Policy Update: Belgian Presidency, STEP and more

Looking to stay up-to-speed on the world of EU politics? This newsletter is your one-stop-shop for all things cleantech policy. We compile news from across policy sectors and break down their potential impact on cleantech.

This update covers:

  1. State of play on the Corporate Sustainability Due Diligence Directive
  2. Strategic technologies for Europe platform (STEP)
  3. The latest on the progress of policy files under the Belgian Presidency of the Council
  4. The European Commission’s Industrial Carbon Management Strategy
  5. Progress on the Energy Taxation Directive
  6. The European Commission’s Strategy on Advanced Materials
  7. Soil Monitoring and Resilience Directive

What we have been reading:

  1. 'Electricity 2024' by the International Energy Agency
  2. 'Catalysing the Global Opportunity for Electrothermal Energy Storage' by Systemiq
  3. 'European climate risk assessment' by the European Environment Agency

Strategic technologies for Europe platform (STEP)

On February 7, the European Parliament and Council struck a deal on the Strategic Technologies for Europe Platform (STEP), to boost investment into strategic technologies and act as a precursor to a possible future European Sovereignty Fund. Under the agreement, the STEP platform will leverage and harness the combined power of EU funds, including Cohesion funds, InvestEU, Horizon Europe, the European Defence Fund, the Innovation Fund and the Recovery and Resilience Facility.

Belgian Presidency

Belgium has come to the helm of the Council of the EU at a critical point in time, just as the EU Green Deal is wrapping up its legislative mandate. This has meant that any outstanding policy files under Fit for 55 or the Green Deal Industrial Plan have had to be steered towards final agreements in a record amount of time, while the European budget for the second half of the budgetary cycle (until 2027) also had to be reallocated and redrafted to take into account the current priorities of the EU in a changed world.

In addition to the legislative work, Belgium has pinned two big issues on to the European agenda for the years to follow: climate adaptation and a European Industrial Deal.

In response to the deadly floods of 2021 which cost the lives of more than 100 Belgians in Wallonia,  the Belgian Presidency held a two-day Summit focused on Climate Change Adaptation, Nature-based Solutions and Resilience, called the ‘Climate Chance Europe 2024 Wallonia Summit.’ The result was the Liege Declaration, which provides a roadmap on adaptation to climate change in Europe. The Declaration largely emphasizes the need to continue with a strengthened emissions reductions trajectory while accelerating the resilience measures available. Overall, this amounts to a renewed and strengthened commitment to the climate agenda beyond 2024 and the EU Green Deal.

Later in February, around 70 leading executives from energy-intensive industries presented to European Commission President Ursula von der Leyen and Prime Minister Alexander De Croo the Antwerp Declaration  – currently boasting hundreds of signatories – for a European Industrial Deal. The Antwerp Declaration aims to preserve European competitiveness and jobs. Among other things, the Declaration calls for:

  • Public funding for a Cleantech Deployment Fund including guarantees for project de-risking; a real EU Energy Strategy
  • Infrastructure development; a strengthened domestic critical raw materials value chain
  • Green public procurement
  • A focus on the transfer from demonstration projects to first-of-a-kind (FOAK) commercial projects

Read more: https://scce24wallonie.eu/en/

European Commission launches Industrial Carbon Management Strategy

On February 6, the European Commission released its Strategy on Industrial Carbon Management (Strategy). The Strategy sets forth a number of actions to be taken at EU and Member State level to enable the deployment of carbon capture, carbon removal, and carbon storage (CCUS) technologies, as well as the infrastructure to establish a single market for CO2 in Europe. Some of the most important actions concern funding.

The Strategy recognises the increasing investment needs to deploy these technologies and mentions that by the end of 2024, the Commission will work with Member States to design a possible Important Project of Common European Interest for CO2 transport and storage. It also mentions that the Commission will assess by 2025 whether certain CO2 capture installations, such as cement or lime production facilities, can transition from project-based grant support to a market-based funding mechanisms, such as competitive bidding auctions as a service under the Innovation Fund.

Impact on cleantech

While the Strategy is an initial first step for unlocking investments in CCUS in Europe, it does not create a solid business case for scaling up these technologies as it is not underpinned by any funding signals. For instance, the US Inflation Reduction Act is boosting CCUS investments through the IRS 45Q tax credit. Under the IRS 45Q, companies can get a tax credit of $85 a ton for sequestered industrial or power emissions.

Read more: eur-lex.europa.eu/legal-content/EN/TXT/?uri=COM%3A2024%3A62%3AFIN

European institutions strike a deal on a regulatory framework for the certification of carbon dioxide removals

On February 20, the European institutions agreed on the final form of a legal framework around projects taking place within the EU that generate carbon credits. The main objectives of the framework are to: (1) accelerate the deployment of verifiable, high-quality carbon removals; (2) encourage the adoption of effective carbon removal solutions by industries and agriculture; (3) tackle greenwashing; (4) quantify, monitor and verify carbon removals; (5) stimulate investments. As for next steps, the final text needs to be formally adopted by the European Parliament and Member States before it can be published in the Official Journal of the EU and enter into force.

