Our Policy Update shares key news from the past month in Brussels, as well as its potential impact on EU cleantech. This month, we dive into:
On 25 January, we organised our annual Cleantech for Europe Summit. Key policymakers, trailblazing innovators and dedicated investors convened in Brussels to chart a common path for European cleantech leadership. The event opened with a keynote speech by Executive Vice President Margrethe Vestager of the European Commission and was attended by 9 Members of the European Parliament from as many countries.
The many insights emerging from the Summit were used as the basis for developing a EU Cleantech Strategy, which was developed together with our regional sister initiatives in France and Germany, as well as the Nordics and Baltics and published following the Commission’s announcement of the Green Deal Industrial Plan – read it below!
On 13 February, the European Investment Bank along with Germany, France, Italy, Spain and Belgium launched the European Tech Champions Initiative (ETCI), a new €3.75bn fund of funds to invest in VCs that back European scaleups. The ETCI will help address one of the mains components of Europe’s scale-up problem, which is the lack of scale of European late-stage VCs.
Speaking at the launch event, Bruno Le Maire, France’s Economy Minister, pointed out that ETCI will help the EU catch up the US and China, while stressing that Europe needs to build its green independence based on innovative scale-ups. ETCI will invest in 10-15 late-stage VC funds of more than €1bn that participate in funding rounds of more than €50m. The funding from ECTI comes with strings attached, namely that the fund should: (i) be established in the EU; (ii) operating in at least one of the participating countries; and (iii) invest a certain percentage of the portfolio in European businesses.
On 17 February, Siemens Energy teamed up with Munich Security Conference and Breakthrough Energy to launch the Energy Resilience Leadership Group. The Group launch was attended by the President of the European Commission, the Executive Director of the International Energy Agency and key CEOs and policymakers. The Group will focus on deploying clean energy technologies within 12 to 24 months that will help reduce Europe's dependence on natural gas. This will be key to accelerating electrification in the EU, supporting European industry and providing access to clean affordable energy to EU citizens.
On 15 February, Cleantech for Europe's sister initiative Cleantech for UK was launched. Six investors and accelerators representing a combined fund size of over £6bn as well as three innovative cleantech scaleups joined the launch event at Imperial College London. Participants were joined by Prime Minister Rishi Sunak and Bill Gates, and discussed how to create the next generation of global cleantech champions in the UK.
Read More: https://www.cleantechforuk.com/executive-summary
On 13 February, after a delay of more than one year, the European Commission finally sets a legal definition for what can be considered renewable hydrogen: it needs to prove correlation with the production of renewable electricity, except in largely decarbonized grids, such as those with a heavy share of nuclear.
The European Parliament and Council were given two months to accept or object to the DA – they cannot amend the Commission’s proposals – and the Parliament has decided to exercise its right to take an additional two months to scrutinise the proposals, delaying the DA’s entry into force from April to June, if ratified by the co-legislators.
On 23 January, the European Commission launched a public consultation on its reform of the EU electricity market design (EMD), outlining the Commission’s understanding of the cause of the energy crisis and how the EU’s electricity market could be tweaked for the twin objectives of enabling consumers to benefit from the lower cost of renewables whilst mitigating the impact that volatile gas prices have on consumers’ electricity bills. The Commission has signaled its openness to a greater use of long-term contracts, notably Contracts for Difference (CfDs) and Power Purchase Agreements (PPAs).
Here, we give our community’s perspective on this debate in our response to the consultation, reflecting the needs of both cleantech manufacturers and developers of flexibility and storage technologies.
On 14 February, the European Commission proposed new CO2 emissions targets for new heavy-duty vehicles (HDVs) from 2030 onwards, as part of a review of truck CO2 standards legislation.
The Commission proposes phasing in stronger CO2 emissions standards for almost all new HDVs with certified CO2 emissions, compared to 2019 levels, via a 45% reduction to fleet-wide emissions by 2030, a 65% reduction by 2035 and a 90% reduction by 2040. The Commission also proposed a 100% reduction in emissions for new bus sales from 2030 to stimulate faster deployment of zero-emission buses in cities.
These proposed rules – which come off the back of last year’s successfully agreed 2035 ban on new internal combustion engine cars – will be subject to interinstitutional negotiations between the European Parliament and Council in the coming months.
