targets and thus also pathways for the various sectors – from green electricity to building heating and fuels.
A CO2 target of 90 percent is likely to meet with resistance from several member states. The coal company PGE, which is majority-owned by the Polish state, has warned that anything over 80 percent will lead to a complete decarbonization of the electricity sector before 2040 – something that Germany and most of its neighbors are already preparing for.
The nuclear alliance made up of France and ten other member states is also opposed to a 2040 quota for renewable energies. In the latest draft of its Energy and Climate Plan (NECP), Paris did not set a new contribution to the increased renewables target for 2030 and instead only set a target for “decarbonized energy”. Others see the supposed equal treatment of nuclear power and green energy as a bad signal for capital-intensive renewable energy projects.
Whether it’s higher interest rates, rising inflation or risks in the value chains: “The investment environment for renewable energies has become much more difficult”, says Matthias Buck, Director Europe at Agora Energiewende. “A clear 2040 target for renewable energies in the EU creates investment security and thus reduces the costs for the expansion of solar and wind energy as central pillars of a climate-neutral energy system.”
He does not see nuclear power plants providing any relief in the medium term in terms of decarbonization: “Analyses, such as those by the International Energy Agency, show that nuclear energy will at best keep its share of the electricity mix in the EU stable until 2040.”
The hidden political explosive device in France’s NECP makes it clear how much the issue of governance in energy policy is underestimated. After all, if the EU does not achieve its targets for renewables and efficiency, energy prices for industry and consumers will not fall. “The current governance system, which focuses on the NECPs, is not fit for purpose”, writes the think tank Bruegel.
There are initial reform proposals, as the Commission has to present an evaluation of the Governance Regulation in the first half of the year. Eurelectric’s most important lobbying project this year is the introduction of a – voluntary – electrification quota of 35 percent for 2030 and 50 to 70 percent for 2050 via the NECPs – a lesson learned from the dispute over heat pumps. Bruegel is proposing a fundamental reform, and it can be read as a criticism of the Commission, which currently oversees the NECPs.
Instead, the heads of state and government themselves should hold a special summit on energy and climate once a year in the future. As with the extraordinary meetings during the energy crisis and international formats such as the G7, these meetings could be permanently prepared by “energy and climate sherpas”, according to Bruegel. A new European Energy Agency would monitor whether the EU states are on track.
Reforms to EU finances, on the other hand, would facilitate an energy policy project that is currently high on the agenda in Brussels. After the Commission recently presented an action plan for the electricity grids, the Belgian Council Presidency intends to follow this up at the meeting of energy ministers in May with a Council conclusion on the entire grid infrastructure, which will be decisive for the work of the next Commission.
During the energy crisis, the EU realized that it is the networks that make it vulnerable, said department head Tinne Van der Straeten in an interview with “Contexte”: “We will therefore have a discussion about physical and legislative barriers to infrastructure development.” The topic of networks is likely to receive a further boost from the internal market report that former Italian Prime Minister Enrico Letta is to present in March on behalf of the Commission.
However, coordination and money are needed for the expansion to make progress. “The political discussion on the climate protection target for 2040 will be much more closely linked to discussions on the new EU budget than last time. In many Eastern and South-Eastern European countries, infrastructure investments are typically financed entirely or at least partially from EU funds”, says Agora expert Buck.
When reforming the debt rules, for example, there could be relief for countries that invest in decarbonization, suggests Bruegel. EU funds, on the other hand, should primarily be used to support projects that really serve EU objectives and not simply plans that national governments have ready in their drawers. The Florence School wants to go even further: “Future EU funds for the member states could also be made dependent on them exploiting their potential for renewable energies and energy efficiency.”
The regulatory experts also want more coordination in a project that the member states pushed for during the negotiations on the electricity market reform – easier approval of capacity mechanisms, especially for the construction of gas-fired power plants.
