Breaking through the Latest Regulatory Plans of the Climate-Friendly Energy Union and Reaching the New Ambitious Plans of the European Green Deal

This is part of our special feature, The Frontlines of Environmental Politics in Europe.

 

The new Green Deal shows how the EU is striving to update a wide range of instruments and adopt new policies to boost the transition towards a new economic system and an energy and industrial transition through four main pillars: carbon pricing, sustainable investment, a new industrial policy and a just transition.

Energy analysts have identified three crucial objectives of twenty-first century energy policy for Europe and the world: security of supply, accessibility and protection of the natural environment. Scientist have called for a technological revolution to overcome it, or either a “sustainable development revolution.”[1] The truth is that the increasing energy consumption by humans, basically since the industrial revolution, has alarming consequences for the biosphere and, although technology has obviously an important role to play, law and governance have a crucial part in this context. The COVID-19 pandemic has shocked the entire world with a sudden health crisis that has rapidly turned into a global economic crisis without shadowing the urgency of climate change mitigation, which is still at the forefront of the European Agenda.

The world has been facing many challenges coming from the Anthropocene since the early nineties, and Europe has become a model of transformation and intensive legislative production in the energy sector and policy initiatives aimed at strengthening the linkages between energy, environment, economy, society, governance, and climate change objectives. But, the need for centralized coordinated regulation, and for “independent” regulatory authorities has for a long time been in conflict with the legal orders of some member states of the EU where traditionally the functions of such agencies where in the hands of the governments and public administration of Member States[2] and closely connected to their economic development. On May 5, 2010 Jacques Delors said that “the EU would need a new treaty to create a European Energy Community, ‘a new EEC.’” He argued that “cooperation under Article 194 of the TFEU, dealing with the functioning of the EU energy market, would only serve the first stage for proceeding towards enhanced cooperation;”[3] according to art. 194 TFEU of the Lisbon Treaty, the EU lacks specific energy competence with respect to the national energy mix. Still, when fighting against climate change, energy policy has been important since the beginning for the EU to present a single interface in relation with its external partners. A weak and uncoordinated governance approach would compromise the very tenets of the Regulation, and put at risk investment in EU’s low-carbon transition diminishing the Union’s global climate leadership, still the current transition is showing that although external EU cooperation is experiencing hardship, the will for energy independence and renewables’ investments are strongly facilitated by regulatory measures.

Today, regardless of the important achievements at regulatory level, and timid accomplishments at the court level considering the complexities of the internal market,[4] the Energy Union has approached the challenging transition at many different speeds and at many costs. Countries like France, Germany, and Denmark are leaders of a group of environmentally and climate friendly governments within the EU, as it was in the UK. They have made of the “energy transition” their political action emblem since 2015, referring clearly to a broad governmental strategy, which aims at transforming their national systems of energy production and consumption (mainly but not only, particularly in the French experience) into a more sustainable one. Countries like Spain and Italy are following their steps—not as an isolated set of legislative initiatives, but as a real national transformation of their energy systems. Other European MS are an emblem for technological innovation and energy efficiency initiatives, such as Sweden, the Netherlands, Finland, and Denmark. On the other side, we have the Visegrád states (Poland, Slovakia, Czech Republic and Hungary) and Bulgaria and Romania, under the leadership of the Polish government opposed to the new EU targets and pushing towards keeping national sovereignty over decisions on their national energy mix.[5]

A review of the latest legal developments of the European energy strategy demonstrates that there have been some steps back[6] on its initial ambitious plan framed by sustainable development considering the opportunity to completely renew the energy sector, by setting up the entrance of prosumers and small energy producers, as well as the optimization of renewable sources at every stage of production, transformation or transmission of energy (even though, this of course has not happened everywhere).

