Plugged In: the energy news podcast
Coming from the heart of the Montel newsroom, Editor-in-Chief, Snjolfur Richard Sverrisson and his team of journalists explore the news headlines in the energy sector, bringing you in depth analysis of the industry’s leading stories each week.
Richard speaks to experts, analysts, regulators, and senior business leaders to the examine not just the what, but the why behind the decisions directing the markets and shaping the global transition to a green economy.
New episodes are available every Friday.
Plugged In: the energy news podcast
On the road to climate neutrality
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Ahead of the EC publication of its Climate Law next week, this week’s pod discusses the implications for Europe’s energy sector.
Listen to a discussion on carbon border taxes, sector coupling,
ETS reform and decarbonising gas.
Host:
- Richard Sverrisson, Editor-in-Chief Europe, Montel.
Guest:
- Catherine Banet, Associate Professor in Energy Law,
University of Oslo.
Hello listeners and welcome to the Montel Weekly Podcast. Bring New Energy Matters in an informal setting. My name is Richard Sverrisson. Today I am joined by Catherine Banet, professor of Energy Law at the University of Oslo. Welcome to you, Catherine.
Catherine Banet, Associate Professor in Energy Law, University of Oslo:Thank you. Thank you for the invitation.
Richard Sverrisson, Editor-in-Chief Europe, Montel:There's plenty of stuff going on the policy regulations side, Catherine, but I thought maybe we could start on the issue that's maybe most pressing at the moment and is on the top of everyone's minds on the tip of their tongues. If you like the green deal. That's going to be presented soon by the European Commission. Could you tell us a little bit about what's happening at the moment? What's coming next week, isn't there, is there some announcement imminent at the beginning of March?
Catherine Banet, Associate Professor in Energy Law, University of Oslo:Yes, actually there are announcements almost every day, every week, part of these EU Green Deal. So the communication that set the different milestones has been already published and now the UPN Commission is following his. It's a work program for 2020, going through the different proposals, would it be legislative proposal or communications? So that's EU Green Deal is really the strategy for the new European Commission. And the main driver will be the EU Climate Neutrality goal by 2050. So what is coming up next week? What everybody's expecting is a concrete. Proposal for the European climate law.
Richard Sverrisson, Editor-in-Chief Europe, Montel:Okay, so what does that involve?
Catherine Banet, Associate Professor in Energy Law, University of Oslo:That will be really the. Fundament for the other proposal. That's the act usually in European law we define a legislative act by directive or regulation, and this time they choose to have a European climate law. So already it's a signal that's something that will be on the top of everything and it will really enshrined in law the climate neutrality goal already backed by the European Council. In November, which is of climate neutrality goal by 2050.
Richard Sverrisson, Editor-in-Chief Europe, Montel:So the climate law, I'm trying to get my head run this, Catherine. So the climate law is a part of the green deal, but how does it differ from a directive or a regulation? So those who have not much of a legal mind as myself.
Catherine Banet, Associate Professor in Energy Law, University of Oslo:Exactly. That's a very good question actually, it'll not differ very much in terms of legal binds because it'll be biding. On the European Union primarily and possibly on the member states as well. And that will build on the architecture of the energy union governance system that was, is expected, but we know very little in terms of what will be the exact architecture. But in terms of content, what is expected is that to have. A legal act that will define the targets of achieving net zero emissions. For the EU countries as a whole with a reduction target of that will be defined further, but by 2050, and that will really be the overall goal that will guide all the other proposals. So all the other EU policies will need to contribute to this goal. And that will be sector. Wide, which is also a commitment that we find in the Paris Agreement. So there is here a cling to other real commitments under the Paris Agreement and the new push from the European Commission to have more ambitious. Climate policy,
Richard Sverrisson, Editor-in-Chief Europe, Montel:I mean the content here, you say it's gonna be concrete, there's gonna be concrete proposals. Are there any numbers that the listeners can expect here? I mean, is there a proposal to increase the reduction of carbon emissions from current, you know, 40 to 55% or increase the targets for renewable energy?
Catherine Banet, Associate Professor in Energy Law, University of Oslo:Yeah, so what has been announced is that first it will in tried in law, that general goal of climate neutrality by 2050. How it'll be done. That's a big question. What has been announced that? After that climate law, there will be a European climate packed that's for the end of the year, and a series of legislative initiatives mostly amending existing legislation. Notably an increase of the EU greenhouse gas emissions target for 2030. Today it's 40% and the UPN Commission has announced that by the summer this year, it will present an impact asset plan to increase the eu. Greenhouse gases, reduction targets for 2030 to at least 50% and towards 55% compared to 1990 levels. So that has been already announced.
Richard Sverrisson, Editor-in-Chief Europe, Montel:Okay. Thank you for correcting my mistake there. Anyway, Catherine, 'cause I think I said around 30%, but there's 40 of course. Yeah. Perfect.
Catherine Banet, Associate Professor in Energy Law, University of Oslo:And the. Second target that is on the table for a possible increase is the renewable energy target. So this one may also be increased in the future. There is no so concrete proposals yet, but it's it's on the list.
Richard Sverrisson, Editor-in-Chief Europe, Montel:That brings me to my next question, which is looking at the timeline so we can say, something's concrete's gonna come next week. What are the next stages in the legislative process?
Catherine Banet, Associate Professor in Energy Law, University of Oslo:Well, for this proposal, as any proposal, it has to be adopted by the UPN Commission, which has the monopoly on legislative initiative. And then it will be examined by the two parts of the co-decision process with the Parliament and then by the up n consult.
Richard Sverrisson, Editor-in-Chief Europe, Montel:Okay.
Catherine Banet, Associate Professor in Energy Law, University of Oslo:That it will be a back and forth process,
Richard Sverrisson, Editor-in-Chief Europe, Montel:but process you said, the proposals for tightening the climate targets and the renewable targets will come in the summer this year, or is it next year?
Catherine Banet, Associate Professor in Energy Law, University of Oslo:Could be mostly most probably next year.
Richard Sverrisson, Editor-in-Chief Europe, Montel:Next year. Okay. So I'm thinking about, you know, maybe those listeners who are looking for some hints as to whether it'll be tightened by how much, what could, you know? Yeah.
Catherine Banet, Associate Professor in Energy Law, University of Oslo:For the greenhouse emissions targets. That will be this year. I say by the summer, but for the renewable energy targets, most probably next year.
Richard Sverrisson, Editor-in-Chief Europe, Montel:So that's the initial timeline. So how do you think this will impact the energy sector in Europe and specifically here? We're based, we're in Oslo today and the Nordic companies and the sector.
Catherine Banet, