EU unveils action plan to double down on renewables and electrification;
But delay to 2040 target proposal is ominous for climate ambition;
Clean Industrial Deal is a boost for green fuels in planes and ships;
Proposed state aid reforms are insufficient to fix an outdated system;
Greater EU investment for clean tech and better use of trade defence mechanisms are welcome, but must be implemented quickly;
Streamlining of reporting rules would undermine Europe’s sustainability leadership.
New EU plans to lower energy costs by doubling down on deployment of renewable electricity, and to activate more investment and trade instruments to scale clean-tech, have been welcomed by green group T&E. However, a decision to delay proposing an EU 2040 climate target sends a very worrying signal, the group said.
Other announcements today included a Clean Industrial Deal that will prioritise the domestic production of renewable fuels for aviation and shipping. However, the EU Commission also rushed out new proposals to weaken the sustainability reporting rules that hold companies accountable for their environmental and social impacts.
Delayed 2040 target
The Action Plan on Affordable Energy aims to enable much higher levels of electrification in the economy, which the EU says should rise from 23% today to 32% in 2030. However, more than one year after confirming that it will publish a 2040 emissions reduction target for the EU, the European Commission today failed to release a proposal as planned. T&E said any climb-down from the expected -90% target would deprive European carmakers, airlines and shipping companies of the investment certainty that clean technology is here to stay.
Aviation and shipping fuels
T&E welcomed the prioritisation of green fuels in the Clean Industrial Deal. It said the plans for a Hydrogen Mechanism – which will connect hydrogen suppliers and buyers with financing options – and the prioritisation of the shipping and aviation sectors are crucial. But the Hydrogen Bank needs not only matchmaking tools but also double-sided auctions, which were omitted today. The text announced plans for a Sustainable Transport Investment Plan, which T&E said should focus on e-fuels as a priority investment.
Faig Abbasov, shipping director at T&E, said: “The Clean Industrial Deal is a step in the right direction, recognising the essential role that green hydrogen-derived fuels play in decarbonising shipping and aviation. But it lacks essential details on how the EU is going to bridge the price gap between fossil fuels and greener alternatives or address the need for larger and longer term offtake commitments. The Sustainable Transport Investment Plan should fill in those missing details or green fuels risk missing the boat and plane.”
State aid rules
The reform of state aid rules outlined today will not adequately support EU-made clean tech or local supply chains, T&E said. It called for the Clean Industry State Aid Framework, which will be published in the second quarter of this year, to set out how European manufacturing can be boosted through targeted and strictly conditional state aid. Without ‘Made-in-EU’ requirements or a performance-based approach to aid, Europe will struggle to get its local cleantech industry off the ground.
Cars and batteries
The Commission also said it would resort to using more trade defence instruments and activating greater EU investment for clean tech. T&E said adding conditions to foreign direct investment is the right step, but financial instruments to support clean tech must be better designed, as the struggling Hydrogen Bank shows. Investment support should be focused on production ramp-up, not pilots, and have local content rules for materials. These proposals need to be put into action quickly given the crisis happening in the local battery sector.
T&E welcomed plans for a labeling system for industrial products that will track their carbon intensity, starting with steel in 2025. The automotive sector consumes 17% of steel in the EU. Other provisions in the Clean Industrial Deal to support cleaner, locally-made products – such as EU content requirements and social leasing – are vague and need to be fleshed out in the forthcoming EU Automotive Plan next week and in an Industrial Decarbonisation Accelerator Act later this year.
Julia Poliscanova, senior director for vehicles and emobility supply chains at T&E, said: “The faltering European battery companies need urgent action to put the trade and investment pledges in the Clean Industrial Deal into action. A green labelling system can play to Europe’s strengths as a more sustainable manufacturer of steel and batteries. But we need to see much more detail about how labelling, as well as local content requirements, will actually work. The plans to overhaul state aid rules also do not go far enough for the EU to build up clean tech manufacturing.”
Sustainability reporting
While there is space for simplification, T&E condemned the so-called Omnibus proposal that actually weakens rules that hold companies accountable for their environmental and social impacts. Companies would only need to look at direct suppliers when doing due diligence checks on their supply chains, under the proposed changes to the Corporate Sustainability Due Diligence Directive. Environmental damages or human rights abuses in raw materials extraction, for example, would therefore not be adequately scrutinised.
The Omnibus also proposes to delay by two years the requirements on companies to report their risks and impacts, under changes to the Corporate Sustainability Reporting Directive. It would also limit the obligations to businesses with more than 1,000 employees and a turnover of €450m. A lack of ESG information due to a reduced scope of the law would make it very difficult for companies to assess their lifetime emissions across the entire value chain.
Giorgia Ranzato, sustainable finance manager at T&E, said: “The infamous Omnibus package is out. While there is space for simplification, today’s proposal throws Europe into reverse, erasing a decade of gains in sustainability and global competitiveness. If approved, the new sustainability reporting obligations will only apply to 0.02% of European companies. This risks a disastrous lack of ESG data across the region, creating a nightmare for responsible investors and consumers. This new package guts corporate accountability.”