 

The first steps of the Energy Union integrating climate change policy

The first steps of the energy policy framework at EU level were based on the sustainability paradigm and the “environmentalization” of energy law.[7] A European sustainable model based on the integration of crucial policies had already emerged with the Lisbon Treaty and “eclipsed” the rest of the world.[8] Today, it is undeniable to assert that a strong and integrated energy union is the most important component of what we should call the “European Sustainability Model” and the integration principle played an important role at the dawn of the environmentalization of energy law. Today, the Energy Union comes together with a strong climate change policy as a unique project with complex challenges[9] for the integration process.

What does it mean for the energy sector to comply with the sustainability objective? Under this paradigm, the long-term development of energy markets should aim at preventing the socially, ecologically, and economically harmful impacts of energy production and consumption, including climate change, trying to overcome what Inge Kaul has called a “sovereignty paradox.”[10] So, today, these would include the development and investment of new technologies, improve energy efficiency (so, reduce demand) and energy access, new forms of governance[11] and access to justice as well as internalizing the negative environmental impact of fossil-fuel-based energy production with the help of emissions trading scheme, and the newly introduced adjustment mechanisms to avoid carbon leakage. Achieving all these objectives EU wide is not an easy task, but what is important is that the EU is bringing consensus into a hardcore area with relevant consequences worldwide. Far-reaching consequences can only be achieved if the current economic system endorsed by the political forces is focused on a strong decarbonization.

Whatever way, the Energy Union has moved from voluntary soft-objectives for decarbonization based on the will for transition towards a sustainable Europe[12] to or towards binding targets, as well as the other way around.[13] In fact, one of the main characteristics of the EU energy policy framework lies on the prominent proliferation of soft-law instruments establishing guidelines and action plans that are a good way to react without trying to find ever-lasting political compromises. Not by chance, one of the latest packages prior to the EU Green Deal plan of proposed measures addressed for the first time the issue of Energy Governance (being governance a crucial part of the puzzle of global climate change policy). According to the proposal “[a] resilient Energy Union with an ambitious climate policy and a fundamental transformation of our energy system can only be achieved through a combination of coordinated action—legislative and non-legislative—at EU and national level. To achieve this concrete action, the Energy Union needs strong Governance ensuring that policies and measures at various levels are coherent, complementary and sufficiently ambitious.”[14]

It is feasible to affirm despite of the different strategies fostered by the current and the past Energy Packages that EU sustainable energy policy has been narrowed down at EU level by the dual objective of market integration and combatting climate change. A clear tendency on regulatory mechanism aiming at this dual objective has been the norm.

In fact, we must not forget that the idea of an Energy Union emerged, in the spring of 2014, when the crisis over Russia’s annexation of Crimea pushed energy concerns back to the top of the priority list.[15] At that time, cooperation and security of supply were at the forefront of the European Energy Policy. On February 25, 2015, the concept of an Energy Union was published in the shape of Commission Communication called “A Framework Strategy for a Resilient Energy Union with A Forward-Looking Climate Change Policy.” The most crucial elements of the Energy Union got into the scene under such critical geopolitical circumstances. Today the geopolitical circumstances are not less challenging but the Union is timely equipped for decarbonization and for freeing European energy systems from Russian gas dependency.

 

The four pillars of the European Green Deal to boost the European economy

In the summer of 2020, 5he EU Commission unveiled a plan to increase the targets for greenhouse gas emission (GhG) reductions by 2030 to between 50 percent and 55 percent compared to 1990 levels. To reach this ambitious plan, a wide range of instruments and new policies should boost the (just) transition towards a new economic and energy system through the above mentioned four main pillars. The consequences of such moves, go beyond specific climate change targets looking for stronger systemic changes. The European Climate Pact launched in December 2020 is an EU-wide initiative inviting people, communities and organizations to participate in climate action and build a greener Europe, as part of the European Green Deal urge for systemic transformation. The pact is a space for people across “all paths of life” to connect. The EU ambitious plan to save the planet is also disclosed by fostering initiatives of cultural nature to combat environmental degradation and climate change. The New European Bauhaus is an example of this. It is an initiative that is bringing a cultural and creative dimension to the European Green Deal. All these policy plans have been shaped by the increasing environmentalist rhetoric and awareness in all political and social forces. The growing presence of Green political movements in local and national assemblies and parliaments has also grown consistently.

