January 14, 2022 European Commission builds on “Fit for 55” energy and climate package with new measures Executive summary In December 2021, the European Commission (the Commission) released a series of legislative proposals as a continuation to the "Fit for 55" package announced in July 2021. The proposals aim to pave the way towards renewable and low carbon fuels and create a market for hydrogen. The package also contains provisions related to methane emissions, providing for obligatory tracking and reduction of methane released into the atmosphere from the energy sector. Furthermore, the Commission set forth the principles around sustainable carbon cycles and for efficient and green mobility and introduced another proposal aiming to foster the decarbonization of the building sector. The new measures are viewed as another milestone in delivering the goals of the European Green Deal. Ahead of implementation, the measures are expected to significantly accelerate business transformation toward sustainability in gas, agriculture and transportation sectors. Detailed discussion Hydrogen and Gas Markets Decarbonization Package On 15 December 2021, the Commission published one of the most anticipated regulations for the entire gas sector - the Hydrogen and Gas Markets Decarbonization Package (the Package). The Package proposes a set of amendments to European Parliament (EP) and Council Directive 2009/73/EC of 13 July 2009 concerning common rules for the internal market in natural gas and EP and Council Regulation (EC) No 715/2009 of 13 July 2009 on conditions for access to the natural gas transmission networks. This is one of the first legislative initiatives in the European Union (EU) setting out detailed provisions for the development of alternative energy carriers. The key decarbonized gases identified in the Package include: hydrogen, biogas, biomethane, ammonia and methanol, which are to gradually become substitutes for the unabated fossil fuels. The regulatory changes are intended to create a market, governance and infrastructure architecture for the transmission and distribution of decarbonized gases in the EU. The Package also envisages expiration of long-term contracts for unabated fossil natural gas by 2049. Regulation on methane emissions reduction in the energy sector On 15 December 2021, the Commission published a proposal to track and reduce methane in the energy sector, the first of its kind in the EU. The document recognizes this powerful greenhouse gas as contributing to a quarter of current anthropogenic global warming. The main objectives of the new regulation is to improve the accuracy of information regarding the main sources of emissions, increase reliability of reporting and further effectively mitigate methane emissions. It also imposes a requirement of mandatory leak detection and repair, in addition to a ban on venting and flaring. Importers of fossil energy into the EU will need to provide information on the methane emissions and their mitigation across their value chains. The rules may be amended by 2025 with a view to introduce more stringent measures on fossil fuels imports once all data is available. Lastly, the EU intends to set up and manage a transparency database for fossil energy imported into the EU. Sustainable carbon cycles Also on 15 December, the Commission published a communication on sustainable carbon cycles, outlining its vision for carbon farming, industrial carbon capture and use (CCU) and carbon capture and storage (CSS). The Commission has proposed how to increase carbon sequestration and scale-up carbon farming as a business practice. The Commission will foster innovative approaches through public funding to support carbon farming. This year, the Commission will propose a regulatory framework for transparent accounting and certifying carbon removals. According to the communication, carbon removals from forests and agriculture will play a crucial role in achieving climate-neutrality by 2050. Revision of the energy performance of buildings directive (EPBD) The European Commission published on 15 December the revision of the EPBD, which translates the Renovate Wave Strategy into legislative action. The EPBD sets the overall vision for new and existing buildings that applies across relevant provisions of the "Fit for 55" package and complements existing legislation (e.g., Energy Labelling Regulation, Ecodesign Directive). The proposal establishes a zero-emission target for all new buildings by 2030, and by 2027 for new buildings in the public sector. In relation to existing buildings, new energy performance standards would require the worst-performing 15% of the building stock of each Member State to be upgraded by 2027 for non-residential buildings and 2030 for residential buildings. Other changes introduced in the proposal include:
Efficient and Green Mobility Package On 14 December 2021, the Commission published four proposals that will serve to modernize the EU's transport system:
_________________________________________ For additional information with respect to this Alert, please contact the following: Fit for 55 general
Carbon Border Adjustment Mechanism
Emission Trading System
Energy Taxation Directive
Renewable Energy Directive
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