Expiration date for SynFuels from indust • Table.Briefings

Dear reader,

It hardly comes as a surprise that Manfred Weber will head the EPP in the future considering he was the only candidate in the running. Last night, he was elected president of Europe’s largest party family. Weber says about himself that he is European “through and through”. However, there is speculation as to whether the new post could be just a stopover on his way back to Bavaria. Read more in the News.

In some circles, Synthetic fuels are seen as a promising alternative to electric propulsion. However, new sustainability requirements from the Commission could make one of the poster children for technology openness much more expensive. Manuel Berkel has tracked down the crucial criterion and analyzed how the Commission is trimming the whole idea of carbon usage.

The European Union has remained “united, which is extremely important at this time,” said the prime minister of Slovakia, Eduard Heger, about the oil embargo that has now been decided. Along with Hungary and the Czech Republic, Slovakia is one of the countries benefiting from the exemption for pipeline oil. German Economic Affairs Minister Robert Habeck, on the other hand, speaks of a “scramble” over the sixth sanctions package, under which Europe’s resolve has suffered. Lukas Scheid has captured reactions from the political and commercial sectors to the “embargo light” – as well as estimates of how severe an impact this embargo can actually have on Russia.

While the EU is still busy with the oil embargo, the number of countries affected by a gas supply stop from Russia continues to grow. As of today, according to Gazprom, the Danish supplier Orsted is to have its gas tap turned off, as is Shell Energy Europe – because of supplies to Germany.

Your
Sarah Schaefer

Commission wants to ban SynFuels from industrial CO2

By

Manuel Berkel

For a long time, the idea was considered a future pillar of a climate-neutral industrial society: CO2 could be captured, and the carbon used to produce synthetic fuels. If these were burned, the CO2 cycle could start all over again. Carbon utilization is the name of the game, and for a long time, industrial emissions were considered the best source. The high CO2 concentration in the exhaust gases was supposed to keep the costs of capture in check, and in addition, process emissions were still widely regarded as unavoidable. However, even before carbon usage really gets rolling, the Commission wants to put an expiration date on the concept.

From 2036, carbon is to be allowed to come only from the air, natural geological sources, or the combustion of biofuels, liquid biofuels, or biomass. So says a hitherto little-noticed passage of a delegated act of the EU Commission on green hydrogen – more precisely, in the annex to the methodology by which the carbon footprint of recycled carbon-based fuels is calculated (Europe.Table reported). In non-EU jargon, they are often also called synthetic fuels or SynFuels.

Investors need sustainable CO2 sources

According to the Commission’s plans, CO2 from industrial waste gases may only be used in the production of these synthetic fuels until 2035 – at least if the plants are subject to emissions trading. The Commission is consulting on the draft legislation until June 17. If it adopts the rules as they stand, this would have far-reaching consequences for the industry.

“Anyone investing in an e-fuels plant must now also consider what sustainable sources the carbon can come from in the long term,” says Peter Kasten, deputy head of Resources & Transport at the Öko-Institut (Institute for Applied Ecology). A refinancing period of a maximum of 13 years would be rather tight.

CO2 capture from the air (DACCS) is also significantly more expensive because the concentration is much lower than in industrial exhaust gases. This is also likely to make synthetic fuels more expensive, which in the transport sector, the FDP in particular still sees as an alternative to electromobility. The only lucrative point sources for CO2 would then probably be large biomass power plants.

In the long term, however, the Commission’s approach is consistent with climate neutrality. Emissions in the energy and industrial sectors must fall to net zero by 2050 at the latest, or even as early as 2040, depending on the continuation of the reduction path. The sustainability requirements for SynFuels would close a long-term loophole.

Small-scale criteria for hydrogen

However, the Öko-Institut is critical of the second delegated act, which regulates the origin of the electricity used to produce liquid or gaseous renewable fuels of non-biogenic origin (RFNBOs). Strict requirements for green electricity are actually intended to prevent electrolyzers for hydrogen production from running mainly on electricity from coal and gas-fired power plants. However, the expert points out that the majority of future hydrogen demand will have to be covered by the world market.

“The criteria for renewable electricity are very European in their small-scale thinking,” Kasten criticizes. “For international hydrogen producers that don’t have experience with EU regulation, it will be a challenge to implement these requirements as long as these plants don’t receive electricity directly from renewable plants.” However, a relevant share of electrolyzers abroad will likely have a direct connection to wind and solar farms, he said.

The energy association BDEW also considers the criteria to be too small-scale. “The criteria now proposed by the EU Commission for the purchase of electricity for the production of renewable hydrogen are so strict that they could significantly slow down or even prevent the emergence of a liquid hydrogen market,” it says in a statement. For green electricity, the association believes that the already established guarantees of origin should suffice instead.

Linkage with emissions trading

Environmentalists, on the other hand, are suspicious of an unusual criterion that links the purchase of green electricity to the certificate price in emissions trading. According to the draft, the simultaneity criterion between high renewable feed-in and electricity procurement by the electrolyzer is also to be fulfilled if the hourly spot market price of the electricity corresponds to 0.36 times the CO2 price.

“This alternative seems to have been included in the draft in the short term,” says Ricarda Dubbert of Environmental Action Germany (Deutsche Umwelthilfe, DUH). “At first glance, linking hydrogen production to the ETS price is incomprehensible. The ETS price is designed to rise, which would increasingly extend the operating times of electrolyzers with such a coupling.” The extent to which this risks undermining simultaneity, however, is difficult to assess.