But what are the main pillars shaping the regulatory measures? The first pillar is based on a fiscal measure ensuring an effective carbon pricing throughout the economy. The EU has extended the European Emission Trading System (ETS) to new sectors making sure that taxation is aligned with climate goals and establishing a single price for all the sectors. The specific tool proposed by the Commission is also introducing a carbon border tax (or adjust mechanism) for specific sectors with the idea to minimize the risk of “carbon leakage” and avoid distributional effects affecting poorer countries which normally have higher emissions. This adjustment mechanism should help economic efficiency and avoid, or at least contrast industrial delocalization into countries with less strict carbon rules, it is compatible with WTO trading rules. This policy, one could say, has a protectionist angle, considering that EU climate efforts are safeguarded from industrial production in countries with less stringent environmental standards. But the carbon tax could also push other countries to decarbonize. For this, the EU should be committed to developing a Green Deal diplomacy, focusing on supporting other countries to share the burden of a green transition. The Geopolitical perspective is clue to contrast energy poverty and integrate social justice mechanisms.[16]

The second pillar regards sustainable investments as a second driver of a transition towards sustainable economy, involving internal fiscal measures to have a green and sustainable impact in the main economic sectors: industrial sector, the housing sector, transport, energy and digital; and some other financial instruments such as the EU recovery instrument (Next Generation EU) to complement national stimulus packages after the pandemic. For this, the EU has approved a Sustainable Europe Investment Plan at the end of 2020. The plan is set to mobilize through the EU budget associated instruments and private funds.

The third pillar is represented by a new EU industrial strategy. The European Commission adopted this new strategy in March 2020[17] facing the challenge of making the whole EU economy sustainable while maintaining competitiveness. The complete the single market (adopting a Single Market Enforcement Action Plan) encompassing the European Pillar of Social Rights together with the social, labor, and environmental highest standards of the European values. This pillar, as much as the others is anchored in the Climate Pact and all the industry related strategies (smart sector, chemical, offshore renewable energy, smart mobility, energy data space, etc.). Development of this area is envisaged by “skilling” and “reskilling,” trying to find support from the European Education Area and investing on it based on the assumption that a competitive industry depends on recruiting and retaining a qualified workforce. A new “Pact for Skills” is necessary considering the challenging importance of digitalization and automation as well as the advances in artificial intelligence that will be re-shaping the whole sector as much as the energy transition.

Finally, the fourth pillar of the EU Green Deal, the Just Transition Mechanism (JTM), is intended as a compensation scheme to respond to the adverse distributional effects of the transition. It will have a Just Transition Fund that will finance the EU countries and territories with higher dependency on fossil energy resources as part of their energy mix, energy production, or industrial production in general and employment market. In fact, it should also contrast greenhouse gas-intensive industries which could be severely impacted by the green transition, and it shall include cooperation funds. We learned the importance of cooperation and the urgent need to address external relations issues from the latest Russia-Ukraine crisis (whose corollary is today’s war) leading to a subsequent focus on European supply security and energy dependence, laying bare on the ground the large differences that still exist among EU MS regarding the reliance on gas from Russia and the dependence of some MS on the Ukraine gas pipelines distributing Russian gas.[18] The German north-stream pipeline and the Blue Stream pipeline connecting Russia and Turkey have helped Europe to find ways to implement its Energy Security Strategy shifting the focus on strengthening solidarity mechanisms that could also increase Energy production in the EU.[19] Europe has definitely made many big steps in order to meet the energy needs of the present, without compromising the climate for future generations, but unwise and corrupted political “whims” will drive us to difficult trade-offs for the recast of legislation concerned with regional cooperation with third countries like Russia.