Six months after the reform comes into force in the spring, the Commission must present a report on ways to speed up the introduction of capacity mechanisms. Legislative proposals are to follow a further three months later; these could be the first energy policy bills from the new Commission.
In the best-case scenario, the reform of the capacity rules will be expanded into a comprehensive check of energy supply security, writes the Florence School: “It can help to identify systemic risks, such as dependence on Russian gas.”
It is the last plenary week of the EU Parliament in 2023 and Siegfried Mureșan has a busy schedule: in Parliament, he is debating the controversial Spanish amnesty law and the criticized Slovakian judicial reform. He is watching as the EU summit discusses the accession negotiations between Ukraine and the Republic of Moldova. And then there is the summit meeting of his political group, the European People’s Party (EPP).
The 42-year-old Romanian has been a Member of the European Parliament since 2014 and has been Vice-Chairman of the EPP, responsible for budget and finance, since 2019. He commutes between Strasbourg, Brussels and Bucharest. “I haven’t missed a single plenary week since the beginning of my term of office”, recalls Mureșan.
For him, the EU is the goal he aspired to early on. “For my generation, Europe was always home. Europe meant the rule of law, democracy and European living standards. That’s where we wanted to go.” Mureșan grew up with a German Catholic mother and a Romanian Orthodox father in Transylvania, Romania. They spoke German and Romanian at home and celebrated Easter twice. “My parents gave me an open mind and an interest in other languages, countries and cultures”, says Mureșan.
When Romania joined the EU in 2007, it was a special moment. At the time, he was living in Berlin and working for the Chairman of the Bundestag Committee on European Union Affairs, Gunther Kirchbaum (CDU). “I knew that I could learn more about Europe from a founding member of the EU than I could in my home country”, says Mureșan. In 2009, he joined the EU Parliament as a staff member and successfully stood as a candidate for the Romanian People’s Movement Party (PMP) in the European elections for the first time in 2014. He has been a member of parliament for the liberal party Partidul Național Liberal (PNL) since 2018.
With a degree in economics, he quickly made a name for himself in the EPP as an economic policy expert. In 2014, he became the EPP’s senior economic policy advisor and in 2016, the Budget Committee appointed him as the first Romanian to lead negotiations for the 2018 EU budget. “I wanted to take on responsibility where I had the necessary expertise”, explains Mureșan. He pushed through more funding for the Erasmus+ program, as well as the Interrail ticket for 18-year-olds.
Mureșan is satisfied with the EU budget for 2024 agreed in November. It was important to him to promote the EU’s research program and competitiveness while also supporting young students and farmers. Mureșan considers excessive debt to be a risk for the EU – as the 2008 financial crisis showed.
He also advocates more funding for defense and security. Two percent of the GDP for NATO is a minimum for him. “We must take on more responsibility and be prepared to defend ourselves,” he says with regard to the war in Ukraine. That is why he wants to travel more to other member states in the future, to “strengthen the neighborhood”.
Siegfried Mureșan could be re-elected to parliament in June this year, which would be his tenth year as a member of parliament. The biggest challenge during this time? “The coronavirus pandemic was a turning point for parliament”, he recalls. But he is proud of how the EU overcame this crisis. “We managed to send a signal to all regions: The EU is at your side.” Mirjam Ratmann
In just over a month, the Commission will present what will probably be its last energy and climate policy milestone in this legislative period: its communication on the greenhouse gas target for 2040. It will mark the start of the legislative cycle for the period after the Green Deal. My colleague Lukas Scheid analyzes how the co-legislators could position themselves ahead of the European elections.
The impact assessment of various climate targets will be even more important for energy policy than the actual communication. This will reveal possible long-term targets for renewables and energy efficiency – long before any legislative proposals follow. In my analysis, I explain why, in addition to the 2040 targets, the topics of infrastructure, gas-fired power plants and governance will shape energy policy this year – and why the future of European industry could depend on the latter.