Agreement on partial oil embargo: embarrassment averted

Viktor Orbán got what he wanted. The 27 EU heads of state and government have agreed to exempt pipeline supplies from the EU’s oil embargo against Russia. Hungary depends on Russian oil and is hooked on the Druzhba pipeline. Orbán had therefore vehemently opposed a more far-reaching oil boycott. The Czech Republic and Slovakia also obtain Russian oil from the Druzhba pipeline and are now spared the measure.

The embargo against Russian oil transported by tankers via sea is to take effect with transitional periods. On Tuesday, a spokesman for the EU Commission in Brussels said that six months are planned for landed crude oil and eight months for refined products. The deadlines will take effect when the EU’s sixth sanctions package against Russia is formally adopted. It is expected that the corresponding decision will be taken this week at the ambassadorial level.

The agreed exemption for pipeline oil applies “without time limit”, Czech Prime Minister Petr Fiala stressed. In addition, the Czech Republic will be allowed to import refined products from Russian crude oil for a transitional period of 18 months. Accordingly, the details are to be determined in the next few days. However, the Council’s conclusions state that the exemption is only “temporary” and that the Council wants to return to the exemption for pipeline oil “as soon as possible.”

Germany and Poland make protocol declaration

Germany also buys Russian oil from the Druzhba pipeline, which supplies the two major eastern German refineries in Leuna and Schwedt. However, Germany and Poland issued a so-called protocol declaration at the EU summit: They confirmed in writing that they would stop buying Russian oil by the end of the year. In practice, therefore, the “pipeline exception” only applies to Hungary, Slovakia, and the Czech Republic. According to EU diplomats, the declaration also served to facilitate the compromise. For some EU states, it would have been completely unacceptable if an economically strong country like Germany had continued to benefit from cheap Russian oil.

Slovak head of government Eduard Heger said that his country could use Russian oil until the moment “we have a full-fledged alternative”. He said he was also glad that it was possible to get Viktor Orbán on board as well. “So the European Union has remained united, which is extremely important at this time.”

German Economic Affairs Minister Robert Habeck, on the other hand, criticized the Hungarian head of state. Orbán had played “nefarious” poker for his own interests. He said that Europe’s strength and determination had suffered as a result of the “scramble” over the sixth sanctions package. Russian President Vladimir Putin would not stop his assault on Ukraine unless he was losing in Ukraine. Orbán, however, had opened a “trade” and no longer made policy in a higher interest.

Harsh sanctions, despite ’embargo light’

By reaching an agreement with Orbán, Europe was able to prevent an “embarrassment”, according to Claudia Kemfert, an expert at the German Institute for Economic Research (DIW). The “embargo light” would hit Russia hard. In the meantime, it was not clear whether the heads of state and government would be able to agree on a joint compromise on the oil embargo.

BDI President Siegfried Russwurm also supported the decision, saying that the EU was sending a “clear signal of unity to the Russian aggressor”. At the same time, he appealed that distortions of competition within the EU should be avoided in the design of the oil embargo, as the oil embargo was an “extraordinarily drastic step” for which German companies had been preparing for weeks. Distortions of competition could occur if countries exempted from the embargo were given market advantages over other EU states.

The agreement is far from “ideal” but represents an important step in the right direction, tweeted Simone Tagliapietra, senior fellow at think tank Bruegel. The biggest weakness is the timing, as the embargo would not take effect until the end of 2022, despite the need to weaken the Russian economy and its military potential as soon as possible, the energy expert said. However, Russia would then see only a fraction of the $23 billion a month Europe pays for Russian oil. That would be a serious blow. The EU should now prepare for gas sanctions, Tagliapietra demanded.

Meanwhile, High Representative of the EU for Foreign Affairs Josep Borrell acknowledged that the embargo will not necessarily lead to a reduction in Russian exports. “We cannot stop Russia from selling its oil to someone else,” he said. At the same time, Borrell pointed out that the EU has recently been Russia’s most important customer. “They will have to look for others, and they will certainly have to lower prices.” In Borrell’s view, this already achieves the EU’s goals. The point, he said, is to take away the Russians’ financial resources for their war machine. This will “most certainly happen”.

Oil prices rose on Tuesday

In response to the agreement reached at the EU summit, oil prices rose significantly on Tuesday. At midday, a barrel (159 liters) of North Sea Brent cost $123.60. That was $1.93 more than the previous day. It is the highest level since the beginning of March. Stockbrokers pointed, in particular, to the statement by EU Commission President Ursula von der Leyen, according to which the European Union’s oil imports from Russia will be reduced by around 90 percent by the end of the year despite the exemption for pipeline deliveries, as a driver for oil prices.

Apparently, the EU is already looking for alternative suppliers. “The EU seems to be increasingly looking around in West Africa,” writes Commerzbank expert Carsten Fritsch. For May, data would suggest oil deliveries of 660,000 barrels per day from Nigeria, Angola, and Cameroon to northwest Europe. Supplies from North Africa also increased. luk/dpa/rtr

Russia halts gas supplies to Germany and Denmark

Russia’s Gazprom said on Tuesday it would cut off gas flows to Danish supplier Orsted and to Shell Energy Europe for its contract to supply gas to Germany, after both companies failed to make payments in roubles. The cuts will be effective from June 1, Gazprom said.

