Energizing Europe: Power Struggles, Green Hydrogen Take-off, and the Climate Club's Rise
EPICO KlimaInnovation is a non-profit and independent energy and climate think tank providing a platform, database and network for policy development. In our new monthly newsletter, we dive into the latest developments of EU energy and climate policies and share our upcoming events and new publications.
In the spotlight
The reform of the electricity market design sparked Franco-German tensions over state-subsidies to energy-intensive companies. In 2022 Germany stood for 53%, and France for 24% of EU's allowed crisis state subsidy – and they are now coming up with creative plans to continue the support. While France is focused on Contracts-for-Difference (CFDs), several proposals for an Industrial Power Price are discussed in Germany, which we assessed together with Aurora Energy Research in the policy report "An Industrial Power Price for Germany". We found non-compatibility with EU-market rules to be the main flaw of the German ministry's proposals and highlighted the need to re-focus on PPAs on the supply-side, cutting taxes and levies and consider production-based and short-term support, which our CEO Dr. Bernd Weber discussed in an interview with Carbon Pulse:
"The BMWK's proposal for a bridge power price would protect specific consumers from excessive prices, but it will also go beyond what is allowed as regulated pricing under the current EU electricity market design."
Read more:
Policy Report: An Industrial Power Price for Germany
The Net-Zero Industry Act (NZIA) was further pressured by the anniversary of the American Inflation Reduction Act (IRA) on 17 August, highlighting the need for rapid EU-action. The NZIA was proposed by the Commission in March with the aim to identify and channel resources to European strategic cleantech key to achieve net-zero.
On 20 September, the European Parliament's Committee for Environment and Health (ENVI) passed their opinion with recommendations to exclude nuclear energy from key technologies, and highlighting prioritization of carbon capture and storage (CCS) technologies for targeted hard-to-abate sectors. While ENVI's opinion colours the final text, we should stay on the lookout for the voting in the responsible committee for Industry, Research and Energy (ITRE) on 25 October and the plenary voting in November. On the Council's side, Member States are yet to publish their official position, but the list of net-zero technologies is expected to be expanded and fast permitting-processes to remain prioritised. We advocated for the inclusion of CO2 removing technologies through an open-letter co-signed with six other key independent organisations in Brussels.
In the State of the Union speech (SOTU) on 13 September, Ursula von der Leyen highlighted the importance of the NZIA as the EU's continued commitment to the Green Deal:
"The core aim will be to support every sector in building its business model for the decarbonisation of industry. Because we believe that this transition is essential for our future competitiveness in Europe."
On the same note, our CEO Dr. Bernd Weber and MEP Markus Pieper published an opinion piece on Euractiv, suggesting to build on the European Green Deal to ensure a business-case for industrial decarbonization.
Read more:
One year on, Europe is still missing a business case for industrial decarbonisation – EURACTIV.com
NZIA-joint-letter-CDR-19.09.23.pdf (carbongap.org)
Hydrogen keeps trending at EU-level as the key technology for decarbonization of hard-to-abate sectors and international low-carbon energy trade. The Commission kicked-off September by announcing the final Terms and Conditions for the European Hydrogen Bank's first pilot auction of €800 million, which will be launched on 23 November. The aim is to boost the development of the European green hydrogen industry by reducing the price gap to fossil fuel hydrogen production. You can read EPICO's response to DG CLIMA's public consultation, where we highlight the importance of ensuring (1) matchmaking between green hydrogen suppliers and offtakers, (2) contribution to decarbonisation, by maximising limited available resources, and (3) consideration of transport methods and proximity between suppliers and off-takers (measured through company-level MoUs). EPICO also raised these issues through its contribution to the European Parliament's ITRE Committee's INI Report on the European Hydrogen Bank.
During the SOTU, Ursula von der Leyen announced a European Wind Power Package as key to the roll-out of a domestic green hydrogen market. With the expansion of renewable energy Europe will increase its capacity to produce hydrogen
Member States are also taking initiative for the EU hydrogen market, with France announcing their earmarking of €4 Billion to domestic low-carbon hydrogen production and Germany announcing a trade-agreement with the UK on hydrogen in September.
Potential African hydrogen-partnerships with the EU and the Southern hydrogen corridor, connecting North Africa to the European markets was highlighted as a key enabler for a European energy transition at the Committee for Development's workshop "Energy needs in Africa and the green transition" 20 September. EPICO also provided input on the DEVE Committee's INI Report on "EU development cooperation in support of access to energy in developing countries".
With the aspiration to define potential strategic H2-partners, EPICO hosted a closed-door roundtable discussion on an EU-Kazakhstan partnership for hydrogen as part of our workshop series "Policy Accelerator for climate innovation 2023". The result of this roundtable discussion and a previous workshop on the issue will be published in the upcoming weeks so stay tuned for updates!
The Carbon Border Adjustment Mechanism's (CBAM) looming entry did not receive the medial attention expected in September, but with the transitional phase introduced on 1 October, the CBAM is expected gear up the attention both within the EU-bubble and on the international arena. The transitional phase is intended to prepare the companies and authorities by demanding emission statements for products placed on the European Market and authorities to develop calculation and measurement tools – while leaving the payment for emissions to CBAM's full-on launch in 2026.
CBAM has been contested from a climate justice perspective, perspective on which EPICO's EU Energy and Climate Policy Manager Sam Williams dove into an interview with Revolve Magazine:
CBAM serves as a poignant reminder that a unilateral one-size-fits-all approach might not effectively address the diverse needs and circumstances of countries worldwide. CBAM alone cannot reduce global emissions in a climate just manner.
Read more:
CBAM:EU Protectionism or Landmark Climate Policy | REVOLVE
The 78th UN General Assembly took place in New York 18-22 September. One unexpected speaker reaching the headlines from the Summits was Werner Hoyer, the European Investment Bank's (EIB) President, after he phrased the importance of avoiding another round of resource-grabbing by the Global North in the Global South for the green transition as 'Colonialism 2.0'.
Avoiding 'Colonialism 2.0' and securing equitable cooperation on decarbonising the steel sector was one of the central themes at the second workshop of the Policy Accelerator for Climate Innovation 2023 in Brussels on Piloting the Climate Club in the Steel Sector.
Initially perceived as a top-down club for enforcing benefits based on a global carbon price, the G7 Climate Club has evolved to position itself as an international and inclusive forum for decarbonisation of hard-to-abate sectors. Germany and Chile are co-chairs on its task force, and an official launch is planned at COP28 in Dubai.
To ensure that the Climate Club will deliver on decarbonization and inclusivity, a team of diverse experts from academia and industrycame together in Brussels for two intense days to develop key recommendations at a sprint workshop using design thinking methods. At the workshop, the team's ideas were tested and challenged by specialists invited from across the field, including DG-CLIMA's Director General Kurt Vandenberghe and the Climate Club's current Co-chair, Chile, represented by the Chilean Mission to Germany Deputy Head of Mission Francisco Javier Ulloa Muñoz.
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