The adoption of the numerous Green Deal laws in the European Parliament was made possible by a comfortable majority of those parties that seriously wanted to make a difference in terms of climate policy. The EPP, Social Democrats, Liberals and Greens were rarely in complete agreement. Compromises were usually hard-won and not accepted by everyone, but they were possible. However, this fundamental consensus began to crack last year when the EPP vehemently opposed new nature conservation laws and found majorities to its right.
In 2024, it is unlikely to be any easier to organize majorities for more climate protection. In the European elections in June, the right-wing side of the Parliament is likely to grow. Although the Von-der-Leyen coalition of the EPP, S&D and Renew could still retain a narrow majority, it would need support from other groups if there were just a few dissenters from its own ranks.
This could have an impact on the EU climate target for 2040 in particular. On Feb. 6, the EU Commission will present its proposal for a new CO2 reduction target – including an impact assessment. The EU Climate Council recommended 90 to 95% compared to the 1990 level. According to the announcements by Climate Commissioner Wopke Hoekstra, the target will most likely be set at 90%. However, this is only the so-called “communication” of the numerical target. Although it is binding for the next Commission, it is not yet a legislative proposal.
The current Parliament therefore still has no say and can only adopt a non-legally binding resolution. The Commission’s legislative proposal to implement the defined target is not expected to follow until the end of the year under the new Commission. This means that only the new EU Parliament will be able to adopt its own negotiating position.
Peter Liese, climate policy spokesman for the EPP, has already indicated that his group could also envisage a lower target than 90 percent. It remains to be seen whether this is an election tactic to avoid committing himself too early or whether he is already trying to push the target down. What is clear, however, is that it amounts to confrontation. The Greens in the EP would prefer to set the target at the upper end of the Climate Council’s recommendations, at 95%.
Which target the individual groups want to commit to also depends directly on how many greenhouse gas emissions can be avoided through carbon capture and storage (CCS). Together with the communication for the 2040 climate target, the Commission is presenting its CO2 management strategy. This defines the role of CCS for the EU’s future climate targets in more detail.
The Greens and Social Democrats only want to allow CCS in a narrowly defined area – in sectors that cannot be decarbonized without CCS, or only with great difficulty. In the electricity sector in particular, they want investment to flow into renewables and electrification instead. The EPP is campaigning for the widespread use of CCS, far beyond the so-called “hard to abate” sectors, in order to protect a larger number of economic sectors from high transformation costs.
It refers to the reports of the Intergovernmental Panel on Climate Change (IPCC), which describes CCS as a necessity for achieving climate targets. However, the IPCC also states that CCS must be used as a priority where other decarbonization options are not sufficient.
This creates a dilemma: The Greens and Social Democrats are strictly opposed to a high individual target for CCS, but could persuade the EPP to agree to a higher CO2 reduction target. An EU Parliament that is further to the right could exacerbate this dilemma if it no longer needs compromises from both camps to find a majority.
Unlike Parliament, which can only seriously address the 2040 target after the election, the member states already have the opportunity to anticipate the decision-making process. The Danish government has already gone ahead and backed a 90 percent target. Other countries could soon follow suit. The new Belgian Council Presidency could also put the issue on the agenda at the Environment Council in March to gauge the mood for the next EU climate target.
The summit of EU heads of state and government at the end of June, at which the Council’s Strategic Agenda 2024-2029 will be defined, could take a further step. In the energy section of the long-term strategy paper, the Council could already agree on a long-term greenhouse gas reduction path, including a target for 2040, possibly also in anticipation of an EU Parliament that is further to the right and more opposed to climate policy. The meeting will take place shortly after the elections. At this point, it is up to Council President Charles Michel to put the issue on the agenda.
Linda Kalcher, Director of the Brussels-based think tank Strategic Perspectives, also sees an opportunity for the current parliamentary groups to intervene in the decision-making process of the next parliament before the election. However, they would have to commit to a target for 2040 now: “If the parties write a figure in their election manifestos for the European elections, then this will also apply to the MEPs in the next parliament”, says Kalcher.