Impact on cleantech

The framework's potential to stimulate investments in durable and verifiable carbon removal approaches like direct air capture and storage, bioenergy with carbon capture and storage, and biochar carbon removal relies heavily on the tailored certification methodologies that the European Commission will need to develop in the coming years. These methodologies will play a crucial role in providing clarity and confidence to investors, ensuring the credibility and effectiveness of the certification process across various carbon removal activities.

Read more: https://www.consilium.europa.eu/en/press/press-releases/2024/02/20/climate-action-council-and-parliament-agree-to-establish-an-eu-carbon-removals-certification-framework/

Energy Taxation Directive

On February 21, Euractiv reported that the Belgian Presidency of the EU plans to break the deadlock around the EU’s Energy Taxation Directive (ETD) by proposing further exemptions from the directive, notably regarding biomass plants. Under the proposal, fuels would start being taxed according to their energy content and environmental performance as opposed to volume, effectively reducing the fossil fuel subsidies under the current system. The ETD has been stuck in the political process since the European Commission tabled a proposal for a reformed ETD in 2021. Taxation is an exclusive competence of EU countries, which have so far blocked progress in the Council due to disagreements over the proposed reform.

Impact on cleantech:

In Europe, coal and natural gas are taxed significantly less taxed than electricity, disincentivizing electrification across numerous sectors and end uses. A successful reform of the ETD could make certain clean technologies – such as heat pumps – much more attractive and economically competitive.

Read more: https://www.euractiv.com/section/economy-jobs/news/leak-the-belgian-presidencys-plan-to-unblock-the-eus-energy-taxation-directive/

Advanced Materials Strategy

On February 27, the European Commission released its Strategy on Advanced Materials for Industrial Leadership. “Advanced Materials” is a term broadly used to describe engineered materials that have been designed for superior performance. They are needed in batteries, zero-emission buildings, renewable energy, and a host of other things.

In order to fund the development of the advanced materials industry, the European Commission will look into possible IPCEIs (state aid for cross-border projects), leverage the EIC, Innovation Fund, STEP, and InvestEU, and mobilize €500 million under a public-private partnership with industry under Horizon Europe for 2025-27. It will also create a Technology Council to help steer this initiative with national authorities and industry.

Impact on cleantech:

This Strategy signals that the EU is getting serious about supporting innovations in the crucial advanced materials space by leveraging public funding, standards, and market development instruments such as public procurement. European cleantech innovators developing advanced materials stand to benefit.

Read more: https://ec.europa.eu/commission/presscorner/home/en

Directive on Soil Monitoring and Resilience

Derived from the EU Zero Pollution Action Plan on water, air and soils, the first law ever to regulate on the health status of European soils was adopted in the specialised committee in the European Parliament. The legislation seeks to address the fact that 60-70% of European soils are estimated to be in an unhealthy state by introducing three tiers of action for monitoring soils, including creating a public list of all the contaminated and/or potentially contaminated soils across the EU.

Through the creation of this new tiered system for soil monitoring, the ambition is to improve the ecological status of soils of initially critically degraded soils over the next six years. It also aims to improve moderated soils to moderate ecological status and those which are currently moderate to be improved to ‘good’ ecological status. Furthermore, the law introduces an obligation to clean up contaminated sites in an attempt to address unacceptable risks for human health and the environment. The costs for these operations have to be born by the polluters, in line with the ‘polluter pays principle’ in EU law.

Last but not least, a Sustainable Soil Management Toolbox is to be created, allowing soil managers to easily access information on the use of sustainable soil management practices, including best practices and latest soil research results.

Impact on cleantech:

This new legislation has the potential to significantly stimulate cleantech uptake in sectors pertaining to agritech, as well as more broadly pollution sensors and carbon monitoring tech. In the wider context of discussions around carbon farming, it becomes clear that a ‘soil economy’ is being established with multiple linked purposes, from healthier food to better management of carbon, to a cleaner environment. Furthermore, as this is the first such law in Europe, it also has the potential to set normative standards for soil monitoring tech globally.

Read more: https://environment.ec.europa.eu/strategy/zero-pollution-action-plan_en

What we have been reading

Catalysing the Global Opportunity for Electrothermal Energy Storage

Systemiq released a report  on electrothermal energy storage (ETES). Over the next decades, the report suggests that ETES could enable the cutting of up to 14% of current energy-related emissions, replace the equivalent of about 30%–40% of current global gas consumption, while offering other benefits such lowering the need for grid expansion, reducing curtailment and compensating for the intermittency of certain renewable energy sources.

IEA Electricity 2024

The International Energy Agency (IEA) published this year’s annual analysis of electricity market development and policies. Taking stock of global electricity market trends, its key points include that low-emissions electricity sources are poised to cover all global demand growth over the next three years. The report also covers dynamics such as the fact that electricity prices for energy-intensive industries in the EU last year were almost double those in the United States and China.

Climate Risk Assessment

The European Environment Agency’s Climate Risk Assessment analyses 36 climate risks faced by Europe, gauging their severity, policy situation and more, while suggesting priority actions. It notes that Europe is the fastest-warming continent in the world, which already poses severe challenges across a range of issues. The report also notes that while the EU has put in place long-term resilience policies, urgent action is needed to adapt to the climate crisis and avoid lock-in effects.

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