According to the Federal Network Agency, the supply freeze for Shell Energie Europe does not jeopardize supply. “Security of supply is currently guaranteed. We are monitoring the situation very closely,” the agency said. Orsted had said on Monday that Gazprom Export could stop supplying gas but said such a move would not immediately put Denmark’s gas supplies at risk.

Gazprom also said it had been told by Shell Energy Europe Limited that it would not pay in roubles for gas supplied to Germany. It added that the contract stipulated gas supplies of up to 1.2 billion cubic meters per year.

Bulgaria, Poland, and Finland have already been cut off from Russian gas. Since Tuesday, Gazprom has also suspended gas supplies to the Netherlands. According to the Federal Network Agency, this has so far also had no impact on supply security in Germany and the Netherlands, as the agency announced on Tuesday in Bonn in its daily situation report. As a result of the delivery stop, a decline in gas flows of around ten percent is expected in the Nord Stream 1 pipeline. “According to the information available, the volumes that are now missing were intended for the Dutch market. These will now be procured elsewhere,” it said.

The Federal Network Agency further reported that gas storage facilities in Germany are now 48.4 percent full. According to information from European storage operators on the Internet, more natural gas has been stored than withdrawn since April 5. Germany’s largest storage facility in Rehden, Lower Saxony, which was almost completely empty until recently, is also slowly being filled again. On Sunday, it was just under 2.2 percent full. The President of the Federal Network Agency, Klaus Müller, had said on Sunday on “Deutschlandfunk” that the storage facility in Rehden will be filled more quickly than before.

Sanction-compliant payments to Russia

The energy companies Uniper and RWE have restructured their payments for Russian natural gas so that they comply with the new requirements from Russia as well as the Western sanctions due to the war in Ukraine.

Uniper said it was paying “in euros in line with the new payment mechanism”. The first payment was made at the end of May. In this way, Uniper is acting in compliance with sanctions and can continue to ensure timely fulfillment of the contract. “The procedure had been agreed in advance with the German government and follows the relevant EU guidelines.”

Germany’s largest electricity supplier, RWE, also said it had changed its payment method to comply with the new requirements. “We confirm that we have paid euros into the account,” it said. The company had said two weeks ago that it had opened a euro account in Russia for future payments. rtr/sas

Draghi: Commission has been given mandate to examine gas price cap

The European Commission has been given a full mandate to examine the possibility of setting a price cap on gas imports from Russia, Italy’s Prime Minister Mario Draghi said on Tuesday.

“The Commission received a mandate to study the feasibility of a gas price cap,” Draghi told reporters in Brussels after the EU summit. “Italy will not be penalized by the agreement. The obligation not to import Russian oil will also apply to us from the end of the year,” Draghi said. rtr

EU and African Union warn of grain crisis

The EU calls for an end to the blockade of Ukrainian grain exports. The Russian war of aggression has a direct impact on global food supply security, according to the conclusions of the EU summit that ended Tuesday in Brussels. Russia must unblock the port of Odesa and end attacks on Ukraine’s transport infrastructure, the 27 leaders said.

They received backing from African Union (AU) Chairman Macky Sall. Stopping grain and fertilizer exports across the Black Sea is worrying for a continent with 282 million malnourished people, Sall said. The price of fertilizer in Africa has already tripled compared to 2021.

Unlike summit head Charles Michel, however, Sall did not blame Russia alone for the crisis. Rather, he also warned of the consequences of the new EU sanctions. The exclusion of Russian banks from the Swift payment system makes it more difficult to pay for important agricultural products, which puts food supplies at risk, Sall said.

After the end of the summit, German Chancellor Olaf Scholz said that responsibility for the food crisis “clearly lies with Russia and its president”. He would not comment on the role of EU sanctions. Germany and the EU would work together with the international community to avert the crisis.

In the sixth sanctions package now planned, Russia’s largest bank, Sberbank, will also be disconnected from Swift. Russia claims that these and other measures make it more difficult to export grain and that the EU is, therefore, itself responsible for the food crisis. Russia, along with Ukraine, is one of the world’s largest grain exporters. Some EU countries are considering military action to end the Russian blockade in the Black Sea. ebo

Manfred Weber elected chairman of the EPP

CSU politician Manfred Weber will head Europe’s largest party family, the EPP, in the future. At a congress in Rotterdam on Tuesday evening, the 49-year-old was elected unopposed with 89 percent of the vote as president of the Christian Democratic organization, to which the CDU and CSU Union parties also belong. Weber replaces former EU Council president and Polish head of government Donald Tusk, who wants to concentrate fully on national politics again.

The declared goal of Weber, who comes from Lower Bavaria, is to give the EPP more importance again. The Christian Democrats have recently suffered heavy defeats – for example, in the Bundestag elections in Germany and the presidential elections in France. In total, there are only about half a dozen Christian Democrats at the head of state or government of an EU country. The economically strongest of these is Austria.

In his election speech, Weber emphasized that the EPP was the party of the rule of law in Europe. Only the EPP guarantees a social market economy. He was sharply critical of the German government. Chancellor Olaf Scholz (SPD) showed “no will, no determination, no leadership” because of strong pro-Russia networks in the SPD, which former Chancellor Gerhard Schröder also embodied.

