- In the next week, EU leaders will focus on the EU’s management of the energy and climate crises, with many unresolved elements: ‘Fit for 55’ and REPowerEU negotiations, additional energy measures, and the EU’s strategy to adapt to a world with permanently high gas prices.
- The longer it takes for EU leaders to agree on a gas price cap, the less attention they can dedicate to structurally improving EU energy security and resilience in preparation for coming winters.
- Additional concrete actions on clean energy and structural demand reduction will be needed to secure affordable and stable energy supply in the near term, boost supply chains, grow clean jobs, and ensure targets can be met.
Will the EU shift gear from emergency response to structural solutions?
EU ambassadors, ministers, heads of state and governments and European Parliament negotiators will use the next weeks to attempt to close negotiations on several Fit for 55 files (including ETS1, ETS2, SCF, CBAM, EED, RED) and guide the next steps in the EU’s management of the ongoing climate and energy crises.
What will shape the EU’s ability to shift its focus away from the next few months to the next few years?
When? The issue will be discussed by ministers at the 13 December Extraordinary Energy Council meeting, and possibly again at the European Council, before returning to ministers on 19 December.
Agreement is proving challenging on a ‘market correction mechanism’, i.e., a price cap on imported gas. While tackling high energy prices for EU households and industry is necessary, this measure will not lead to the structural reduction of gas demand needed to ensure EU energy security. Instead, it is proving politically disruptive.
REPowerEU & ‘Fit for 55’: the shift from setting ambition to delivery
When? Potential progress during the 10 December Energy Council. However, thinking beyond the 2030 renewable energy and energy savings targets and measures to accelerate renewables deployment will likely have to wait until 2023.
The EU’s fastest and most affordable way from emergency to stability is by reducing its dependence on fossil gas. The REPowerEU targets will be critical for driving the shift to renewable energy and energy efficiency. A 45% renewable energy by 2030 target in the Renewable Energy Directive would slash 2030 EU gas imports in half compared to the 40% target originally proposed in the ‘Fit for 55’ package.
So far, the Czech Presidency has not been willing to accommodate the significant group of member states who support higher ambition. Perseverance by the group of countries supporting a higher target, the Commission, and Parliament, will determine the end game.
However, to achieve the RePowerEU targets by 2030, EU leaders will need to address the next set of challenges: filling the 2022-2025 action gap to deliver on structural gas reduction, boost supply chains, grow clean jobs and ramp up renovations.
When? Kick-off debate at the European Council, 15-16 December. However, political agreement on concrete policy measures will likely have to wait until 2023.
Following the release of the Commission’s “Orientation” on fiscal reform last month, the December European Council is a chance for member states to begin to forge a new fiscal consensus.
The European Council has a clear opportunity this week to do so, by signalling the need for a reform which empowers member states to strengthen the resilience & competitiveness of Europe’s economy while accelerating the green transition. Member states will have to come to a pro-investment deal before the end of 2023, when the suspended fiscal rules are set to be reactivated.
When? European Council, 15-16 December.
Following the recent scaling up of public debate around the US Inflation Reduction Act (IRA), a point on transatlantic relations was also added to the European Council’s agenda. As countries move from setting targets to implementation, trade challenges around policies such as green subsidy programmes could be the norm instead of the exception, especially as countries try to maximise their share of new markets in the clean energy future.
The IRA has prompted mixed and heated reactions from European leaders, some calling on the US to mitigate domestic content requirements for the EU, others for developing a “Buy European” scheme, or even calling to bring the issue before the WTO. So far, these calls have broadly overseen the need to devise a constructive long-term transatlantic agenda to agree on common principles for aligning trade and climate policies, both bilaterally through the Transatlantic Technology Council’s Transatlantic Initiative for Sustainable Trade, as well as multilaterally.
When? EU leaders will set the political direction at the European Council, 15-16 December. Concrete legislative proposal will come early 2023.
The crisis response is accelerating clean energy, like the deployment of solar power and heat pumps among others. This could mean the EU may achieve a net-zero power system faster than anticipated. All eyes will be on the European Council to see if they send a clear signal to the Commission for a market update that gets ready for full decarbonisation. Without this, the market could go from enabler to blocker of the energy transition. The Council will need to indicate support for a Q1 2023 proposal that will set the decarbonisation of the power sector as its North Star. If not done now, changes would not come until the new Commission is in place in 2024.
Timeline – December 2022
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Notes to Editors
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