In a Nutshell

The Renewable Energy Directive (RED) aims to increase the share of renewable energy sources (RES) within the European Union’s final energy consumption. It establishes a common framework for the development of renewable energy capacity in the European Union and sets a binding target for the share that renewable energy represents within the EU’s final energy consumption.

In its 2021 revision, the Commission proposed increasing the target minimum share of RES in the EU’s final energy consumption to 40% in 2030 (RED III), an increase of 8 percentage points compared to its 2018 recast (RED II), which had established a minimum RES share of 32% of final energy consumption in 2030. Since the 2021 proposal, the binding renewable target has been raised to a 42.5% RES share in 2030 as part of the RePower EU Package (RED IV). RePower EU follows the Russian invasion of Ukraine and an increasing need to reduce dependency on Russian gas.

The Directive is particularly relevant for bioenergy with carbon capture and storage (BECCS), as it regulates the use of biomass and biofuels for energy generation, affecting the feasibility of introducing BECCS in the EU, and its potential scale. RED is also highly relevant to carbon dioxide removal (CDR) methods that rely on a stable supply of renewable and lowemissions energy, such as direct air carbon capture and storage (DACCS).

The RED also impacts biomass-based CDR methods beyond BECCS. Due to the high expected demand and relatively limited supply of eligible types of biomass, competition may arise between actors proposing different potential uses for biomass. Biomass use also affects carbon storage in biogenic carbon sinks. For example, forests can be a biogenic carbon sink, provide timber, and provide residual harvest biomass for bioenergy production.

What's on the Horizon?

  • A tentative political agreement on RED III was reached between the EU Parliament and the EU Council on 30 March 2023. This agreement was due to be formally approved on 17 May, but a last-minute disagreement over the role of low-carbon hydrogen produced using nuclear energy in the EU’s decarbonisation targets led to the process being postponed.
  • On 19 June, the EU Council reached an agreement on RED III. The European Parliament Committee responsible for the file approved the text on 28 June. A plenary vote in the European Parliament took place on 12 September, during which the EP voted in favour of the revision. The Council adopted the final text on 9 October 2023. The text was published in the Official Journal of the EU on 31 October 2023 and entered into force on 20 November 2023.
  • The energy policy framework for the post-2030 period is under discussion.

Deep Dive

Making sense of the Renewable Energy Directive

To help deliver on the EU’s increasing climate ambitions, including the EU-wide 55% emissions reduction target by 2030 and the target to achieve net neutrality by 2050, the targets set by the RED have been repeatedly increased. As a result, the RED has evolved from RED I to its latest version, RED IV. Starting from a target of 20% RES as a share of total final energy consumption by 2020 set in 2009, RED I was revised as part of the “Clean energy for all Europeans” package in 2018 to include a target of a 32% RES share by 2030, thereby becoming RED II.

In July 2021, as part of the “Fit-for-55” package, RED III was proposed and the target was raised to 40% by 2030. Following the Russian aggression against Ukraine, the Commission proposed a first amendment (RED IV) with a target of 45% as part of its “REPowerEU” plan. In November 2022, the Commission proposed a second amendment for a Council regulation to accelerate RES deployment.

In March 2023, the EU Parliament and the Council reached a tentative agreement to raise the target to a 42.5% RES share by 2030. Member states will need to increase their national contributions in their integrated National Energy and Climate Plans (NECP), which are due to be updated in 2023 and 2024, to collectively achieve the target. Achieving the target would bring EU member states’ total renewable energy generation capacity to 1236 GW by 2030.

RES considered within the RED’s scope include wind, solar, hydro, tidal, geothermal, and biomass. The binding target is supported by differentiated targets for a variety of sectors, such as heating and cooling, industry, and transport. The provisional agreement under RePowerEU also aims to remove barriers to the scale-up of renewable energy generation by making permitting processes for renewable energy installations quicker and easier. To this end, member states will define regions (so-called ‘go-to areas’) with limited environmental risks and high renewable energy generation capability, in which the permitting procedure shall be simplified. 

The RED and its impacts on biomass use

Biomass is considered a RES within the provisional agreement, provided that its use meets several sustainability criteria. These include requirements that woody biomass used in energy generation follows the cascading principle – ensuring that biomass of higher quality should serve purposes demanding higher-quality biomass first – and that forest biomass may not be harvested from areas with particular significance with regard to carbon stocks or biodiversity. Furthermore, no financial support shall be granted when energy facilities use stumps and roots for energy generation (as they are considered important, for example, to protect soil carbon stocks) or when they use high-quality biomass that should be reserved for other use cases under the cascading principle, such as industrial-grade roundwood, veneer logs, and saw logs.