Weber has led the EPP group in the European Parliament since 2014. As the top candidate of his party family in the 2019 European elections, he failed to become President of the EU Commission.

It is considered conceivable that the EPP post could also be a stopover for Weber on his way back home. The incumbent CSU chairman, Markus Söder, has recently been struggling with less favorable poll ratings.

Weber emphasized that he is a European “by heart”. But he does not explicitly rule out a candidacy. This question simply does not arise, the 49-year-old said recently. In return, Söder praised Weber as a great European even before his election. dpa

Denmark votes on EU cooperation on defense issues

Denmark will decide today in a referendum whether to abolish a special regulation on EU defense issues. Almost 4.3 million Danes are being called upon to take a stand on the question of whether their country can participate in European security and defense cooperation in the future by abolishing the so-called EU defense reservation.

The polling stations are open from 8 a.m. to 8 p.m. Preliminary results are expected in the late evening.

The vote takes place against the backdrop of Russia’s war of aggression in Ukraine, which has also led to security concerns and a rethinking of Denmark’s own defenses. Polls indicate that a majority of Danish citizens want to get rid of the reservation, which was introduced in 1993. The majority of Danish parties are in favor.

It would be the first time that Denmark has voted in a referendum to abolish such a special EU regulation. In 2000, Germany’s northernmost neighbor had voted by a majority against the euro, and in 2015 also against EU judicial cooperation. dpa

CBAM and ETS reform jeopardize the transformation of the steel industry

By Hans Jürgen Kerkhoff

Hans Jürgen Kerkhoff, Geschäftsführer und Präsident der Wirtschaftsvereinigung Stahl, im Interview über die Umstellung der Stahlindustrie auf Wasserstoff. — Hans Jürgen Kerkhoff is Managing Director and President of the German Steel Federation.

Why is the decision in Brussels so important for Germany? The steel industry is one of the major producers of greenhouse gasses in our country, emitting up to 60 million tons of CO2 a year. At the same time, companies have very specific concepts on how to tackle this challenge for the benefit of all. Direct reduction systems are to replace blast furnaces. When green hydrogen replaces coke and coal, water is produced during production instead of harmful carbon dioxide. In parallel, the scrap-processing electric steel mills will switch to green power and green hydrogen.

If these plans can be realized, the steel sector will be an industry by the middle of the century whose green products will be reflected ever more positively in the full range of its value chains – from electric vehicles to every everyday product containing green steel. Significant CO2 reductions are already possible by 2030 if the political framework conditions are set appropriately.

So companies are in the starting blocks for their transformation to a carbon-neutral future. However, it should also be clear that this will require considerable investment, as it ultimately involves a complete conversion of production facilities. The green manufacturing processes for steel based on green power and carbon-neutral hydrogen will also initially be significantly more expensive than conventional production.

Climate protection contracts required

Instruments such as climate protection contracts are needed to offset the higher costs of green production and thus pave the way to ever lower CO2 steel production. Green lead markets must create demand and customers’ will to pay for it; this can ensure that state subsidies will gradually be scaled back in the future. The steel industry has no interest in becoming a permanent subsidy recipient.

However, these political framework conditions at the national level, which are only gradually becoming fleshed out, will not be able to kick-start the transformation on their own. The key question is whether regulations will now also be put in place at the European level that will enable companies to find their way to a carbon-neutral future. Will companies receive the security they need to make investments in new plants? Will there be carbon leakage protection to ensure international competitiveness against cheaper “gray” steel from countries outside the EU, particularly during this transition phase?

Currently, there are many question marks. The proposal of the Environment Committee in the European Parliament envisages an even faster reduction of free allocation and its end by 2030, five years earlier than the EU Commission had planned. Instead of free allocation, a completely untested CO2 border adjustment is to protect the industry from carbon leakage. Exports remain unprotected and are therefore at a massive disadvantage in international competition.

Free allocation remains indispensable

As long as border adjustment has not been sufficiently tested and its effectiveness proven, free allocation remains indispensable if the transformation toward carbon neutrality is to succeed without production losses. The goal is not to perpetuate existing CO2-intensive technologies into the future but to enable companies to implement their climate protection plans against the backdrop of international competition.

The transition to low-carbon steel production will not happen overnight, only in stages. Free allocation will also keep conventional steel production competitive during the transition period. This will help to manage the further transformation and secure steel supplies. Steel is at the start of many value chains and is also indispensable, for example, for a green energy supply with wind turbines, pipelines and much more.

Up to €16 billion in additional costs

If the recommendations of the Environment Committee or the previous proposals of the EU Commission become reality, the steel industry’s path to transformation will become significantly harder. Under the Commission’s proposal, the additional costs would amount to up to €16 billion in the period from 2026 to 2030, which would be further exacerbated by the proposals of the Environment Committee.

Such plans deprive companies of important investment leeway they will need to manage the transition. This would hit businesses at a time when they need to make billion-dollar investment decisions, for example, on new plants that will enable them to move into a carbon-free future.

The plans for carbon pricing in Brussels do not fit in with the ambitious transition paths of steel companies. Europe must not lose sight of industrial realities. On Tuesday, it is up to the European Parliament to take a better path than the “Fit for 55” program has set out so far. A carbon-neutral Europe without a carbon-neutral industry would be the wrong solution. It makes more sense to give companies the breathing room they need to manage their transformation in the crucial next few years.

