COP27, Permitting and EU Innovation Fund: Our Latest Policy Update

Our Policy Update shares key news from the past month in Brussels, as well as their potential impact on EU cleantech. This month, we dive into:

  • The cleantech agenda at COP27
  • The latest emergency regulation on permitting of renewables
  • The Construction Products Regulation
  • A new €3 billion call for decarbonization pilots and projects by the EU Innovation Fund update
  • The latest on negotiations of the Fit for 55 package;
  • Next year’s Commission Work Programme;

The cleantech innovation agenda expected to make inroads at COP27

The European Parliament for the first time underlinedcleantech as a strategic priority in its resolution for COP 27, urging for the wide deployment of cleantech applications in energy efficiency, decarbonisation, long-duration energy storage, and grid.

One year after the First Movers Coalition (FMC) – a US-led public-private partnership to commercialize clean technologies through advance purchase commitments – was announced at COP26, this years’ COP has already seen the FMC expanded to 65 companies making $12 billion in purchasing commitments, as well as the world's most ambitious standard for clean cement.

Mission Innovation (MI), an international initiative created in 2015 at COP21 in Paris, introduced a new model for global collaboration: setting goals for RD&D funding as opposed to goals for reducing emissions. Major economies that participated in MI, including China, France, Germany, India, Japan, South Korea, the United Kingdom, and the United States, succeeded collectively in increasing their funding significantly.

Impact on cleantech:
While the consensus-based COP-process and eventual COP27 agreement send important policy signals to innovators, more ambitious ‘coalitions of the willing’ such as Mission Innovation and the First Movers Coalition help lower the cost and improve the performance of cleantech through knowledge exchange as well as funding and market creation opportunities.

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Renewables permitting and rules around clean hydrogen

On 9 November, the European Commission proposed a temporary emergency regulation on the acceleration of permitting for renewables. It includes simplified and accelerated permitting for solar energy, heat pumps, and clean energy plants. The regulation seeks a deadline of maximum 1 month for the permitting process for solar energy equipment and its co-located storage, grid connections, especially when repowering, if the change of capacity is less than 15%. Additionally, the proposal includes tacit approval for small solar installations.

The proposed rules come as the additionality criteria for hydrogen projects is under intense negotiations, with the European Commission and rapporteur still at odds. This situation is holding back final investment decisions in renewable hydrogen projects.

Impact on cleantech:
The temporary rules accelerating permitting for renewables will enhance Europe’s energy resilience through clean energy capacity additions. This emergency regulation could serve as a template to accelerate the permitting of innovative renewables more broadly, as well as critical minerals mines and processing facilities.

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Tightened Emissions Reductions targets for the EU’s largest carbon budget (transport, building, waste and agriculture sectors)

On 8 November, the European Parliament and European Council reached a deal on the revision of Climate Action Regulation implementing the Paris Agreement (also known as the Effort Sharing Regulation).

This is the European Union’s largest carbon budget, covering approximately 60% of all EU GHG Emissions, comprising the ‘non-traded’ sectors, such as transport, buildings, agriculture, waste and certain industrial installations not covered by the European Union Emissions Trading System. As such, the increased level of ambition agreed on by the legislators introduces additional requirements for emissions to be reduced across these critical sectors, sectors which citizens interact with daily. This will create a need for Member States of the European Union to designate concrete plans for reducing emissions even further beyond what they initially expected to for 2030 and therefore opens up the door to innovative technologies which can make these commitments into a reality. The benefits are cross-cutting, as this introduces demand-side considerations into the mix of policy options as well and as incentives for minimising waste will be required.

This agreement marks yet another finalised ‘Fit-for-55' file, setting more ambitious national targets for EU countries to reduce emissions from areas not covered by the EU ETS or the LULUCF regulation.

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EU Ministers reach agreement to accelerate green growth in the built environment

On 25 October, EU Energy Ministers put forward their recommendations on the Commission’s proposal to revise the Energy Performance of Buildings Directive (EPBD). The EPBD is the EU’s legal framework setting building energy standards. Largely following the Commission proposal, the EU Energy Ministers agreed that all new buildings should be zero-emission buildings by 2030, while existing buildings should be transformed into zero-emission buildings by 2050. Key provisions of the Ministers’ position include the introduction of minimum energy performance standards for existing buildings and that all new buildings should be designed to optimize their solar energy generation potential. As for next steps, negotiations on the final shape of the EPBD legislation are not yet set to start as the European Parliament Plenary will most probably vote on its EPBD recommendations in December.

Impact on cleantech: With construction accounting for about 15% of EU emissions, the revision of the EPBD provides a real opportunity to use cleantech to tackle one of the major industrial sources of emissions. While measures such as  the installment of suitable solar energy installations on all new and existing public and non-residential buildings and minimum energy performance standards are a step in the right direction, more legislative ambition is needed to unlock cleantech innovation in buildings. This is the case for a reinforced Whole Life Carbon (WLC) framework which would provide for accurate tracking of embodied carbon and thus stimulate the uptake of clean technologies in the construction sector.

