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The Energy Ministers’ Council met in Brussels last week to discuss the ‘Clean Energy for all Europeans’ legislative package. The proposals submitted by the European Commission at the end of last year aim at deepening European integration in the field of energy. This will also have a considerable impact on the German energy transition. What exactly is to change under the new laws?

At the Energy Ministers’ Council meeting, Rainer Baake, State Secretary at the Federal Ministry for Economic Affairs and Energy said: “The proposals will help to better coordinate the energy policies of the individual Member States.” The European Union needs reliable regulations in order to be able to reach the EU energy and climate protection targets it has set itself for 2030. A governance system shall be put in place for this purpose. This is intended to answer questions such as: how can we maintain an overview of Member States’ efforts? What happens if voluntary contributions made by the Member States in order to reach the mandatory EU targets for 2030 are not sufficient for expanding the use of renewable energy and enhancing energy efficiency?

European Commission: Each Member State is required to present a national action plan

The governance regulation proposed by the EU Commission requires every Member State to present a national energy and climate protection action plan for 2021-2030 and to coordinate its actions with its neighbour states. The plans are to deal with matters relating to energy efficiency, renewable energy, energy security and climate protection in the respective Member State. Every two years, Member States will be required to report on their progress. They must take additional action should there be growing evidence that their contributions are not sufficient as to enable all EU targets to be reached. In the view of the German Government, such a governance system is necessary in order for the common goals to be achieved in practice. It is similar to the system of long-term planning and monitoring that is employed in Germany, and creates more investment and planning reliability for companies and other market players.

The European Commission’s legislative package, previously also referred to as the ‘winter package’, includes four directives and four regulations (click here for more information). It comprises the governance regulation, directives on energy efficiency and on renewable energy, and directives and regulations establishing a new European energy market design. Ministers recently exchanged views on the legislative package for the first time, when they met for the Energy Ministers’ Council meeting. Detailed discussions on the respective directives and regulations, led by the Maltese EU Council Presidency, focus mainly on subjects of energy efficiency.

State Secretary Baake: Important decisions must be taken by the Council and the Parliament

The Federal Government is critical of the Commission’s suggestion to outsource politically important decisions on European energy and climate protection policies, i.e. of moving them away from the democratically legitimate European institutions to other bodies and subordinate acts of law. State Secretary Baake stressed how important it is to include European citizens in decision making processes and therefore to leave all important decisions to the Council and the Parliament.

According to State Sectary Baake, Germany also takes a critical view of the Commission’s proposals on promoting renewable, which it considers to be insufficient. These have to be amended to achieve greater convergence between European funding systems and the legal certainty that investors need. The State Secretary welcomes the fact that the Commission intends to adjust the electricity market design to take account of the rising share of renewable energy on the markets, as has already been done in Germany.

Better incentives to reduce carbon emissions: Emissions trading reforms

The Council of Environment Ministers met on the day after the Energy Ministers’ Council meeting in order to discuss the reform of the most important EU climate protection instrument, the Emission Trading System or ETS. Follow this link to learn more about emissions trading certificates. Additional international certificates that were fed into the system and the reduced demand due to the economic crisis have led to an excess of certificates in the ETS. The price of carbon emissions certificates has sunk dramatically and the ETS is running the risk of entirely losing its incentive effect for reducing emissions in a cost-efficient way and for encouraging low-carbon innovations.

The EU Commission had presented draft legislation on how the ETS should be designed for the trading period 2021-2030. The total amount of carbon certificates is to be reduced by 2.2 per cent after 2020, as opposed to the 1.74 per cent reduction today. The Council also wants to enhance the impact of emissions trading on climate protection and has now agreed on a common position regarding the ETS reform: double the previously envisaged amount of surplus certificates (i.e. 24 instead of 12 per cent per year) is to be put into the market stability reserve between 2019 and 2023. They will thus be temporarily taken from the market. Another new element is a cap for the certificate portfolio in the reserve - carbon certificates in the reserve shall be permanently deleted once a certain limit is reached. The market stability reserve was introduced as early as 2014 to gradually reduce the excess certificates as of 2019.

Industries that compete internationally need to be well protected in order to avoid carbon leakage, i.e. an exodus of production and the shifting of the associated carbon emissions to locations outside of the EU. This is intended to raise the share of free certificates by up to two per cent. State Secretary Matthias Machnig said there is still need for improvement: to better protect industry competitiveness within the industrial sector, he wants to see the negotiations used to ensure that the share of free certificates allocated to industry is raised considerably.

The “trialogue” between Parliament, Council and Commission is now scheduled to take place, following the round of consultations in the Parliament and the meeting of the Council of Environment Ministers.