 

Conclusions

Within the European context, a strong integration of climate change and energy regulation is at the core of EU decarbonization process and energy has always been a crucial part of the European integration process despite of the differing geopolitical components. The Energy Union project has sought from the start to further integrate the internal market, to develop a more common approach to security of supply and to create a genuine solidarity basis which lies behind the climate change global dimension that integrates energy policy with social and the highest environmental protection requirements.

Thus, the EU Green Deal plan is embedding previous regulatory EU paths and fostering innovating policies that will shape current and future European Sustainability plans saving the planet and including “all paths of life” and “all citizens.” Therefore, the articulation between the European, regional, and national levels represent a major challenge of today’s and future decarbonization policies, regulatory instruments and governance considering topics such as fiscal measures, border adjustment mechanisms, innovating industry, distribution networks, the wholesale market and the growing role prosumers should have to be part of the energy value chain. Some of the governance challenges are related to the fact that the range is varied and complex, mixing different modes of governance referring to the “broad categories of hierarchy, network and markets.”[20] Such governance modes reach from supranational hierarchical governance allowing for the adoption of legally binding decisions, up to forms of governance that are intended to steer behavior without legally binding action. The EU Green Deal is building up on this whilst launching multi-stake holders Actions’ Pact. Still, the wide diversity of issues covered by the EU Green Deal are not the only obstacle towards the construction of a well-defined neutral carbon economy. The interaction of unexpected political, social or economic components could create distortions that the legal framework might have not foreseen.

 

María Dolores Sánchez Galera is currently a lecturer and research Fellow member of the “Pascual Madoz” Institute of Land Urbanism and Environmental Law of Carlos III University (Madrid) specialized in Energy, Environmental Law and Sustainability; she is part of the Scientific Committee of the Economy of Francesco. Member of the Sustainable Development Solutions Network (SDSN) (Spain), engaged with energy poverty, cooperation issues and cultural and educational issues for the implementation of the UN 2030 Agenda for Sustainable Development.

References

Bosselmann, Klaus, “Germany’s ‘Energiewende’: what can environmental law scholarship learn from it?” in Jaria I Manzano, J., Chalifour, N., Kotzé, Louis (eds) Energy Governance and Sustainability

Galera Rodrigo, Susana. 2016. “Changing the Energy Model: Step Back on the Europe 2050 Strategy?” in 65 European Energy and Environmental Law Review.

Hoffert, M. et al, “Advanced Technology Paths to Global Climate Stability: Energy for a Greenhouse Planet” (2002) 298 Science 981. Some others have called on, “an industrial revolution for sustainability starting now”.

Inge Kaul, explains the paradox in the following way: “The paradox is that states, notably their governments, are losing policy-making sovereignty precisely because they hold on to conventional strategies of realizing sovereignty, which make them shy away from international cooperation. If nations want to win back their policy-making capacity, only one path remains: cooperation”, at the launch of The Governance Report (Hertie School of Governance, 2014) on 23 February 2014, available at www.governancereport.org/media/news/the-sovereignty-paradox/.

Ostrom, E. 2009. “A Polycentric Approach for Coping with Climate Change.” World Bank Policy Research Paper 5095, 10-14.

Penttinen, Sirja-Leena, “The Next Chapter in the Saga of Renewable Energy Support Schemes: Still “a Certain Degree of Mystery” after Essent Belgium II, European Law Review, 2018, 1.

Prosser, Tony, The Limits of Competition Law Markets and Public Services, Oxford, OUP, 2005, p.159.

Rifkin, Jeremy, The European Dream: How Europe’s vision of future is quietly eclipsing the American Dream, Penguin 2004.

Ringel, M., Knodt, M., “The Governance of the European Energy Union: Efficiency, effectiveness and acceptance of the Winter Package 2016”, In Energy Policy, V. 112, 2018, pp. 209-220.

Sánchez Galera, M.D., “The integration of Energy and Environment under the Paradigm of Sustainability threatened by the Hurdles of the internal Energy Market”, in 13 European Energy and Environmental Law Review, (2017).