EUROPE.TABLE EDITORS

Till
Hoppe

Charlotte
Wirth

Falk
Steiner

Timo
Landenberger

Corinna
Visser

Lukas
Knigge

Eric
Bonse

Sarah
Schaefer

Manuel
Berkel

Lisa-Martina
Klein

Markus
Grabitz

Stephan
Israel

Claire
Stam

Dear reader,

It hardly comes as a surprise that Manfred Weber will head the EPP in the future considering he was the only candidate in the running. Last night, he was elected president of Europe’s largest party family. Weber says about himself that he is European “through and through”. However, there is speculation as to whether the new post could be just a stopover on his way back to Bavaria. Read more in the News.

In some circles, Synthetic fuels are seen as a promising alternative to electric propulsion. However, new sustainability requirements from the Commission could make one of the poster children for technology openness much more expensive. Manuel Berkel has tracked down the crucial criterion and analyzed how the Commission is trimming the whole idea of carbon usage.

The European Union has remained “united, which is extremely important at this time,” said the prime minister of Slovakia, Eduard Heger, about the oil embargo that has now been decided. Along with Hungary and the Czech Republic, Slovakia is one of the countries benefiting from the exemption for pipeline oil. German Economic Affairs Minister Robert Habeck, on the other hand, speaks of a “scramble” over the sixth sanctions package, under which Europe’s resolve has suffered. Lukas Scheid has captured reactions from the political and commercial sectors to the “embargo light” – as well as estimates of how severe an impact this embargo can actually have on Russia.

While the EU is still busy with the oil embargo, the number of countries affected by a gas supply stop from Russia continues to grow. As of today, according to Gazprom, the Danish supplier Orsted is to have its gas tap turned off, as is Shell Energy Europe – because of supplies to Germany.

Your
Sarah Schaefer

Commission wants to ban SynFuels from industrial CO2

By

Manuel Berkel

For a long time, the idea was considered a future pillar of a climate-neutral industrial society: CO2 could be captured, and the carbon used to produce synthetic fuels. If these were burned, the CO2 cycle could start all over again. Carbon utilization is the name of the game, and for a long time, industrial emissions were considered the best source. The high CO2 concentration in the exhaust gases was supposed to keep the costs of capture in check, and in addition, process emissions were still widely regarded as unavoidable. However, even before carbon usage really gets rolling, the Commission wants to put an expiration date on the concept.

From 2036, carbon is to be allowed to come only from the air, natural geological sources, or the combustion of biofuels, liquid biofuels, or biomass. So says a hitherto little-noticed passage of a delegated act of the EU Commission on green hydrogen – more precisely, in the annex to the methodology by which the carbon footprint of recycled carbon-based fuels is calculated (Europe.Table reported). In non-EU jargon, they are often also called synthetic fuels or SynFuels.

Investors need sustainable CO2 sources

According to the Commission’s plans, CO2 from industrial waste gases may only be used in the production of these synthetic fuels until 2035 – at least if the plants are subject to emissions trading. The Commission is consulting on the draft legislation until June 17. If it adopts the rules as they stand, this would have far-reaching consequences for the industry.

“Anyone investing in an e-fuels plant must now also consider what sustainable sources the carbon can come from in the long term,” says Peter Kasten, deputy head of Resources & Transport at the Öko-Institut (Institute for Applied Ecology). A refinancing period of a maximum of 13 years would be rather tight.

CO2 capture from the air (DACCS) is also significantly more expensive because the concentration is much lower than in industrial exhaust gases. This is also likely to make synthetic fuels more expensive, which in the transport sector, the FDP in particular still sees as an alternative to electromobility. The only lucrative point sources for CO2 would then probably be large biomass power plants.

In the long term, however, the Commission’s approach is consistent with climate neutrality. Emissions in the energy and industrial sectors must fall to net zero by 2050 at the latest, or even as early as 2040, depending on the continuation of the reduction path. The sustainability requirements for SynFuels would close a long-term loophole.

Small-scale criteria for hydrogen

However, the Öko-Institut is critical of the second delegated act, which regulates the origin of the electricity used to produce liquid or gaseous renewable fuels of non-biogenic origin (RFNBOs). Strict requirements for green electricity are actually intended to prevent electrolyzers for hydrogen production from running mainly on electricity from coal and gas-fired power plants. However, the expert points out that the majority of future hydrogen demand will have to be covered by the world market.

“The criteria for renewable electricity are very European in their small-scale thinking,” Kasten criticizes. “For international hydrogen producers that don’t have experience with EU regulation, it will be a challenge to implement these requirements as long as these plants don’t receive electricity directly from renewable plants.” However, a relevant share of electrolyzers abroad will likely have a direct connection to wind and solar farms, he said.

The energy association BDEW also considers the criteria to be too small-scale. “The criteria now proposed by the EU Commission for the purchase of electricity for the production of renewable hydrogen are so strict that they could significantly slow down or even prevent the emergence of a liquid hydrogen market,” it says in a statement. For green electricity, the association believes that the already established guarantees of origin should suffice instead.

Linkage with emissions trading

Environmentalists, on the other hand, are suspicious of an unusual criterion that links the purchase of green electricity to the certificate price in emissions trading. According to the draft, the simultaneity criterion between high renewable feed-in and electricity procurement by the electrolyzer is also to be fulfilled if the hourly spot market price of the electricity corresponds to 0.36 times the CO2 price.

