Revising energy regulations in the EU: What to know for 2023
There’s been a lot of talk about ramping up energy efficiency in the EU. Now revisions are on their way. Read what to expect in 2023.
In the EU, energy-related regulations are on the fast track for revisions. So much so that it’s safe to say that in 2023, you can expect European authorities to adopt and put into practice several measures. This means that – among other changes – we’ll most likely see higher taxes on fossil fuels as well as economic incentives for adopting green energy, such as installing solar panels.
Here’s a breakdown of what your business can expect to see from soon-to-be-revised directives:
Energy directive revisions are coming
The EU Green Deal set the starting point for many measures in the energy sector (of course, alongside others). Its goal to transform Europe into the first climate-neutral continent by 2050 led to the ambitious objective from the Fit for 55 package, which calls to reduce 55% of greenhouse gas (GHG) emissions by 2030.
To get there, all eyes are on reducing energy consumption by tackling some relevant areas of energy use, such as buildings, industry, and transport. Therefore, in 2023, we expect the EU to adopt European Commission Work Program proposals, revising the directives regarding:
- energy efficiency
- buildings’ energy performance
- energy taxation
- renewable energy
Let’s dive into what each revision entails…
Energy efficiency: Cutting up to 39% of consumption
The Directive on Energy Efficiency is a key instrument for increasing the use of green energy and thereby achieving the EU Green Deal’s decarbonization objective. In the directive, the European Commission proposes to promote cost-effective savings that in the long term will lead to reduced GHG, improved energy security, and lower energy costs for companies. Regarding the industry, despite the efforts already made in this sector, the reduction of heating and cooling is identified as crucial for a transition to a clean and carbon-neutral economy.
This proposal establishes higher targets on energy use cuts, namely less than 39% of primary consumption and less than 36% of final consumption by 2030.
To achieve this objective complementary and more specific legislation is necessary, such as the following rules regarding buildings, taxation, and renewable energy.
Building’s energy performance: Reaching zero emissions by 2050
Recently the EU has been investing in the development of legislation seeking to set important rules to improve the energy performance of buildings, namely the Near Zero Energy Buildings (NZEB) standard, Directive 2010/31/EU of the European Parliament and of the Council of 19 May 2010 on the energy performance of buildings (recast).
For example, the ambitious goal that all buildings in the region must be zero emission/ by 2050. To reach the goal, all new buildings must be zero-emissions and energy performance certificates will be mandatory for all buildings, new or pre-existing – all by 2030.
For pre-existing non-residential buildings, each Member State must establish minimum energy performance standards, meaning the maximum amount of energy that buildings are allowed to use per m2. However, there are some exceptions to this obligation, such as industrial sites and buildings smaller than 50 m2.
On top of that, we also see the EU incentivizing the adoption of green energy. By 2028, all non-residential buildings with a functional floor greater than 400 m2 going through renovations must include solar energy installations. For this purpose, companies may benefit from financial benefits and tax reductions. If this proposal is adopted by the European Parliament and Council, companies may expect the creation of national databases with the energy performance certificates, which allow them to have easier access to energy efficiency of the buildings. Also, in order to harmonize at the European level, the scale of energy performance classes on which the energy performance certificates are based will be established by the directive.
All eyes are on reducing energy consumption by tackling some relevant areas of energy use, such as buildings, industry, and transport.
Energy taxation: Raising taxes for more products
The Energy Taxation Directive aims to, among other goals, provide incentives that encourage companies and citizens to adopt more sustainable actions. To do so, the Fit for 55 package proposes to revise this directive so that it includes higher taxation on the energy sector.
If the proposal by the Commission is adopted, companies may expect significant changes in the tax structure and a broadening of the taxable base. For instance, instead of taking into consideration the volume of fuels and electricity, authorities will base taxes on the energy content of each product and its environmental performance. Also, the revised directive will call to tax more products, including Kerosene used in the aviation sector and heavy oil used in the maritime sector. In addition, this applicable tax applicable will progressively increase over a period of 10 years. Since the proposal for revision of the Directive is still under discussion, it’s still not possible to clearly define the real impact on companies taxation wise. However, companies may expect heavier taxation on fossil fuels in the future.
Renewable energy: Sourcing 40% of consumed energy
In order to leave fossil fuels behind, it is essential to invest in greener energy, such as renewable energy. Enter: changes to the Renewable Energy Directive. The plan for this revision is to invest more in wind power, solar power, hydropower, and biofuels.
One of the main goals of this revision is to establish a higher threshold for energy coming from renewable energy. The target is for 40% of the energy consumed in the EU to come from renewable sources by 2030.
In order to achieve this goal, each Member State must establish its own national thresholds. Therefore, we expect that the use of renewable energy sources, such as the use of renewable hydrogen in industry, will be incentivized at a national level to pursue such a target. In this sense, lately the European Commission, in the scope of Important Projects of Common European Interest (IPCEI), has already allowed the grant of state aid by several Member States, such as Portugal, France and Sweden, to invest in infrastructures to produce and store hydrogen.
What to do ahead of the energy directive revisions?
Of course, the EU is still working on the appropriate measures to ensure carbon neutrality and energy efficiency in its Member States. But we anticipate that some changes will roll out already this year – and in order to align with new requirements, businesses must act now. The first thing to check is whether you have a complete view of your businesses’ applicable requirements in terms of sustainability and environmental impact – as well as how they’re expected to evolve in the future.
They could mean investing in new machinery or other changes to your facilities, buildings, or processes. Specifically, companies are being called to invest more in renewable energy options – at the European level, that means hydrogen as the main alternative. Don’t let energy-related regulations – or any others for that matter – surprise you. Make sure you have an overview of what’s anticipated for your business and how you can be prepared.