Sánchez Galera, MD “Geopolitics and Governance of the European Green Deal. An Analysis under Cooperation and Social Justice Premises”, STALS research papers, online, 2022.

Savaresi, Annalisa “Early Brexit Questions: The Paris Agreement and Climate Policy”, in European Futures, on line accessible at: www.europeanfutures.ed.ac.uk

Solorio, I., Bechberger, M., Popartan, L., “The European Energy Policy and its ‘Green Dimension’: Discursive Hegemony and Policy Variations in the Greening of Energy Policy”, in Barnes and Hoerber, T. (eds)., Sustainable Development and Governance in Europe, Routledge, 2013.

Schellnhuber, H. J., “Global Warming: Stop Worrying, Start Panicking?”(2008) 105 Proceedings of the National Academy of Sciences 14239, 14240.

[1] Hoffert, M. et al, “Advanced Technology Paths to Global Climate Stability: Energy for a Greenhouse Planet” (2002) 298 Science 981. Some others have called on, “an industrial revolution for sustainability starting now”. See further, Schellnhuber, H. J., “Global Warming: Stop Worrying, Start Panicking?”(2008) 105 Proceedings of the National Academy of Sciences 14239, 14240.

[2] See Prosser, Tony, The Limits of Competition Law Markets and Public Services, Oxford, OUP, 2005, p.159.

[3] https://www.euractiv.com/section/eu-priorities-2020/news/delors-advocates-new-eu-treaty/

[4] Case C-492/14 Essent Belgium, 29 September 2016. Let’s refer only to one this latest decision changing direction on RES energy produced by a foreign country but distributed by within Flanders. The Court up till now had been ‘soft’ in allowing environmental goals to eclipse the Treaty free movement rules. This time the CJEU ruled that the Belgium system for promoting green energy was undermining the Treaty rules on free movement and the internal energy market legislation by not allowing energy produced outside the Flemish region be transported free of charge by the DSO’s of the Flanders region. The CJEU considered the RES Belgium system discriminatory on this preliminary ruling.  Hence, with regards to the proportionality test based on national criteria the Court introduced a shift in the ‘saga’ of soft approaches with regards to the balance struck between environmental protection and the free movement of goods. See further, Penttinen, Sirja-Leena, “The Next Chapter in the Saga of Renewable Energy Support Schemes: Still “a Certain Degree of Mystery” after Essent Belgium II, European Law Review, 2018, 1.

[5]Ringel, M., Knodt, M., “The Governance of the European Energy Union: Efficiency, effectiveness and acceptance of the Winter Package 2016”, In Energy Policy, V. 112, 2018, pp. 209-220.

[6] We should be aware that previous to the 2020, 2030 strategies the Commission took a much longer-term view, publishing, based on European Council request, a Communication called A Roadmap for Moving to a Competitive Low Carbon Economy in 2050, COM (2011) 112. For a critical overview of the Europe 2050 Strategy, see Galera Rodrigo, Susana, “Changing the Energy Model: Step Back on the Europe 2050 Strategy?” in 65 European Energy and Environmental Law Review, (2016).

[7] For an overview on this issue, see further, Sánchez Galera, M.D., “The integration of Energy and Environment under the Paradigm of Sustainability threatened by the Hurdles of the internal Energy Market”, in 13 European Energy and Environmental Law Review, (2017). Also, Solorio, I., Bechberger, M., Popartan, L., “The European Energy Policy and its ‘Green Dimension’: Discursive Hegemony and Policy Variations in the Greening of Energy Policy”, in Barnes and Hoerber, T. (eds)., Sustainable Development and Governance in Europe, Routledge, 2013.

[8] For an overview of how the EU model eclipses the rest of the world, see, Rifkin, Jeremy, The European Dream: How Europe’s vision of future is quietly eclipsing the American Dream, Penguin 2004.