The foundations should now be in place for the rapid expansion of renewable energies, lower electricity prices and the development of the hydrogen economy. The Belgian Council Presidency and the Parliament still have to get the trilogue results on the electricity market, the gas package and buildings through the final votes. Then, apart from the tax directive, all energy issues from the Green Deal will be ticked off. However, the first stumbling blocks are already awaiting implementation this year. And after that, the path to the period after the Fit for 55 package is already opening up.
When the Commission makes its first formal statement on a new greenhouse gas target for 2040 at the beginning of February, energy experts will be studying the accompanying material in particular. This is because the Commission is unlikely to communicate milestones for renewable energies and energy efficiency this early on. However, the accompanying impact assessment should contain scenarios for various CO2 reduction targets and thus also pathways for the various sectors – from green electricity to building heating and fuels.
A CO2 target of 90 percent is likely to meet with resistance from several member states. The coal company PGE, which is majority-owned by the Polish state, has warned that anything over 80 percent will lead to a complete decarbonization of the electricity sector before 2040 – something that Germany and most of its neighbors are already preparing for.
The nuclear alliance made up of France and ten other member states is also opposed to a 2040 quota for renewable energies. In the latest draft of its Energy and Climate Plan (NECP), Paris did not set a new contribution to the increased renewables target for 2030 and instead only set a target for “decarbonized energy”. Others see the supposed equal treatment of nuclear power and green energy as a bad signal for capital-intensive renewable energy projects.
Whether it’s higher interest rates, rising inflation or risks in the value chains: “The investment environment for renewable energies has become much more difficult”, says Matthias Buck, Director Europe at Agora Energiewende. “A clear 2040 target for renewable energies in the EU creates investment security and thus reduces the costs for the expansion of solar and wind energy as central pillars of a climate-neutral energy system.”
He does not see nuclear power plants providing any relief in the medium term in terms of decarbonization: “Analyses, such as those by the International Energy Agency, show that nuclear energy will at best keep its share of the electricity mix in the EU stable until 2040.”
The hidden political explosive device in France’s NECP makes it clear how much the issue of governance in energy policy is underestimated. After all, if the EU does not achieve its targets for renewables and efficiency, energy prices for industry and consumers will not fall. “The current governance system, which focuses on the NECPs, is not fit for purpose”, writes the think tank Bruegel.
There are initial reform proposals, as the Commission has to present an evaluation of the Governance Regulation in the first half of the year. Eurelectric’s most important lobbying project this year is the introduction of a – voluntary – electrification quota of 35 percent for 2030 and 50 to 70 percent for 2050 via the NECPs – a lesson learned from the dispute over heat pumps. Bruegel is proposing a fundamental reform, and it can be read as a criticism of the Commission, which currently oversees the NECPs.
Instead, the heads of state and government themselves should hold a special summit on energy and climate once a year in the future. As with the extraordinary meetings during the energy crisis and international formats such as the G7, these meetings could be permanently prepared by “energy and climate sherpas”, according to Bruegel. A new European Energy Agency would monitor whether the EU states are on track.
Reforms to EU finances, on the other hand, would facilitate an energy policy project that is currently high on the agenda in Brussels. After the Commission recently presented an action plan for the electricity grids, the Belgian Council Presidency intends to follow this up at the meeting of energy ministers in May with a Council conclusion on the entire grid infrastructure, which will be decisive for the work of the next Commission.
During the energy crisis, the EU realized that it is the networks that make it vulnerable, said department head Tinne Van der Straeten in an interview with “Contexte”: “We will therefore have a discussion about physical and legislative barriers to infrastructure development.” The topic of networks is likely to receive a further boost from the internal market report that former Italian Prime Minister Enrico Letta is to present in March on behalf of the Commission.
However, coordination and money are needed for the expansion to make progress. “The political discussion on the climate protection target for 2040 will be much more closely linked to discussions on the new EU budget than last time. In many Eastern and South-Eastern European countries, infrastructure investments are typically financed entirely or at least partially from EU funds”, says Agora expert Buck.