The provisional agreement sets out a new binding combined target of 5.5% for advanced biofuels, generally derived from non-food-based feedstocks, and renewable fuels of non-biological origin, mostly renewable hydrogen and hydrogen-based synthetic fuels, in the share of renewable energy supplied to the transport sector. The increasing need for advanced biofuels that use biomass as a feedstock may conflict with the demand for the lower-quality biomass upon which several CDR methods rely, such as BECCS and biochar.

Where does BECCS fit in?

The recognition of biomass as a renewable energy source affects the feasibility and potential scale of BECCS. BECCS can both provide renewable energy and remove carbon dioxide from the atmosphere. The 2021 proposal states that member states should not support electricity production from installations producing only electricity, as opposed to, for example, installations producing both heat and power), unless these installations are located in regions included in the Just Transition Plan, or if the installations used CCS technologies to capture and store the associated (biogenic) CO2 emissions.

Currently, negative emissions stemming from BECCS cannot contribute towards targets set under any of the three main legislative pillars of EU climate action, namely the EU Emissions Trading System (EU ETS), the Effort Sharing Regulation (ESR), and the LULUCF Regulation.

The RED: Are sustainability criteria enough to ensure the sustainable use of biomass?

The role of biomass within the RED is important. While sustainability criteria exist to prevent the misuse of biomass for energy generation, the demand for biomass may increasingly exceed supply. Some communities might be adversely impacted, especially in terms of resource use and food security. It is therefore critical that future revisions of the RED take these concerns into consideration.

Timeline

1997
2001
2003
2009
2018
2021
2022
30 March 2023
17 May 2023
19 June 2023
12 September 2023
9 October 2023
31 October 2023
20 November 2023
1997

Energy for the future: renewable sources of energy, indicative EU target of 12% renewables by 2010.

2001
2003
2009

RED I: EU target of 20% renewables by 2020 and national binding targets

2018

RED II: 32% renewables target for 2030 – This is the piece of legislation that is currently in force

2021

RED III: EU Green Deal: EC proposal to raise target for 2030 to 40%

2022

RED IV: REPowerEU Plan: EC proposal to raise target for 2030 to 45% (voted as part of RED III)

  • Parliamentary position agreed & endorsed 14/09/2022 
  • Council general approach agreed on 29/06/2022. 
30 March 2023

Council and Parliament reach provisional agreement on the revision

17 May 2023

A last-minute objection postponed the adoption of the revision of the Directive

19 June 2023

The Council reached an agreement on its position

12 September 2023

The EU Parliament voted in favour of the revision

9 October 2023

The Council adopted the final text

31 October 2023

The Directive was published in the Official Journal of the EU

20 November 2023

Entry into force of RED III

Status

Year

1997

Unofficial Title

RED

Official Document

Last Updated

19/06/2023

In a Nutshell

The National Energy and Climate Plans (NECPs) outline the EU member states’ 2021-2030 strategy to meet the 2030 energy and climate targets. The Regulation on the governance of the energy union and climate action (EU) 2018/1999, adopted in 2018, requires member states to regularly submit NECPs and update them. It also sets the EU Commission review process of the plans.

Member states outline how they will address energy efficiency, renewables, greenhouse gas emissions reductions, interconnections, and research and innovation in their NECP. A common template is used to facilitate transborder collaboration and efficiency gains.

So far, the 2030 climate and energy targets aim for at least 55% of greenhouse gas emissions reductions, 32% of renewable energy within the total energy production mix and 32.5% improvement in energy efficiency. The Fit-for-55 package called for more ambitious targets, some of which are still under review, including a 42.5% share of renewable energy within the Renewable Energy Directive.

The current versions of the NECPs, submitted at the end of 2019, massively overlook the role of carbon dioxide removal (CDR) in their ability to achieve their targets. None of the 27 plans include targets for CDR, nor do they take into consideration novel carbon removal methods. Even conventional CDR methods such as afforestation or soil carbon sequestration are not properly addressed in the majority of NECPs.

This is concerning. To reach the scale of removals needed to reach net zero emissions by 2050, CDR capacities must be scaled up now. Member states should seize the opportunity to include CDR in their NECPs. In parallel, the inclusion of CDR in the 2040 targets would set the course until 2050.

What's on the Horizon?