“This alternative seems to have been included in the draft in the short term,” says Ricarda Dubbert of Environmental Action Germany (Deutsche Umwelthilfe, DUH). “At first glance, linking hydrogen production to the ETS price is incomprehensible. The ETS price is designed to rise, which would increasingly extend the operating times of electrolyzers with such a coupling.” The extent to which this risks undermining simultaneity, however, is difficult to assess.

Agreement on partial oil embargo: embarrassment averted

Viktor Orbán got what he wanted. The 27 EU heads of state and government have agreed to exempt pipeline supplies from the EU’s oil embargo against Russia. Hungary depends on Russian oil and is hooked on the Druzhba pipeline. Orbán had therefore vehemently opposed a more far-reaching oil boycott. The Czech Republic and Slovakia also obtain Russian oil from the Druzhba pipeline and are now spared the measure.

The embargo against Russian oil transported by tankers via sea is to take effect with transitional periods. On Tuesday, a spokesman for the EU Commission in Brussels said that six months are planned for landed crude oil and eight months for refined products. The deadlines will take effect when the EU’s sixth sanctions package against Russia is formally adopted. It is expected that the corresponding decision will be taken this week at the ambassadorial level.

The agreed exemption for pipeline oil applies “without time limit”, Czech Prime Minister Petr Fiala stressed. In addition, the Czech Republic will be allowed to import refined products from Russian crude oil for a transitional period of 18 months. Accordingly, the details are to be determined in the next few days. However, the Council’s conclusions state that the exemption is only “temporary” and that the Council wants to return to the exemption for pipeline oil “as soon as possible.”

Germany and Poland make protocol declaration

Germany also buys Russian oil from the Druzhba pipeline, which supplies the two major eastern German refineries in Leuna and Schwedt. However, Germany and Poland issued a so-called protocol declaration at the EU summit: They confirmed in writing that they would stop buying Russian oil by the end of the year. In practice, therefore, the “pipeline exception” only applies to Hungary, Slovakia, and the Czech Republic. According to EU diplomats, the declaration also served to facilitate the compromise. For some EU states, it would have been completely unacceptable if an economically strong country like Germany had continued to benefit from cheap Russian oil.

Slovak head of government Eduard Heger said that his country could use Russian oil until the moment “we have a full-fledged alternative”. He said he was also glad that it was possible to get Viktor Orbán on board as well. “So the European Union has remained united, which is extremely important at this time.”

German Economic Affairs Minister Robert Habeck, on the other hand, criticized the Hungarian head of state. Orbán had played “nefarious” poker for his own interests. He said that Europe’s strength and determination had suffered as a result of the “scramble” over the sixth sanctions package. Russian President Vladimir Putin would not stop his assault on Ukraine unless he was losing in Ukraine. Orbán, however, had opened a “trade” and no longer made policy in a higher interest.

Harsh sanctions, despite ’embargo light’

By reaching an agreement with Orbán, Europe was able to prevent an “embarrassment”, according to Claudia Kemfert, an expert at the German Institute for Economic Research (DIW). The “embargo light” would hit Russia hard. In the meantime, it was not clear whether the heads of state and government would be able to agree on a joint compromise on the oil embargo.

BDI President Siegfried Russwurm also supported the decision, saying that the EU was sending a “clear signal of unity to the Russian aggressor”. At the same time, he appealed that distortions of competition within the EU should be avoided in the design of the oil embargo, as the oil embargo was an “extraordinarily drastic step” for which German companies had been preparing for weeks. Distortions of competition could occur if countries exempted from the embargo were given market advantages over other EU states.

The agreement is far from “ideal” but represents an important step in the right direction, tweeted Simone Tagliapietra, senior fellow at think tank Bruegel. The biggest weakness is the timing, as the embargo would not take effect until the end of 2022, despite the need to weaken the Russian economy and its military potential as soon as possible, the energy expert said. However, Russia would then see only a fraction of the $23 billion a month Europe pays for Russian oil. That would be a serious blow. The EU should now prepare for gas sanctions, Tagliapietra demanded.

Meanwhile, High Representative of the EU for Foreign Affairs Josep Borrell acknowledged that the embargo will not necessarily lead to a reduction in Russian exports. “We cannot stop Russia from selling its oil to someone else,” he said. At the same time, Borrell pointed out that the EU has recently been Russia’s most important customer. “They will have to look for others, and they will certainly have to lower prices.” In Borrell’s view, this already achieves the EU’s goals. The point, he said, is to take away the Russians’ financial resources for their war machine. This will “most certainly happen”.

Oil prices rose on Tuesday

In response to the agreement reached at the EU summit, oil prices rose significantly on Tuesday. At midday, a barrel (159 liters) of North Sea Brent cost $123.60. That was $1.93 more than the previous day. It is the highest level since the beginning of March. Stockbrokers pointed, in particular, to the statement by EU Commission President Ursula von der Leyen, according to which the European Union’s oil imports from Russia will be reduced by around 90 percent by the end of the year despite the exemption for pipeline deliveries, as a driver for oil prices.