When reforming the debt rules, for example, there could be relief for countries that invest in decarbonization, suggests Bruegel. EU funds, on the other hand, should primarily be used to support projects that really serve EU objectives and not simply plans that national governments have ready in their drawers. The Florence School wants to go even further: “Future EU funds for the member states could also be made dependent on them exploiting their potential for renewable energies and energy efficiency.”
The regulatory experts also want more coordination in a project that the member states pushed for during the negotiations on the electricity market reform – easier approval of capacity mechanisms, especially for the construction of gas-fired power plants.
Six months after the reform comes into force in the spring, the Commission must present a report on ways to speed up the introduction of capacity mechanisms. Legislative proposals are to follow a further three months later; these could be the first energy policy bills from the new Commission.
In the best-case scenario, the reform of the capacity rules will be expanded into a comprehensive check of energy supply security, writes the Florence School: “It can help to identify systemic risks, such as dependence on Russian gas.”
It is the last plenary week of the EU Parliament in 2023 and Siegfried Mureșan has a busy schedule: in Parliament, he is debating the controversial Spanish amnesty law and the criticized Slovakian judicial reform. He is watching as the EU summit discusses the accession negotiations between Ukraine and the Republic of Moldova. And then there is the summit meeting of his political group, the European People’s Party (EPP).
The 42-year-old Romanian has been a Member of the European Parliament since 2014 and has been Vice-Chairman of the EPP, responsible for budget and finance, since 2019. He commutes between Strasbourg, Brussels and Bucharest. “I haven’t missed a single plenary week since the beginning of my term of office”, recalls Mureșan.
For him, the EU is the goal he aspired to early on. “For my generation, Europe was always home. Europe meant the rule of law, democracy and European living standards. That’s where we wanted to go.” Mureșan grew up with a German Catholic mother and a Romanian Orthodox father in Transylvania, Romania. They spoke German and Romanian at home and celebrated Easter twice. “My parents gave me an open mind and an interest in other languages, countries and cultures”, says Mureșan.
When Romania joined the EU in 2007, it was a special moment. At the time, he was living in Berlin and working for the Chairman of the Bundestag Committee on European Union Affairs, Gunther Kirchbaum (CDU). “I knew that I could learn more about Europe from a founding member of the EU than I could in my home country”, says Mureșan. In 2009, he joined the EU Parliament as a staff member and successfully stood as a candidate for the Romanian People’s Movement Party (PMP) in the European elections for the first time in 2014. He has been a member of parliament for the liberal party Partidul Național Liberal (PNL) since 2018.
With a degree in economics, he quickly made a name for himself in the EPP as an economic policy expert. In 2014, he became the EPP’s senior economic policy advisor and in 2016, the Budget Committee appointed him as the first Romanian to lead negotiations for the 2018 EU budget. “I wanted to take on responsibility where I had the necessary expertise”, explains Mureșan. He pushed through more funding for the Erasmus+ program, as well as the Interrail ticket for 18-year-olds.
Mureșan is satisfied with the EU budget for 2024 agreed in November. It was important to him to promote the EU’s research program and competitiveness while also supporting young students and farmers. Mureșan considers excessive debt to be a risk for the EU – as the 2008 financial crisis showed.
He also advocates more funding for defense and security. Two percent of the GDP for NATO is a minimum for him. “We must take on more responsibility and be prepared to defend ourselves,” he says with regard to the war in Ukraine. That is why he wants to travel more to other member states in the future, to “strengthen the neighborhood”.
Siegfried Mureșan could be re-elected to parliament in June this year, which would be his tenth year as a member of parliament. The biggest challenge during this time? “The coronavirus pandemic was a turning point for parliament”, he recalls. But he is proud of how the EU overcame this crisis. “We managed to send a signal to all regions: The EU is at your side.” Mirjam Ratmann
