In brief
On 14 September 2022, the European Parliament voted to adopt its negotiating position on the revision of the Renewable Energy Directive II (“REDII”). The Parliament agreed that its position should include a new headline target that 45% of all EU energy use would be sourced from renewable sources by 2030, and upward revised sectoral targets for buildings, transport and heating compared to the European Commission’s proposal.
There have been suggestions in the media that the EU ‘additionality’ requirements applied to the production of renewable fuels of non-biological origin (RFNBOs), such as renewable hydrogen, have been effectively scrapped. This article clarifies the legal position in relation to the current status of the ‘additionality’
Contents
Background
The legal basis for the ‘additionality’ requirements applicable to the production of RFNBOs can be found in Article 27(3) of the REDII. This Article itself already provides a few default rules and requirements relating to ‘additionality’, but mainly delegates to the Commission the power and mission to establish more detailed rules via a Delegated Act.
At this stage, the Commission has not yet formally adopted any Delegated Act on ‘additionality’ requirements but has already published a well-advanced draft thereof (“Draft Additionality Delegated Act”). See our earlier alert for further background. Once formally adopted by the Commission, this Delegated Act would be either approved or vetoed (but could not be amended) by either the Council of the European Union (“Council”) or Parliament (or both).
As part of the ’Fit for 55’ package, the Commission tabled a legislative proposal to revise the REDII, to be negotiated by the Parliament and Council. In the Commission’s proposal, Article 27(3) was left unchanged on the issue of establishing additionality requirements via a Delegated Act to be drafted and adopted by the Commission. Under the usual legislative procedure at EU level, the Parliament and Council first determine their own internal position for negotiations within each institution by amending the Commission’s proposal, before actually initiating the inter-institutional negotiations between Parliament and Council that will lead to the adoption of a new law.
‘Additionality’ requirements in the Parliament’s Report
The Parliament’s negotiating position (“Parliament’s Report”) for the purposes of institutional negotiations amends the Commission’s legislative proposals, and in particular Article 27(3) of the REDII, in two ways.
- Procedure: Unlike the Commission’s proposal, the Parliament has taken the position to insert ‘additionality’ requirements directly into Article 27(3) itself and to remove all delegation of powers to the Commission in this respect.
- Substance: The Parliament proposes a looser and simpler additionality framework than the one outlined in the Draft Additionality Delegated Act.
The most significant aspect of the Parliament’s approach is that, while it maintains (loose) spatial and temporal correlation requirements between when/where the RFNBO is produced and when/where the renewable electricity is produced, it features no requirement for the electricity used to produce RFNBOs to be ‘new’ or ‘additional’ in any meaningful way.
Indeed, regardless of whether the renewable electricity is taken from the grid or from a direct line, the Parliament’s Report: (i) allows the renewable electricity installation used for producing RFNBOs to have been supported by public funds, and (ii) imposes no requirements regarding the timing of the first deployment of the said installation, which can thus even have been deployed – for example – 20 years ago without violating the Parliament’s proposed rules.
This a significant departure from the Commission’s approach in the Draft Additionality Delegated Act, or even from the fundamental legislative purpose of ‘additionality requirements’,
What’s next
The Parliament’s Report is not the final legislative text, but represents the Parliament’s official negotiating position going into the ‘trilogues’ (inter-institutional negotiations with the Council). In the Council’s own negotiating position adopted in June, it did not propose any changes to Article 27(3) or the existing additionality framework. Given that the Parliament’s position effectively removes the notion of ‘additionality’(focusing solely on correlation issues), it is not clear at this stage whether the Council will accept the Parliament’s position.
Nonetheless, in the unlikely event that the Council were to agree with the negotiating position of the Parliament, the Commission’s Draft Additionality Delegated Act would become irrelevant (and void if adopted) and no longer applicable. Instead, the requirements set by the final legislative agreement would apply from the entry into force of the revision of the REDII. In this light, it remains to be seen whether the Commission will formally table in the near future a Delegated Act based on the draft that it provided for consultation. Should it do so, given this position of the Parliament that the approach proposed by the Commission should be very significantly relaxed, it is not unlikely that it would be vetoed. The Commission may choose to wait for the discussion on this topic in the trilogue before tabling a formal delegated act.
Whilst the final scope of the additionality requirement still remains uncertain, it is clear that a more flexible approach than that contained in the draft for consultation is likely to be adopted.
Baker McKenzie’s unique European Regulatory team, led by Christopher Jones, former Deputy Director General for Energy at the European Commission, provides strategic regulatory advice and guidance. The team has market leading expertise, first-hand knowledge of EU regulation and competition policy, years of experience in a broad spectrum of energy and sustainability policies and activities, including hydrogen where we contribute to the World Business Council for Sustainable Development (WBCSD)’s Energy Pathway Hydrogen workstream, and other national industry’s hydrogen associations.