On the 1st of February 2023, the European Commission issued a Communication on a Green Deal Industrial Plan (GDIP), in response to increased cleantech competitiveness in the wake of the United States’ Inflation Reduction Act. The GDIP is a collection of several proposals, many of which Cleantech for Europe has advocated for, including:
The GDIP Communication refers to a package of 3 critical legislative initiatives which will be launched in March 2023, a Net-Zero Industry Act, a Critical Raw Materials Act and the Electricity Market Design revision proposal. The Net-Zero Industry Act is set to propose priorities and manufacturing goals for key sectors (yet to be determined), to create fast-tracked European supply chain development through projects (including ICPEIs) and not least through faster permitting and certification, as well as proposing the use of regulatory sandboxes, a concept ‘borrowed’ from the digital policy space. The proposal for the Net-Zero Industry Act is expected in the second half of March 2023.
The element that received the most attention in the GDIP Communication, was the announcement from the side of European Commission of a EU Sovereignty Fund, before the Summer 2023, to allow more funding and financing for projects of strategic importance. At the moment, it is foreseen that this fund will be integrated into the upcoming revision of the EU budget, already long scheduled to be taking place in 2023/24. This opened a bigger debate on whether this involves recycling the use of previously existing funds or whether this creates new sources of funding streams, a debate which is still unfolding, and which will only take more shape in Q2 and Q3 of 2023.
In the context of GDIP, the European Commission pledged to relax its State aid restrictions to ‘enhance the competitiveness of Europe’s net-zero industry and support the fast transition to climate neutrality.’ In this vein, the Commission proposed:
The Commission intends to use public procurement rules to drive demand for sustainable products, and will base criteria on existing standards. At the same time, these standards are being further developed through files such as the Ecodesign Regulation for Sustainable Products. While the EU currently does not enforce mandatory Green Public Procurement, certain sector specific rules do impact procurement, though local procurers approach the issue in different, uncoordinated ways.
Difficult-to-abate sectors such as road transport and construction make up a large part of public procurement, and binding GPP rules would strengthen cleantech options against polluting incumbents. Thus, GPP criteria should be developed in close collaboration with the cleantech sector, whose products are vital to decarbonising the public procurement market. Crucially, binding GPP rules and standardised reporting should be enforced by the EU level, to enable cross-border scale-up.
Our read is that the Inflation Reduction Act is already acting as a strong magnet, attracting cleantech innovators and investors with clear market signals. If the EU wants to retain and scale its clean technologies, it needs to send equally clear and compelling market signals. As the EU negotiates its Green Deal Industrial Plan, we put together our community’s take on what is needed for the EU to lead the global cleantech race:
The GDIP follows from a European Council meeting from December 2022, in which the EU governments invited the Commission to present a strategy at EU level to boost competitiveness and productivity, the European Council commented on the proposed plan and has further committed to reverting to these matters at its upcoming meeting in late March 2023. However, in its meeting from 8/9 February 2023, the European Council already issued some conclusions reflecting on the proposed Commission plan.
As part of that meeting, EUCO highlighted the crucial role that the Capital Markets Union plays for Europe’s continuation as a continent of innovation. It further indicated support for streamlining permitting, for a proposal for raw materials as well as for revising the European electricity market design. A call was made for the simplification of state aid procedures, calling for these procedures to become faster and more predictable, but also for this simplification to allow for “targeted, temporary and proportionate support to be deployed speedily, including via tax credits”, in those sectors that are strategic for the green transition and are adversely impacted by foreign subsidies or high energy prices. Similarly, a strong call was made for simplifying the regulatory environment through clear framework conditions for investment in the EU, referring to manufacturing capacity for products deemed to be of strategic importance importance to meeting the EU’s climate neutrality goals.
Less than a month after the European Commission’s Communication on the Green Industrial Plan, the European Parliament plenary in Strasbourg adopted an important resolution on the topic of “An EU strategy to boost industrial competitiveness, trade and quality jobs”. This resolution very clearly calls for steps to be taken for securing European leadership in cleantech and for providing high-quality jobs and re-shoring European industries, as to enable the European Union to achieve its EU Green Deal objectives. The Parliament resolution defines the EU’s key strategic technologies to encompass solar and wind energy, heat pumps, electricity grids, batteries, long-duration energy storage, electrolyser manufacturing for renewable hydrogen and sustainable building materials. In addition, it calls for Transition Pathways to be introduced for all sectors as to give investors in the EU both visibility as well as certainty and predictability.
Most importantly, this The EP resolution calls on the Commission to re-focus on the scaling-up and commercialisation of strategic technologies in the Union to bridge the gap between innovation and market deployment, by providing risk financing for early-stage technology and demonstration projects, and by developing early value chains to provide support to commercial-scale, zero-emission technologies and other environmentally sustainable products above others.
On the topic of the European Sovereignty Fund, this resolution makes the bold move of asking for ‘fresh money’ (I.e. new sources of financing in addition to the existing ones).