In the night of Tuesday 13 to Wednesday 14 December, the European Parliament negotiators and the Czech Presidency of the Council of the European Union reached a provisional political agreement on the introduction of ‘REPowerEU’ chapters in the national recovery plans as part of the Next Generation EU European recovery plan (see EUROPE 13082/3).
These chapters will include projects that will reduce the EU’s dependence on Russian hydrocarbons and accelerate the energy transition to a decarbonised economy.
Funding. Regarding the funding of these chapters, the negotiators agreed that the €20 billion in subsidies will come 60% from the European ‘Innovation Fund’ and 40% from an earlier auctioning (2024 instead of 2027) of greenhouse gas emission allowances under the EU Emissions Trading System (‘ETS’). The European Parliament called for 100% financing via ETS certificates (see EUROPE 13061/4).
Rapporteur on the reform of the ‘ETS’, Peter Liese (EPP, German), said that the ‘ETS’ market stability reserve would be used to refinance 10% of the Innovation Fund budget. MEPs also obtained guarantees from the EU Council and the European Commission that the firepower of the ‘Fund’ would be increased during the negotiations on the ETS this Friday (see other news).
The distribution key for the 20 billion in subsidies between Member States is the one recommended from the outset by the EU Council (see EUROPE 13035/14), the European Parliament having chosen not to intervene on this point.
Unused loans from the Recovery and Resilience Facility (RRF), the financial arm of Next Generation EU, may also be mobilised. Member States will have “thirty days” to indicate whether they wish to use the loans initially allocated and, after that, the loans will be redistributed to the applicant Member States “on a first-come, first-served basis”, European Parliament co-rapporteur Siegfried Mureșan (EPP, Romanian) told EUROPE. Currently, more than €200 billion in loans remain available, but Mureșan predicted that Member States will make greater use of allocated loans as funding issues tighten.
While it was agreed that agricultural policy should not fund the ‘REPowerEU’ chapters, MEPs did accept a mobilisation of cohesion policy through a voluntary transfer of 5% of national allocations. An additional 7.5% of transfers is possible, but the governance of cohesion policy will still apply.
“Unspent funding from the 2014-2020 period could help vulnerable households and SMEs”, said Pascal Arimont (EPP, Belgian). “Funds from the Brexit Adjustment Reserve could be transferred, but we have blocked the EU Council’s request that this also be the case for the ‘Just Transition Fund’”, he added.
Finally, while the European Commission has announced that the firepower of the ‘REPowerEU’ strategy will be further increased, the EU legislator indicates, in a recital of the text, that the super-profits of companies benefiting from soaring energy prices could be used to finance this strategy.
As requested by MEPs, the chapters can be pre-financed up to 20% once they have been adopted by the EU Council, potentially in the first quarter of 2023.
Scope. The ‘REPowerEU’ projects should reduce the EU’s dependence on Russian hydrocarbons and stimulate the energy transition, in particular through the development of renewable energy, energy sobriety and energy efficiency. A retroactive clause allows for the inclusion of projects that started before 1 February 2022 or even in 2020, to increase the scale of projects in countries whose allocation from the grant component of the RRF decreased during the June review.
Gas projects aimed at increasing the diversification of supplies, including LNG, will also be eligible. Contrary to what MEPs wanted, investments that will increase the capacity of existing oil infrastructure will also be possible. This exception will only concern “Hungary, the Czech Republic and Slovakia”, said Damian Boeselager (Greens/EFA, German), as these three landlocked countries benefit from exceptions under EU sanctions against Russian oil.
All references to projects involving ‘low carbon’ energy, which could have opened the way for projects involving nuclear energy, were deleted from the body of the legislation.
Furthermore, the European Parliament succeeded in convincing the EU Council of the importance of including a cross-border dimension in the ‘REPowerEU’ chapters. An indicative threshold of 30% of cross-border projects has been introduced, except for countries that do not have any, Mureșan said.
‘Do no significant harm’. The Parliament has succeeded in placing a very strict framework around the departure from the ‘do no significant harm’ principle, which, according to the Commission, was necessary to accelerate the decoupling from Russian fossil fuels through the diversification of gas supplies.
A strict framework was “fundamental”, said Eider Gardiazabal Rubial (S&D, Spanish), co-rapporteur on this dossier. She listed the provisions agreed for this purpose: - projects benefiting from the derogation will have to be essential to ensure energy security; - no less polluting alternative should exist; - projects should not, as a whole, jeopardise the 2030 and 2050 climate targets; - compensation measures will have to be taken to mitigate the environmental impact; - gas and/or oil projects should not spend 30% of the amounts allocated to the national ‘REPowerEU’ chapters.
On the other hand, MEPs agreed to extend the deadline by which eligible projects benefiting from the exception to the ‘do no significant harm’ principle must be operational to the end of 2026, whereas they had been advocating the end of 2024.
Transparency. Finally, with the reopening of the regulation establishing the ‘RRF’, MEPs fought hard to include new provisions to increase transparency concerning the beneficiaries of EU funding.
This is a “major breakthrough”: Member States will have to publish a list of the 100 biggest beneficiaries of the Facility on an easily accessible platform and this data will be compiled in the regular reports on the implementation of the European recovery plan, stated Dragoș Pîslaru (Renew Europe, Romanian), third co-rapporteur. (Original version in French by Mathieu Bion)