?European Energy Monthly | Issue 3
FleishmanHillard EU
The leading EU government relations, public affairs and communications consultancy in Brussels.
Dear reader,
Further EU energy market integration instead of increased fragmentation. This was the main message from former Italian Prime Minister Enrico Letta in his recent report on the EU Single Market commissioned by the European Council. The report has gathered a lot of attention since it was published on 17 April as it will help EU leaders to provide their strategic guidance for the next European Commission after the June elections. With the increased concerns over the EU’s industrial competitiveness fuelled by high energy and carbon prices, Letta argues that further integration is the key to lowering prices and creating a competitive advantage.?
Dedicating a full section to the Single Energy Market, Letta puts forward several eye-catching recommendations after over 400 meetings with stakeholders. One of the most prominent is to establish a new ‘Clean Energy Delivery Agency’ which would oversee the roll-out of clean tech projects, energy infrastructure and provide companies with a one-stop shop for advice on funding and permitting. It would essentially help achieve the 2030 energy targets that have been put in place during this legislative term.?
The other looming question Letta attempts to answer is how to finance the structural change to a renewables-based energy system. Letta boldly recommends a new ‘Clean Energy Deployment Fund’ focused on clean tech and a more powerful Connecting Europe Facility for Energy that could fund new interconnections. Other existing financing instruments such as state aid rules, Important Projects of Common Interest and investment guarantees should also be reformed and expanded.?
None of these recommendations are completely new, but what is promising about this report is that it is directly addressed to the EU’s Heads of State who oversee the energy transition in their countries and who must decide on how to support their industry through this change, especially financially. Without strong leadership, the EU’s energy and climate targets are at risk and industry might lose confidence in the process, let’s see if this Letta report can shake things up for the better
KEY UPCOMING ENERGY EVENTS
Organizer:?Fiera Milano SpA
Location: Rho (Milan), Italy
Organizer: Federal Association of the Energy and Water Industry
Location: Berlin, DE
Organizer: European Commission
Location: Brussels, Belgium
Organizer: RenewableUK
Location: Manchester, GB
EUROPEAN UNION NEWS
Spain’s bid for the EU: Teresa Ribera , Spanish Minister for the Ecological Transition, has been nominated to lead the centre-left PSOE into the European elections and is positioning herself for an energy/climate portfolio.
Net-Zero Industry Act: During the last Plenary of the current mandate, MEPs backed the Net-Zero Industry Act (NZIA), leading the way to an advancement of the bloc's green industrialization efforts. The Act aims at facilitating the domestic manufacturing of key technologies crucial for decarbonization.
EU energy learnings: Faith Birol, head of the European Environmental Agency, stated that Europe made two “monumental mistakes ” in energy policy: namely, relying on Russian gas and de-prioritising nuclear power.
Sanctions on Russian LNG: The European Commission is expected to include restrictions to the imports of Russian liquefied natural gas in its next sanction package. The measures would address trans-shipments, which move LNG from one vessel to another that then transports it to the final destination.
Hydrogen Champions: On 30 April, the European Commission announced the beneficiaries of the first auction to distribute hydrogen production subsidies, with projects located in Spain and Portugal winning more than €590 million.?
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NATIONAL NEWS
Energy Prices: Germany's National Economic Advisor Veronika Grimm warns in a study that German energy prices could remain high in the long term due to costly grid expansion, offsetting the low generation costs of renewables.
Zero Carbon: France’s Minister Delegate, Roland Lescure, unveils a new legislative framework to put France on the path to becoming the first carbon-free industrialized country.
Solar: The city of Barcelona plans to triple its solar energy production by 2027 and make all municipal buildings energy self-sufficient by 2030.
Nuclear: Poland and the United States open a joint clean energy technology training center under Polish auspices for nuclear energy knowledge transfer.
G7 climate talks: G7 Ministers met in Turin for environment and climate change talks, the first major international gathering on the subject since COP28 last December.
Renewable Energies: The UK set a new record for renewable energy production, reducing carbon-based electricity production to just 2.4% of the total electricity mix for one hour on April 15.
Energy Discovery Of The Month
CBAM: The other side of international competition
While Europe is currently discussing its own competitiveness and ways to improve it, the EU's trading partners are preparing for the launch of the Carbon Border Adjustment Mechanism in 2026. CBAM requires companies operating outside the EU to be charged for greenhouse gas emissions tied to their EU exports of iron, steel, cement, aluminium, fertilizer, hydrogen and electricity at the border. A report published by the International Emissions Trading Association (IETA) in April provides an overview of which trading partners of the EU bloc will be most affected by CBAM and how they are responding to this new instrument in the EU's trade policy. A few examples:?
The United Kingdom plans to launch its own CBAM in 2027. The instrument will mirror the EU mechanism and cooperation with Europe is likely. The UK has replaced the EU ETS with a new national scheme, which currently covers a quarter of the country's emissions.
The United States initially expressed concerns about the CBAM. However, since 2021, the government's focus has been on concluding negotiations on the Global Arrangement on Sustainable Steel and Aluminium (GSA), a carbon-based sectoral agreement to address issues related to the carbon intensity of these sectors and global overcapacity.
China challenged CBAM at the World Trade Organization (WTO). The Chinese government is concerned that CBAM will result in significant cost losses for its exports, thus damaging the competitiveness of China's heavy industry. However, as China has started to set up its own ETS, there is the possibility that Chinese exports to the EU will enjoy a cost advantage in the long term.
Brazil is the trading nation most affected by CBAM in Latin America, according to the IETA. Accordingly, the government takes a critical view of the CBAM and has already labelled the mechanism as discriminatory. On the other hand, some experts believe that Brazil could benefit as its exports to the EU are less CO2-intensive than those of other countries.
As the IETA report illustrates, the international debate on carbon pricing and how to deal with it on the trade side is alive and kicking. And it is worth observing what impact this will have on the trade policy and competitiveness of the world's major economic regions.
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