  • As set by the Regulation on the Governance of the Energy Union and Climate Action, member states must have submitted an updated draft of their NECPs by 30 June 2023, and the final version by 30 June 2024 unless they can justify that the current plan remains valid.
  • On 1 January 2029 and every ten years thereafter, member states will need to submit a new final NECP covering each ten-year period, and a draft one year prior.
  • On 3 July, only eight countries submitted their draft updated NECPs: Spain, Croatia, Slovenia, Finland, Denmark, Italy, Portugal and the Netherlands. We will keep monitoring this space as member states submit their NECPs and a more detailed analysis will follow accordingly.

Timeline

24 December 2018
31 December 2018
June 2019
31 December 2019
17 September 2020
30 June 2023
18 December 2023
30 June 2024
1 January 2028
1 January 2029
31 December 2018

Deadline for member states to submit their draft NECPs for the period 2021-2030

June 2019

EU Commission communicated an overall assessment and country-specific recommendations

31 December 2019

Deadline for member states to submit their final NECPs

17 September 2020

EU Commission published a detailed EU-wide assessment of the final NECPs. Later on, it also published individual assessments.

30 June 2023

Deadline for member states to submit draft updated versions of their NECPs

18 December 2023

The EU Commission published its assessment of EU member states’ draft updated NECP

30 June 2024

Deadline for member states to submit final updated versions of the NECPs

1 January 2028

Deadline for member states to submit draft NECPs covering the period 2031-2040

1 January 2029

Deadline for member states to submit final NECPs covering the period 2031-2040

Status

Policy Type

Year

2018

Unofficial Title

NECPs

Last Updated

23/06/2023

In a Nutshell

The Net Zero Industry Act (NZIA) is a legislative proposal from the European Commission from March 2023 that aims to provide a stable and simplified regulatory environment to support the scale-up of net zero technologies. The NZIA aims to reach a goal of at least 40% manufacturing capacity of strategic net zero technologies in the EU according to annual deployment needs.

The Act sets out enabling conditions, streamlined permitting processes, and one-stop shops for net zero technology manufacturing projects. It differentiates between ‘net zero technologies’ (at least TRL 8) and ‘innovative net zero technologies’ (lower TRL, and can benefit from regulatory sandboxes to foster innovation). It proposes a list of eight strategic net zero technologies that would benefit from even faster permitting process within what are defined as “net zero strategic projects”:

  • Solar photovoltaic and solar thermal technologies,
  • Onshore wind and offshore renewables,
  • Battery/storage,
  • Heat pumps and geothermal energy,
  • Electrolysers and fuel cells,
  • Sustainable biogas/biomethane technologies,
  • Carbon capture and storage (CCS),
  • Grid technologies.

The Act establishes an annual EU CO2 injection capacity goal of 50 million tonnes. This goal will be adjusted when the regulation is incorporated into the EEA Agreement to account for additional capacity in Norway and Iceland and is expected to grow post-2030; according to the Commission’s estimates, the EU could need to capture up to 550 million tonnes of CO2 annually by 2050 to meet the net zero objective, including for carbon removals.

In one of the world’s firsts, oil and gas producers are subject to an individual contribution to this target, making them directly responsible for building and operating the newly mandated CO2 injection capacity. The contributions will be calculated based on a “pro-rata” basis, accounting for their share of oil and gas production within the EU during 2020-2023.

The Act also aims to facilitate access to markets through public procurement, auctions, and support for private demand. It focuses on ensuring the availability of skilled workforce and foresees net zero industrial partnerships with third countries.

What's on the Horizon?

The NZIA proposal by the European Commission has entered ordinary legislative procedure to reach a formal adoption by the European Parliament and the Council. The European Parliament Environment Committee (ENVI) voted its opinion on the file in September, followed by the Industry Committee’s (ITRE) deliberation on its position on 25 October. The Parliament adopted its position on 21 November 2023. The Council adopted its general approach on 7 December 2023. After three trilogue meetings, the co-legislators reached a provisional agreement on 6 February. Over the next weeks, the agreed text will be voted on first by the European Parliament Industry Committee, then by the whole Parliament and by EU Ministers to formally adopt it. It will then become EU law once it is published in the Official Journal of the EU.  

To provide dedicated funding support to scale up clean technologies, the Commission was set to propose a European Sovereignty Fund by Summer 2023 within the context of the multi-annual financial framework (MFF). On 20 June, the Commission proposed, instead, to establish a ‘Strategic Technologies for Europe Platform’ (STEP), to provide an immediately available tool to member states. A provisional agreement on the STEP was reached on 7 February.

Deep Dive

As one pillar of a larger Green Deal Industrial Plan, the NZIA is meant to strengthen and support the EU’s capacity to reach its climate goals. It ensures Europe seizes the potential to be a world leader in the global net zero industry in the context of strong support for net zero technologies coming from different parts of the world, such as the United States’ IRA.