Apparently, the EU is already looking for alternative suppliers. “The EU seems to be increasingly looking around in West Africa,” writes Commerzbank expert Carsten Fritsch. For May, data would suggest oil deliveries of 660,000 barrels per day from Nigeria, Angola, and Cameroon to northwest Europe. Supplies from North Africa also increased. luk/dpa/rtr

Russia halts gas supplies to Germany and Denmark

Russia’s Gazprom said on Tuesday it would cut off gas flows to Danish supplier Orsted and to Shell Energy Europe for its contract to supply gas to Germany, after both companies failed to make payments in roubles. The cuts will be effective from June 1, Gazprom said.

According to the Federal Network Agency, the supply freeze for Shell Energie Europe does not jeopardize supply. “Security of supply is currently guaranteed. We are monitoring the situation very closely,” the agency said. Orsted had said on Monday that Gazprom Export could stop supplying gas but said such a move would not immediately put Denmark’s gas supplies at risk.

Gazprom also said it had been told by Shell Energy Europe Limited that it would not pay in roubles for gas supplied to Germany. It added that the contract stipulated gas supplies of up to 1.2 billion cubic meters per year.

Bulgaria, Poland, and Finland have already been cut off from Russian gas. Since Tuesday, Gazprom has also suspended gas supplies to the Netherlands. According to the Federal Network Agency, this has so far also had no impact on supply security in Germany and the Netherlands, as the agency announced on Tuesday in Bonn in its daily situation report. As a result of the delivery stop, a decline in gas flows of around ten percent is expected in the Nord Stream 1 pipeline. “According to the information available, the volumes that are now missing were intended for the Dutch market. These will now be procured elsewhere,” it said.

The Federal Network Agency further reported that gas storage facilities in Germany are now 48.4 percent full. According to information from European storage operators on the Internet, more natural gas has been stored than withdrawn since April 5. Germany’s largest storage facility in Rehden, Lower Saxony, which was almost completely empty until recently, is also slowly being filled again. On Sunday, it was just under 2.2 percent full. The President of the Federal Network Agency, Klaus Müller, had said on Sunday on “Deutschlandfunk” that the storage facility in Rehden will be filled more quickly than before.

Sanction-compliant payments to Russia

The energy companies Uniper and RWE have restructured their payments for Russian natural gas so that they comply with the new requirements from Russia as well as the Western sanctions due to the war in Ukraine.

Uniper said it was paying “in euros in line with the new payment mechanism”. The first payment was made at the end of May. In this way, Uniper is acting in compliance with sanctions and can continue to ensure timely fulfillment of the contract. “The procedure had been agreed in advance with the German government and follows the relevant EU guidelines.”

Germany’s largest electricity supplier, RWE, also said it had changed its payment method to comply with the new requirements. “We confirm that we have paid euros into the account,” it said. The company had said two weeks ago that it had opened a euro account in Russia for future payments. rtr/sas

Draghi: Commission has been given mandate to examine gas price cap

The European Commission has been given a full mandate to examine the possibility of setting a price cap on gas imports from Russia, Italy’s Prime Minister Mario Draghi said on Tuesday.

“The Commission received a mandate to study the feasibility of a gas price cap,” Draghi told reporters in Brussels after the EU summit. “Italy will not be penalized by the agreement. The obligation not to import Russian oil will also apply to us from the end of the year,” Draghi said. rtr

EU and African Union warn of grain crisis

The EU calls for an end to the blockade of Ukrainian grain exports. The Russian war of aggression has a direct impact on global food supply security, according to the conclusions of the EU summit that ended Tuesday in Brussels. Russia must unblock the port of Odesa and end attacks on Ukraine’s transport infrastructure, the 27 leaders said.

They received backing from African Union (AU) Chairman Macky Sall. Stopping grain and fertilizer exports across the Black Sea is worrying for a continent with 282 million malnourished people, Sall said. The price of fertilizer in Africa has already tripled compared to 2021.

Unlike summit head Charles Michel, however, Sall did not blame Russia alone for the crisis. Rather, he also warned of the consequences of the new EU sanctions. The exclusion of Russian banks from the Swift payment system makes it more difficult to pay for important agricultural products, which puts food supplies at risk, Sall said.

After the end of the summit, German Chancellor Olaf Scholz said that responsibility for the food crisis “clearly lies with Russia and its president”. He would not comment on the role of EU sanctions. Germany and the EU would work together with the international community to avert the crisis.

In the sixth sanctions package now planned, Russia’s largest bank, Sberbank, will also be disconnected from Swift. Russia claims that these and other measures make it more difficult to export grain and that the EU is, therefore, itself responsible for the food crisis. Russia, along with Ukraine, is one of the world’s largest grain exporters. Some EU countries are considering military action to end the Russian blockade in the Black Sea. ebo

Manfred Weber elected chairman of the EPP

CSU politician Manfred Weber will head Europe’s largest party family, the EPP, in the future. At a congress in Rotterdam on Tuesday evening, the 49-year-old was elected unopposed with 89 percent of the vote as president of the Christian Democratic organization, to which the CDU and CSU Union parties also belong. Weber replaces former EU Council president and Polish head of government Donald Tusk, who wants to concentrate fully on national politics again.

The declared goal of Weber, who comes from Lower Bavaria, is to give the EPP more importance again. The Christian Democrats have recently suffered heavy defeats – for example, in the Bundestag elections in Germany and the presidential elections in France. In total, there are only about half a dozen Christian Democrats at the head of state or government of an EU country. The economically strongest of these is Austria.