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The Innovation Fund just launched another €3 billion of funding for decarbonisation

The European Commission launched a new call for large-scale project applications under the Innovation Fund. The call will be divided into 4 priority areas, with earmarked financial envelopes available for each of these areas as follows:

  • Electrification & hydrogen in industry (€1 billion)
  • Clean tech manufacturing (€700 million)
  • Mid-sized pilot projects (€300 million)
  • General decarbonisation window (€1 billion)

This format follows the top priorities laid out by the REPowerEU communication, with the aim to secure an innovative and energy-independent European Union. The mid-sized pilots projects can receive a maximum of €40 million (covering both construction and operation of the projects) for validating, testing and optimising highly innovative deep decarbonisation solutions.

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Net zero construction materials: the way forward

In March 2022, the European Commission put forward a proposal to revise the Construction Products Regulation (CPR). The CPR sets the rules for the marketing of construction products in the EU and addresses their sustainability. In the context of the CPR review, in October 2022,  the European Parliament held a hearing hosting stakeholders of the buildings’ ecosystem to gather input on how to make the built environment fit for net zero. The hearing focused on implementation problems with the current CPR, its new proposed sustainability requirements for construction products and the prospects for recyclability of construction products. As for next steps in the legislative process, the European Parliament and the Council will have to adopt their respective positions on the CPR before they can enter into negotiations to shape the final form of CPR.

Impact on cleantech:
Cleantech for Europe published a joint paper with GLOBE EU, a network for European legislators, setting forth recommendations that could catalyze the uptake of net zero construction materials. These include: (i) enhanced green public procurement; (ii) increased public funding for low carbon materials innovation; (iii) better carbon accounting; and (iv) using carbon pricing to enable green innovation.

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One step closer to a Single Market for capital?

On 19 October, the European Parliament and the Council reached an agreement on the amendments to the European Long-Term Investment Fund Regulation (ELTIF). The ELTIF Regulation provides for a new type of collective investment framework allowing investors to put money into companies and projects that need long-term capital, including private credit, private equity and infrastructure, The amendments put forward by the European Parliament and Council are lifting several restrictive features of the framework including prohibitions on co-investments that did not allow asset managers to include ELTIFs in their private market product lines.

Impact on cleantech:
The update of the ELTIF framework can help mobilise capital for cleantech, as it enables ELTIFs to pursue fund-of-funds strategies  and  provides for channeling of more financing to SMEs and long-term projects, including by removing existing constraints on the portfolio composition and minimum value threshold of ELTIFs currently set at €10M.

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Driving the difference: The EU on track to reach zero-emission road mobility by 2035

After two years of the launch of the Fit for 55 climate package, in October, the European Parliament and Council secured an agreement on phasing out traditional combustion engine and ensure that by 2035, all vehicles sold in the EU are zero-emission vehicles. The new rules also set forth a methodology for the assessment and data reporting of full life-cycle CO2 emissions of cars and vans sold on the EU market.

Impact on cleantech:
Making it a legal imperative to decarbonizing mobility will create a new impetus for electrification, which will boost the market for Electric Vehicles and create a significant shift in market size for automotive components.

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European Commission 2023 Work Programme: What’s in it for cleantech?

On 18 October, the European Commission adopted its Work Programme for 2023. The Commission’s 2023 Work Programme, entitled ‘A Union Standing Firm and United’, lays out legislative and non-legislative initiatives that the Commission will be working on. The 2023 Work Programme emphasizes on tackling the energy crisis and to what the it sees as new challenges to the global rules-based order along with progressing the twin digital and green transitions.

Impact on cleantech:
From an innovation standpoint, key initiatives that will influence the uptake of cleantech include:

Q1 2023:

  • A European Critical Raw Materials Act with the aim to address the supply risk of critical raw materials such as lithium, magnesium, rare earths, and others;
  • The overhaul of the EU’s Electricity Market Design to reduce electricity demand and the cost of electricity for cleantech innovators.

Q2 2023:

  • An revamp of food waste and textiles aspects of the EU Waste Framework Directive to improve the overall environmental outcome of waste management in line with the waste hierarchy;
  • A legislative initiative on protecting, sustainably managing and restoring EU soils, which could boost innovation on clean technologies such as those mitigating droughts and extracting toxic metal from the soil.

Q3 2023:

  • The development of an EU Hydrogen bank which as the Commission’s Green Deal Chief, Commissioner Timmermans said, will deploy contracts for difference scheme under the Innovation Fund to lower the green premium of developing green hydrogen;
  • A legislative framework on sustainable food systems which could spur a demand for cleantech food innovation such as 3D-printed synthetic meat.

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Conference Spotlight: Cleantech Forum Europe November 2022

Last week, the Cleantech Group organized its Cleantech Forum Europe in Brussels. The conference hosted a large amount of the European cleantech innovators, as well as investors. Session topics covered a range of fields, from heavy industry, sustainable aviation fuels to heating and cooling of panels. Additionally, the EU Commission attended the Forum, detailing the focus and policy priorities of new call of the Innovation Fund (see above).

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