(Strategic) net zero technologies

The NZIA proposes key developments for net zero technologies. Two main aspects of the definition are particularly relevant: (1) the definition is not technology-neutral, it identifies key areas to be addressed, and further lists a family of eight strategic net-zero technologies, which benefit from even faster permitting, priority status, and in some circumstance of overriding public interest, and (2) net zero technologies must be at least Technology Readiness Level (TRL)  8. CDR is not explicitly listed as a strategic net zero technology, and the TRL 8 requirement would exclude most CDR methods. However, if based on TRL only, some could fall under the definition of ‘innovative net zero technologies’, e.g., some forms of direct air capture are considered TRL 7. This flaw of the proposal could be addressed by co-legislators by adding carbon removal in the definition of net zero technologies and in the related annex.

CO2 injection capacity target to incentivise CO2 storage infrastructure

The NZIA proposes a 50 million tonnes per year of CO2 injection capacity in the EU by 2030. The act rightly identifies the lack of storage capacity as one of the largest bottlenecks for CO2 capture investments. One of the key aspects of the act is the transparency of CO2 storage capacity, including the obligation for member states to make publicly available data on sites that can be permitted on their territory, as well as reporting on CO2 capture projects in progress, and their needs for injection and storage capacity. The NZIA clarifies that CO2 injection capacity will also be available to accommodate CDR, but provisions are not proposed to ensure the shared CO2 infrastructure can efficiently be used to accommodate both CCS and CDR methods. A comprehensive and coordinated approach to carbon management that considers both CCS and CDR is needed to ensure that limited CO2 storage capacity is used effectively to reach the EU’s climate neutrality targets. The target will need to be continuously reassessed to meet the storage needs in the EU, especially beyond 2030. Furthermore, separate provisions to ensure adequate transport infrastructure should be foreseen. The European Commission estimates that about 550 million tonnes of CO2 may need to be captured annually by 2050 to meet the net zero objective.

Oil and gas producers’ responsibility to develop the EU  CO2 injection capacity has the potential to be a world-leading initiative

The NZIA Article 18 introduces an innovative obligation on oil and gas producers to take responsibility for building EU CO2 storage infrastructure subject to the EU’s injection capacity target. This obligation could introduce an element of producer responsibility for fossil fuel producers in a similar way as producers of packaging, car tires, and other products are required by law to take responsibility for the environmental footprint of end-of-life disposal. If confirmed, this provision would also allow the development of open carbon storage sources by mapping and hosting transparent, open data on carbon storage resources, much of which is held today by private companies. Critical details of this obligation, such as how different sources of CO2 for storage are prioritised or barred, which entities, beyond oil and gas producers, are required to build the CO2 infrastructure, and the procedures to determine their location remain open and need further attention.

Fresh funding is needed

The proposal establishes new initiatives, such as the “Net Zero Europe Platform”, that will discuss the financial needs of the net zero strategic projects and could be key in advising how the financing of these projects can be achieved. Beyond this, the NZIA is anchored in already existing funding mechanisms such as Innovation Fund, InvestEU, Horizon Europe, Important Projects of Common European Interest (IPCEI), the Recovery and Resilience Facility, and Cohesion Policy programmes. Clarity on new and additional funding will be key, as bigger goals will require bigger means that can support the variety of CDR methods at different TRL stages.

Timeline

1 February 2023
16 March 2023
26 May 2023
13 June 2023
19 June 2023
27 June 2023
20 September 2023
25 October 2023
21 November 2023
7 December 2023
13 December 2023
22 January 2024
6 February 2024
22 February 2024
22 April 2024 (TBC)
1 February 2023

The Green Deal Industrial Plan Communication

16 March 2023
26 May 2023

Publication of Draft Report by MEP Christian Ehler

13 June 2023

Deadline for submission of amendments – ENVI Committee

19 June 2023

Deadline for submission of amendments – ITRE Committee

27 June 2023

Deadline to provide feedback to the Commission on the NZIA proposal

20 September 2023

ENVI Committee adopts draft opinion

25 October 2023

ITRE Committee vote

21 November 2023

EU Parliament plenary adopted the parliament’s report

7 December 2023

The Council adopted its general approach

13 December 2023

First trilogue on the file

22 January 2024

Second trilogue on the file

6 February 2024

Third trilogue on the file. The EU Parliament and the Council reached a provisional agreement.

22 February 2024

ITRE Committee adopted the provisional agreement

22 April 2024 (TBC)

Indicative plenary vote on the provisional agreement

Status

Unofficial Title

NZIA

Year

2023

Official Document

Last Updated

24/04/2023