In his election speech, Weber emphasized that the EPP was the party of the rule of law in Europe. Only the EPP guarantees a social market economy. He was sharply critical of the German government. Chancellor Olaf Scholz (SPD) showed “no will, no determination, no leadership” because of strong pro-Russia networks in the SPD, which former Chancellor Gerhard Schröder also embodied.

Weber has led the EPP group in the European Parliament since 2014. As the top candidate of his party family in the 2019 European elections, he failed to become President of the EU Commission.

It is considered conceivable that the EPP post could also be a stopover for Weber on his way back home. The incumbent CSU chairman, Markus Söder, has recently been struggling with less favorable poll ratings.

Weber emphasized that he is a European “by heart”. But he does not explicitly rule out a candidacy. This question simply does not arise, the 49-year-old said recently. In return, Söder praised Weber as a great European even before his election. dpa

Denmark votes on EU cooperation on defense issues

Denmark will decide today in a referendum whether to abolish a special regulation on EU defense issues. Almost 4.3 million Danes are being called upon to take a stand on the question of whether their country can participate in European security and defense cooperation in the future by abolishing the so-called EU defense reservation.

The polling stations are open from 8 a.m. to 8 p.m. Preliminary results are expected in the late evening.

The vote takes place against the backdrop of Russia’s war of aggression in Ukraine, which has also led to security concerns and a rethinking of Denmark’s own defenses. Polls indicate that a majority of Danish citizens want to get rid of the reservation, which was introduced in 1993. The majority of Danish parties are in favor.

It would be the first time that Denmark has voted in a referendum to abolish such a special EU regulation. In 2000, Germany’s northernmost neighbor had voted by a majority against the euro, and in 2015 also against EU judicial cooperation. dpa

CBAM and ETS reform jeopardize the transformation of the steel industry

By Hans Jürgen Kerkhoff

Why is the decision in Brussels so important for Germany? The steel industry is one of the major producers of greenhouse gasses in our country, emitting up to 60 million tons of CO2 a year. At the same time, companies have very specific concepts on how to tackle this challenge for the benefit of all. Direct reduction systems are to replace blast furnaces. When green hydrogen replaces coke and coal, water is produced during production instead of harmful carbon dioxide. In parallel, the scrap-processing electric steel mills will switch to green power and green hydrogen.

If these plans can be realized, the steel sector will be an industry by the middle of the century whose green products will be reflected ever more positively in the full range of its value chains – from electric vehicles to every everyday product containing green steel. Significant CO2 reductions are already possible by 2030 if the political framework conditions are set appropriately.

So companies are in the starting blocks for their transformation to a carbon-neutral future. However, it should also be clear that this will require considerable investment, as it ultimately involves a complete conversion of production facilities. The green manufacturing processes for steel based on green power and carbon-neutral hydrogen will also initially be significantly more expensive than conventional production.

Climate protection contracts required

Instruments such as climate protection contracts are needed to offset the higher costs of green production and thus pave the way to ever lower CO2 steel production. Green lead markets must create demand and customers’ will to pay for it; this can ensure that state subsidies will gradually be scaled back in the future. The steel industry has no interest in becoming a permanent subsidy recipient.

However, these political framework conditions at the national level, which are only gradually becoming fleshed out, will not be able to kick-start the transformation on their own. The key question is whether regulations will now also be put in place at the European level that will enable companies to find their way to a carbon-neutral future. Will companies receive the security they need to make investments in new plants? Will there be carbon leakage protection to ensure international competitiveness against cheaper “gray” steel from countries outside the EU, particularly during this transition phase?

Currently, there are many question marks. The proposal of the Environment Committee in the European Parliament envisages an even faster reduction of free allocation and its end by 2030, five years earlier than the EU Commission had planned. Instead of free allocation, a completely untested CO2 border adjustment is to protect the industry from carbon leakage. Exports remain unprotected and are therefore at a massive disadvantage in international competition.

Free allocation remains indispensable

As long as border adjustment has not been sufficiently tested and its effectiveness proven, free allocation remains indispensable if the transformation toward carbon neutrality is to succeed without production losses. The goal is not to perpetuate existing CO2-intensive technologies into the future but to enable companies to implement their climate protection plans against the backdrop of international competition.

The transition to low-carbon steel production will not happen overnight, only in stages. Free allocation will also keep conventional steel production competitive during the transition period. This will help to manage the further transformation and secure steel supplies. Steel is at the start of many value chains and is also indispensable, for example, for a green energy supply with wind turbines, pipelines and much more.

Up to €16 billion in additional costs

If the recommendations of the Environment Committee or the previous proposals of the EU Commission become reality, the steel industry’s path to transformation will become significantly harder. Under the Commission’s proposal, the additional costs would amount to up to €16 billion in the period from 2026 to 2030, which would be further exacerbated by the proposals of the Environment Committee.

Such plans deprive companies of important investment leeway they will need to manage the transition. This would hit businesses at a time when they need to make billion-dollar investment decisions, for example, on new plants that will enable them to move into a carbon-free future.

The plans for carbon pricing in Brussels do not fit in with the ambitious transition paths of steel companies. Europe must not lose sight of industrial realities. On Tuesday, it is up to the European Parliament to take a better path than the “Fit for 55” program has set out so far. A carbon-neutral Europe without a carbon-neutral industry would be the wrong solution. It makes more sense to give companies the breathing room they need to manage their transformation in the crucial next few years.