Newsletter 3.2020
Dear reader,
Welcome to the third EUROFUEL newsletter of 2020. In this edition, we look closer at the impact of the corona virus outbreak on the EU and particularly on its climate agenda. While once again showing the deep divisions existing amongst Member States, the crisis has made clear that a coordinated and ambitious EU response is needed to relaunch our economy.
The oil sector has been particularly hit by this crisis, affected by dramatic drops in demand leading to negative prices for the first time in history. This situation will have an unprecedented impact on the entire industry, with the full spectrum of implications still to unfold. In these circumstances, it is essential to show that heating oil is a reliable energy source, essential to provide storable, affordable and efficient heating solutions for European households.
Discussions are still ongoing at the EU level on what should be the right recipe to relaunch the economy. While there seems to be an even stronger pressure to make the Green Deal at the core of economic recovery, it is crucial to promote a holistic approach which leaves no one behind giving every sector time and incentives to adapt and develop long-term solutions. This is crucial for a truly sustainable transition.
Yours,
Dr Ernst-Moritz Bellingen
COVID-19: the EU’s response
Beyond putting health systems across Europe at an extreme level of pressure, the coronavirus outbreak is having a detrimental impact on the global economy, including Europe. To counter these negative effects, responses have been developed at different levels of governance. When it comes to the European level, institutions have taken important steps to limit the crisis’ consequences on the economy. The most relevant are the following:
- Pandemic Crisis Support based on the existing European Stability Mechanism: instrument providing loans to euro area Member States at favourable conditions to counter the crisis (Member States can ask up to 2% of its 2019 GDP).
- Instrument for temporary Support to mitigate Unemployment Risks in an Emergency (SURE): fund with voluntary guarantees by all EU Member States.
- Loosening of EU state aid rules to allow Member States directly support those sectors most impacted by the crisis.
- Amendment of the structure of existing EU funds redirecting resources for counter the economic effects of the outbreak.
- European Central Bank’s New Pandemic Emergency Purchase Programme (PEPP) of EUR 750 billion providing liquidity to the economy and supporting favourable financing conditions for the private and public sector.
While these are all relevant measures, discussions are still ongoing to define the size and rationale of the Recovery Fund, an instrument aimed at providing funding through the EU budget to programmes designed to kick-start the economy in line with European priorities and ensuring solidarity with the most affected Member States. This initiative has been long discussed within the European Council, with Member States failing to agree on more radical measures such as the mutualisation of debt. To solve the stalemate, Member States therefore tasked the Commission to come up with a proposal for an ambitious recovery plan. The latter, expected on 6 May, is likely to be based on an updated and enhanced EU budget (Multi-Annual Financial Framework – MFF 2021 - 2027).
The impact on COvID-19 on EU climate ambitions
While the size and the content of the Commission’s proposal will be clear only after the 6th May, most policymakers in Brussels think that the economic recovery should promote the green and digital transitions. The European Green Deal is therefore considered as a key initiative, crucial to relaunch the economy while putting it on a new pathway of sustainable growth. In this regard, very relevant is the call by French MEP Pascal Canfin (Renew Europe, Chair of ENVI Committee) for a Green recovery alliance, asking for an economic recovery based on sustainable investments and a continued implementation of the European Green Deal. Endorsed by several MEPs, CEOs of multinational companies, business associations, NGOs and think tanks, the initiative emphasizes that the recovery should aim at the creation of a new economic model built around green principles such as the transition towards climate neutrality.
This vision is shared also by most Member States, including Germany. In her intervention during the Petersberg Climate Dialogue, Chancellor Angela Merkel argued that the global economic recovery needs to be green, reaffirming her support for the European Green Deal and the EU objectives to become climate neutral. Berlin’s position is even more important in this phase as the government will take over the rotating EU Council Presidency from July, a privileged occasion to shape policies in Brussels. The call for a green recovery, is inevitably impacting also the EU climate policy-agenda. While some initiatives have been postponed, the schedule for others has been confirmed or even anticipated. Policymakers, especially in the European Parliament, are committed to swiftly adopt the Climate Law, which enshrines the 2050 decarbonisation objective into law. In this regard, the Commission is also willing to respect its plans evaluating through an impact assessment (scheduled for September) the possibility to raise intermediate GHG targets for 2030.
An initiative which will be even more prioritised as a result of the corona outbreak will be the Renovation Wave, a strategy which the Commission plans to present in September. The reason why this initiative has gained more traction in the past weeks is because, to the eyes of the Commission, represents a concrete example of green recovery. Stimulating housing renovation will not only have a positive impact on jobs and growth but will also help to improve the energy efficiency of buildings making them more climate friendly. Undoubtedly, this will have implications also on the heating sector. While the objective of the Commission will be to promote renewable heating solutions, this initiative holds opportunities also for our industry. Heating oil is once again proving to be a reliable and an affordable heating source, especially for off-grid houses. We are already developing new technologies leading to more sustainable heating solutions and ready to be part of the future energy system. This gives us even more motivation to advocate for a technology-neutral approach, allowing our industry to adapt and deliver new solutions to European households.