Newsletter 4.2022
Dear reader,
Welcome to the fourth EUROFUEL newsletter of this year! This edition takes stock of the latest political developments at global and European level, focusing respectively on the adoption of the 6th sanctions package against Russia over the war in Ukraine and the progress made by the EU institutions on the Fit for 55 Package.
This past month has been extremely intense on the legislative side for topics of relevance for Eurofuel. On the one side, we witnessed the adoption by the European Leaders, after a thrilling Hungarian drama, of the 6th sanctions package, which will ban all imports of Russian oil from maritime shipping by the end of the year. A move which will have significant consequences for the heating sector in the long term. And on the other hand, both Council and Parliament made significant progress on most of the files part of the Fit for 55 package, agreeing on their respective negotiating positions on key proposals for the heating sector, such as the EU Emissions Trading Scheme (ETS) and the Social Climate Fund (SCF). Furthermore, MEPs and Member States also set their positions on the highly controversial proposal on CO2 emissions for cars and van, with potential implications for the liquid fuels sector at large. Another hot topic has been the developments on the taxonomy front, as the EU parliament backed the inclusion of gas and nuclear investments in the taxonomy.
Nevertheless, some battles are yet to be fought, with key deadlines approaching in the Parliament on proposals that will have a significant impact on our industry, such as RED, EED and, most importantly EPBD. With everything on the move, we have our work cut out for us for the coming months, and we will work hard to make sure that the voice of the oil heating industry is heard by the European Institutions.
Yours,
Dr Ernst-Moritz Bellingen
EU bans Russian Oil shipments
After weeks of intense negotiations, on 31st May, EU leaders reached a political agreement on a 6th package of sanctions against Russia, with the crucial element being an embargo of almost 90% of imports of Russian oil.
In order to placate Hungary and other countries worries about domestic impact, the package also included some specific exemptions. Nevertheless the devil is in the details, and when EU ambassadors gathered on 1st June for what was expected to be a standard meeting to sign off on the legal text underpinning the measures agreed, instead, Budapest launched a last-minute attempt to derail the process, while some countries also asked for clarification regarding the labelling of Russian oil imports exempted from the ban, amid concerns about the impact on the EU’s single market.
The delay raised serious questions on whether Commission President Ursula von der Leyen jumped the gun by announcing the sixth sanctions package a month ago without getting her ducks in a row. However, despite the drama, EU Member states ultimately managed to move forward and sign on the agreed text amid the political imperative to secure a deal.
Under the proposal, only Russian oil traveling by ship into the EU will be banned by year-end, representing about two-thirds of imports from the country. Russian oil that reaches the EU via pipeline will be exempt, at least temporarily.
The banning of imports of Russian oil, even with some exceptions, is certainly a powerful political statement. But, in light of the difficulties emerged to find a compromise among Member States, it is questionable whether the EU leaders will ever manage to reach an agreement on a future potential ban on Russian Gas. Even though that doesn’t mean the newest sanctions will not have an effect on the gas market. Following the EU decision in fact, Moscow has begun to strike back, cutting gas supplies to several European countries due to “technical issues”. A move that it is destined to rise the stake of the debate and will surely impact future decisions.
Fit for 55
June was a fundamental month for several key files of the fit for 55 package, with both Parliament and Council agreeing on their respective positions ahead of the trilogues negotiations.
Under the push of the French presidency, the Council has been particularly prolific, managing to iron out a general consensus on the entire package ahead of summer. On June 27th, EU Energy ministers reached a milestone agreement on two legislative proposals that tackle the energy aspects of the EU’s climate transition, the Renewable Energy Directive and the Energy Efficiency Directive, while two days later their colleagues in the Environment Council adopted a common position on EU emissions trading system (EU ETS), effort-sharing between member states in non-ETS sectors (ESR), emissions and removals from land use, land-use change and forestry (LULUCF), the creation of a social climate fund (SCF) and new CO2 emission performance standards for cars and vans.
On the Parliament side however, things have been less smooth, with a un unexpected drama over the new ETS for buildings and transport (ETS II) almost leading to a collapse of the EU governing coalition between the EPP and S&D. In the end however, MEPs managed to broker a compromise, giving the green light for negotiations with Member States on all but two proposals of the Fit for 55. The sole exceptions being the revised Renewable Energy Directive and Energy Efficiency Directive that are still being debated in the ITRE committee and are expected to be voted in plenary only in September.
The different proposals and agreements combine several elements that will have major impacts on our industry, especially with both institutions agreeing on the proposed introduction of carbon pricing for heating, under the ETS II, albeit with some distinctions. While the Council remained mostly aligned with the Commission proposal in fact, the Parliament went above and beyond to emphasize that businesses will have to pay a carbon price on products like fuel or heating oil, while regular consumers are to be exempted.
On the other hand, Member States and MEPs found a singular common position on the controversial phase out of internal combustion engines (ICE) for cars and vans in pursuit of a zero-emission objective for 2035, both co-legislators agreeing on a de facto ban of new ICEs in 2035. A move that could spell doom for the liquid fuel sector at large as it represents a major step-back for technology neutrality. Even if the text relates to cars, in fact, its implications are that electricity has zero CO2 emissions (since the production is not accounted for) and that low carbon and renewable liquid fuels cannot be considered a valuable pathway for decarbonisation.