[9] Considering the geopolitical diversity of the EU countries and the divergent political wills the EU is experiencing, taking into account the ‘Brexit’ negotiations. See further, Savaresi, Annalisa “Early Brexit Questions: The Paris Agreement and Climate Policy”, in European Futures, on line accessible at: www.europeanfutures.ed.ac.uk

[10] Bosselmann refers to the paradox as the “Dilemma consisting on how ‘nation-states see the natural world merely as relative, competing with other concerns such as economic prosperity, political strategizing or down-right power interests. This creates the dilemma of wanting to be sees as ambitious without actually being committed”, see Bosselmann, Klaus, “Germany’s ‘Energiewende’: what can environmental law scholarship learn from it?” in Jaria I Manzano, J., Chalifour, N., Kotzé, Louis (eds) Energy Governance and Sustainability. Inge Kaul, explains the paradox in the following way: “The paradox is that states, notably their governments, are losing policy-making sovereignty precisely because they hold on to conventional strategies of realizing sovereignty, which make them shy away from international cooperation. If nations want to win back their policy-making capacity, only one path remains: cooperation”, at the launch of The Governance Report (Hertie School of Governance, 2014) on 23 February 2014, available at www.governancereport.org/media/news/the-sovereignty-paradox/.

[11] More flexible ways of governance, adaptive and participatory governance are needed and they clearly pose challenges for traditional public regulation and policy. A non-hierarchical, collaborative governance style is needed because energy system development frequently depends on private sector investments, the guiding principle of adaptability is inherently in tension with investors’ desire for predictable returns. Ostrom suggested a way to resolve that tension by observing that an important aspect of polycentric collective action is to build and maintain ‘trust’.  See further, Ostrom, E., “A Polycentric Approach for Coping with Climate Change” (2009) World Bank Policy Research Paper 5095, 10-14.

[12] The EU strategies on Sustainability started with the Lisbon Strategy for the period 2000-2010, and followed by the Europe 2020; a 10-year strategy proposed by the European Commission on 3 March 2010 for advancement of the economy of the European Union. It aims at “smart, sustainable, inclusive growth” with greater coordination of national and European policy. It is the writer opinion that one of the strategy major achievements are the ones concerned with the Energy Union in which the wider spectrum of stakeholders is involved.

[13]Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on the Governance of the Energy Union, amending Directive 94/22/EC, Directive 98/70/EC, Directive 2009/31/EC, Regulation (EC) No 663/2009, Regulation (EC) No 715/2009, Directive 2009/73/EC, Council Directive 2009/119/EC, Directive 2010/31/EU, Directive 2012/27/EU, Directive 2013/30/EU and Council Directive (EU) 2015/652 and repealing Regulation (EU) No 525/2013.

COM/2016/0759 final – 2016/0375 (COD)

[14] See further, the reasons and objectives of the proposal, https://ec.europa.eu/energy/sites/ener/files/documents/1_en_act_part1_v9_759.pdf

[15] See further, Vandendriessche, M., Saz-Carranza, A. and Glachant, J-M., “The Governance of the EU’s Energy Union: Bridging the Gap?”, EUI Working Papers, RSCAS 2017/51, p.4.

[16] Sánchez Galera, MD “Geopolitics and Governance of the European Green Deal. An Analysis under Cooperation and Social Justice Premises”, STALS research papers, online, 2022.

 

[17] COM (2020) 102 final, A New Industrial Strategy for Europe. Communication from the Commission to the European Parliament, the European Council, the Council, the European Economic and Social Committee and the Committee of the Regions. A New Industrial Strategy for Europe.

[18] http://www.gazpromexport.ru/en/statistics/

[19] See further, https://ec.europa.eu/energy/en/topics/energy-strategy/energy-security-strategy, see also the press release dating from February 2016.

[20] Ringel, M., Knodt, M., “The Governance of the European Energy union: Efficiency, effectiveness and acceptance of the Winter Package 2016”, in Energy Policy, vol. 112, 2018, pp. 209-220.

 

Published on May 18, 2022.

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