Eurofuel Newsletter #3
Dear readers,
Welcome to a new edition of the Eurofuel newsletter. We take a look today at the aftermath of the European elections, while also considering the recent legislative developments following the entry into force of the Energy Performance in Building Directive.
Between 6 and 9 June, European citizens cast their ballots to choose the direction of the Union for the next five years, and the anticipated rightward shift could have significant impacts on EU’s, and our industry’s, future. While Brussels is preparing to welcome the new Members of the European Parliament, we should not forget that the EU machine does not fully stop. With Commission Officials at work to implement the newly entered into force Energy Performance in Buildings Directive, stakeholders are already taking positions on critical issues such as the definition of fossil fuel boilers, due to be adopted early next year.
In light of these developments, the heating oil industry is ever more committed to taking up the challenge and contributing to a more sustainable and reliable energy system. Drawing a clear path for the years to come is crucial, especially taking into account the institutional reshuffle in the European Parliament and the European Commission that is taking place this year. With these changes ahead, we must show to policy-makers that the industry is ready for the new challenges and committed to give its contributions and play a central role in the future energy system.
Yours,
Dr Ernst-Moritz Bellingen
The European Green Deal after the European elections
Over the past five years, under the European Green Deal, the European Commission has set ambitious climate targets for 2030 and beyond, with the ambition of making Europe the first climate-neutral continent by 2050. In recent months however, this framework has been subjected to increasing skepticism from right-wing parties, who argue that the targets are overly ambitious and too costly, burdening industry.
Overall, the result of the European elections partially aligns with this trend, with a clear shift to the right of the European Parliament, pushed, at least in part, by voters’ concerns about defense and competitiveness issues. However, this does not necessarily mean that we will witness a complete overhaul of the traditional balance of power of the European Institutions. While right-wing parties under ECR, ID, and those right-wing MEPs not yet affiliated with a political group are on the rise, nevertheless, the centre-right EPP remains the strongest faction and is the winner of the elections, gaining 9 seats for a total of 186, compared to the results in 2019.
Meanwhile, despite losing some seats the Socialists & Democrats come second, doing better than expected. Based on these numbers, even considering the poor showing of the liberals of Renew Europe, the pro-European parties - which also comprise the Greens, maintain a comfortable, though not too large majority in the Parliament, with a potential super grand coalition’ comprising the EPP, S&D and Renew - the three groups of the informal von der Leyen coalition - combining for 400 of the 720 seats. Ursula von der Leyen herself indicated that this is the preferred scenario, stating that: "The previous platform of cooperation between EPP; S&D and Renew have proven their worth. Tomorrow we will seek talks with Socialists and Liberals to continue the cooperation."
Electoral math aside, however, there are also significant political takeaways that will have significant repercussions on the future green agenda of the EU. Although the fears of an outright dismantling of the Green Deal seem to have been put to rest, it is nonetheless undeniable that climate change and energy transition have lost centrality in public debate compared to the 2019 EU elections. This is exemplified by the results of the Greens group that dropped from fourth to sixth place in the European Parliament, with the Greens’ vote share halved in Germany – as a sanction for being part of the coalition government and France. Thus, even if the election results are unlikely to change the direction of travel in the energy transition – also due to the significant momentum built with the adoption of key files of the Fit for 55 legislative package – a more "realistic" approach to climate policy is to be expected.
In particular, the increased focus on competitiveness, of an “industrial green deal”, and a larger number of industry-friendly MEPs are likely to result in most of the main political groups embracing a more pragmatic approach to the different options in the energy mix, for example with nuclear being seen as a tangible option. Even more, with increased pressure from the right, the EPP might be tempted to push for postponements or watering down some of the most controversial provisions of the Green Deal. This could be done by taking advantage of revision clauses in Green Deal laws, as with the possible postponement of the entry into force of the provisions under the ETSII for the building sector. Additionally, as the implementation of the Green Deal depends a lot on the timely and thorough transposition of the EU legislation into national frameworks, the poor showing in the elections of the German and French governing parties could also hinder the implementation of the Green Deal targets as most of them are Directives, thus need to be transposed into national law. At the same time, political uncertainty in Paris and Berlin could also affect the capacity of two of the biggest European economies to compromise at the EU level on politically sensitive issues, with repercussions on the overall functioning of the EU machine.
Legislative term conclusions: how to address the multiple energy transition challenges?
The first days of May have been busy with the entry into force of the revised Energy Performance of Buildings Directive (EPBD). With all the eyes focused on the European elections and the future of the Green Deal in general, it would be easy to dismiss this as a side note, especially considering that the implementation is now in the hands of national governments. Yet, as is often the case with European laws, the end of the formal legislative process is also the beginning of the ever more complicated work of the Commission to define technical aspects left unspecified in the final text. For the EBPD, the European Commission will develop guidelines to develop the definition of fossil fuel boilers ahead of the phase-out of the dedicated subsidies mandated for 2025. While the end of dedicated subsidies might have a limited impact on our industry, as most forms of incentives for oil heating boilers have been already phased out by most Member States, the wrong definition of what can be considered a fossil fuel boiler could have wide-ranging implications for the future of technological innovation.
The EPBD publication in the Official Journal has been marked by a strongly worded position paper emanating from environmental organisations presenting their list of demands for the upcoming guidelines. This publication illustrates the significant level of politisation of the debates which requires a careful assessment of different variables. To avoid unforeseen consequences for the European industry, the imposition of regulatory barriers has to be carefully assessed. The pace and magnitude of this transition will certainly require a common endeavour to bring together industry experts, financial investors, and EU institutions.
With the right EU policy framework and definitions in place, our industry could make a significant contribution to help the EU successfully deliver on the climate objectives, ensure a secure and affordable supply of energy, and foster innovative EU-based competitive industries. To this end, the Commission should be reminded that discussions and research have already taken place to eliminate and prevent the apparition of future barriers that could limit the development of sustainable alternatives. The European Investment Bank has been engaging with companies across the value chain on solutions to facilitate growth in the sustainable fuel market.
Capitalising on the chemical comparability between fossil and sustainable fuels would facilitate the adaptation as industry knowledge is well established and limited innovation is needed. It will be Eurofuel’s primary task to bring these considerations to DG ENER, which is leading the work on this matter, as well as the new Commission that will take office later this year.