Such approach is a dangerous precedent. That said, the fight is not over yet. Now it is time for Parliament and Council to sit at the table and to find a common position. The two institutions will work on the proposals throughout the coming months, with trilogue meetings potentially set to start already in July, and Eurofuel will continue engaging – together with its partners – with key political stakeholders to ensure the upcoming regulatory framework will acknowledge the importance of renewable and low carbon liquid fuels in heating, putting them at the centre of the energy transition.
Sustainable finance
Unlike on the CO2 file, the Parliament showed some pragmatism by backing the inclusion of gas and nuclear investments in the taxonomy. Indeed, on July 6th, the Parliament rejected a motion by a group of MEPs, from the Greens and the Left political parties, to oppose the inclusion of nuclear and gas as environmentally sustainable economic activities. The inclusion of nuclear and most efficient gas energy activities in the EU Taxonomy will enable investors to label and market investments in these activities as green. As such, these investments will theoretically remain financially attractive. The debate over gas and nuclear rules has exposed deep rifts between EU countries over how to fight climate change with its political symbolism far outweighing the impact on investors. Nuclear-friendly France and some gas-friendly eastern European countries were among those backing the new rules, while Luxembourg and Austria threatened to sue the EU if its proposal becomes law. Czech Prime Minister Fiala, that just took over the presidency of the Council in July 2022, specifically asked MEPs to back the inclusion of gas and nuclear in the taxonomy, when presenting the presidency’s priorities on 6th July, explaining that gas and nuclear "are the only tools that will allow the several Member States to achieve common climate goals”. The EPs vote paves the way for the EU proposal to pass into law, unless 20 of the 27 EU countries decide to oppose the move, which is seen as very unlikely. If the proposal becomes law, the new rules will apply as of 2023.
Fight over EPBD
While the rest of the Fit for 55 files are moving on, a crucial debate for the future of the heating industry is just now reaching its apex, with the publication on 6th June of MEP Ciarán Cuffe (Green, Ireland) draft report on the Energy Performance of Buildings Directive.
On key social aspects, the much-awaited report does provide some positive additions to the Commission proposal. The new draft proposes applying minimum energy performance standards first in the worst-performing buildings, adding safeguards for households to protect them from burdensome debt. MEP Cuffe also proposes increasing financial assistance for vulnerable groups through targeted loans or grants and promoting renewable energy deployment in buildings by expanding EU support measures to heat pumps.
The Irish MEP have been urging the Commission for some time to introduce “integrated renovation programmes” at EU level to speed deep renovation of the existing build stock. The idea is that the renovation could be more effective if the whole neighbourhood and not only single buildings are considered, also addressing local mobility, social infrastructures, and water and wastewater management. This approach is supported by Viessmann, the German manufacturer of home heating appliances. “With integrated planning and subsidies schemes for PV, heat pumps and storage, we can not only increase energy savings and boost demand-side flexibility but help people become more involved in the energy transition,” said Alix Chambris, global vice president of Public Affairs & Sustainability at Viessmann Group.
On the other hand, however, Eurofuel is greatly concerned that some of the changes proposed by the ITRE rapporteur in his Draft Report will instead hinder the possibility for European citizens to have access to the necessary incentives and technologies to upgrade obsolete and/or inefficient heating systems with the progressive integration of more efficient and hybrid solutions fuelled by the new generation of renewable and low-carbon liquid products.
In particular, we believe the proposed introduction of an explicit recommendation to Member States to ban fossil fuels based technical building system under Article 19 to be too broad, as it could lead to the disproportionate and discriminatory ban of low-carbon and renewable fuels technologies, predominately used in low-income households and/or off-grid communities, that are already fulfilling the decarbonisation objectives and should therefore continue to be allowed, alongside the technology used for them.
To fight this narrow approach, Eurofuel is actively engaging with the members of the ITRE committee to convey the fundamental message that all technologies and low carbon energy sources able to contribute to the decarbonisation efforts should be fully acknowledged by the Directive, in line with the Commission’s commitment to technology-neutral approach and taking full consideration of the different socio-economic realities across Europe.
To this end we have forwarded several amendments to Mr Cuffe’s Report to key members of the ITRE committee ahead of the amendments deadline with was set on 5th July.
Internal news
Eurofuel has been accepted in the Renewable and Low-Carbon Fuels Value Chain Industrial Alliance. Initiated by the European Commission, the Alliance is a voluntary collaboration of stakeholders from across the transport fuels and other relevant value chains, from sourcing to end-users, as well as technology and finance providers for each step in the value chain. They represent both the fuels supply and demand sides from the aviation and waterborne sectors, as well as civil society organisation, governments and their agencies. The Secretariat is held by FuelsEurope in collaboration with Hydrogen Europe.
Eurofuel believes that the deployment of low carbon and renewable liquid fuels will eventually benefit more than the aviation and maritime sectors and that heating would be an additional market, which would further justify investments in these products. Eurofuel is therefore looking forward to contributing to this initiative!
More information on the Alliance: Renewable and Low-Carbon Fuels Value Chain Industrial Alliance
Eurofuel also launched its blog: Eurofuel - Blog
