EUROFUEL NEWSLETTER #1
Dear reader,
Welcome to the first EUROFUEL newsletter of 2024. In this edition, we review the relevant legislative developments that took place in the last months of 2023. We also look at an upcoming critical period, as we prepare for the EU elections.
2023 closed with two significant developments for our industry: the interinstitutional agreement on the revision of the Energy Performance of Buildings Directive, and the landmark deal reached at the COP28 climate summit in Dubai. While the former involves new and more energy performance requirements for buildings, the latter has been described as an historic step to transition away’ from fossil fuels.
In light of these recent developments, our industry is at a critical juncture. These initiatives must underscore the commitment to a sustainable transition, emphasising energy efficiency and reduced emissions while ensuring fairness. Moreover, as the EU gears up for a pivotal election year, it is crucial to advocate for a diverse energy mix that includes renewable liquid fuels alongside electrification. A concerted effort to champion a balanced transition, considering technological progress and consumer needs, is essential during this time of impending political shifts.
Yours,
Dr Ernst-Moritz Bellingen
The New Era of EU Buildings: EU Agrees on Stricter Energy Standards
After long and, at times, bumpy negotiations, in December 2023, the Council and the European Parliament finally reached a provisional agreement to revise the Energy Performance of Buildings Directive (EPBD), aiming to enhance energy performance requirements for new and renovated buildings across the EU.
The agreement, due to be ratified in April, sets ambitious targets, including zero emissions from fossil fuels for all new buildings by 2030 and for all buildings by 2050. It also establishes minimum energy performance standards (MEPS) for non-residential buildings, mandating that by 2030, all such buildings must perform better than the worst-performing 16%, and by 2033, better than the worst-performing 26%. On the other end, residential buildings are expected to reduce average energy consumption by 16% by 2030 and 20-22% by 2035. Last but not least, the agreement includes a roadmap to phase out fossil fuel boilers by 2040, with subsidies for standalone units ending in 2025.
At the same time, Member States are required to create national strategies to meet the reduction targets, with the flexibility to accommodate specific national circumstances. Enhanced Energy Performance Certificates will inform citizens, and financial incentives will be provided to protect energy-poor households. Overall, a renovation wave is expected, with Member States developing national Building Renovation Plans, renovation passports, and support structures like one-stop-shops.
From the oil, gas, and heating industry perspective, the EPBD agreement can be considered as somewhat satisfactory, as the foreseen timeline for the phaseout of fossil fuels has been pushed to 2040, instead of 2035 as initially proposed. Moreover, Member States will devise their individual strateges to achieve the Directive reduction targets. This allows for a certain degree of flexibility regarding the measures that will be taken. This approach provides enough adaptability to reflect each country's distinct situation. Furthermore, despite the EBPD’s aim to end subsidies for standalone fossil fuel boilers units in 2025, and the anticipated reduction in demand for traditional heating systems, the provisional agreement gives the possibility to give financial incentives for the installation of hybrid heating systems with a considerable share of renewable energy after 2025, leaving room for optimism for our industry despite the challenges.
COP28's Mixed Outcomes: Ambition Meets Greenwashing Concerns
The COP28 climate summit, held in Dubai in December, concluded with mixed outcomes that will shape the global energy transition and set the stage for COP29. A key achievement was the successful conclusion of the first-ever Global Stock Take (GST), a mid-term review of progress toward the Paris Agreement goals. The GST called for nations to "transition away" from fossil fuels and advocated for a 1.5°C-aligned energy transition. Participants agreed on ambitious targets, including a tripling of global renewable energy capacity and a doubling of annual energy efficiency improvements by 2030.
Despite the progress, COP28 faced criticism regarding potential greenwashing as world leaders made numerous declarations without strong enforcement mechanisms. The summit's Emirati presidency announced initiatives to clean up the energy sector, including pledges by oil and gas companies to reduce emissions, and commitments by 118 countries to increase renewable energy and energy efficiency. However, concerns were raised about the “unabated” use of fossil fuels and the reliance on unproven carbon capture technologies. Choosing Azerbaijan's ecology minister, a former oil executive, to preside over COP29 in 2024 has further fuelled debate about the influence of the fossil fuel industry on climate negotiations.
COP28 also underscored the need for a holistic approach to climate action, emphasising the role of agriculture, nature-based solutions, and sustainable mobility. The Emirates Declaration on Sustainable Agriculture and the Mangrove Breakthrough initiative highlighted the importance of integrating climate strategies with biodiversity and ecosystem conservation. Despite securing over $726 million for the Loss and Damage Fund and $188 million for the Adaptation Fund, the summit acknowledged that financing falls short of the needs of the most vulnerable countries.
As COP28 ended, the focus shifted to implementing the GST outcomes and preparing for COP29. The climate summit recognised the importance of multistakeholder events, such as the World Economic Forum Annual Meeting in Davos, in building momentum toward Nationally Determined Contributions (NDC) revisions and driving forward the takeaways from COP28. There remains a pressing need for a clear roadmap, increased investment, and stronger commitments to ensure an effective transition toward a resilient and inclusive low-carbon future.
The need to transition away from fossil fuels was recognised for the first time during COP28, even without a clear obligation or a hard timeline for that goal. Nevertheless, the fossil fuels sector is expected to accelerate its transition towards more sustainable and environmentally friendly practices. To that end, Eurofuel support renewable liquid fuels as a straightforward and flexible solution for decarbonising heating, offering a simple conversion for existing systems and serving as an attractive alternative to other less feasible options, thus accelerating Europe's transition to sustainable heating practices.
Climate Policy at a Crossroads: The EU Green Deal Faces Election Challenges
With the provisional agreements reached in December on EPBD and the Corporate Sustainability Due Diligence Directive (CSDDD), the European institutions are getting ready to sign off on the final chapters of the Green Deal after 5 years of legislative battles to set the framework for a net-zero economy by 2050. However, with the EU elections looming this June, there is a growing backlash against the Green Deal due to a shift in citizens' priorities following the rise in the cost of living and the loss of competitiveness of key industries caused by high energy prices and the rampant inflation of the past 2 years.
The extent to which the EU's climate transition policies have contributed to this shift remains a point of contention. Nevertheless, the trend of deprioritising sustainability goals in favour of other policy areas is apparent in the positioning of major European political parties ahead of the elections. Right-wing parties in particular - the EPP and ECR - have shown a preference for policy priorities such as economic competitiveness over a strict environmental focus. On the other hand, the socialist (S&D) and the Greens are advocating for the promotion of the social dimensions of the Green Deal, emphasising the equitable aspects of the green transition. Moreover, the range of stances on environmental policies varies widely among parties, from implementing existing energy and climate rules, which align with calls for a regulatory pause on new green legislation, to advocating for the repatriation of EU environmental policies to the national level.
Overall, the EU's approach, often seen as excessively bureaucratic, has inadvertently fuelled discontent, leading to demands for a transition from prescriptive regulations to incentive-based policies. As the EU elections approach, it remains to be seen how environmental policies, including the Green Deal, will be modified, and potentially implemented in response to the shifting political landscape.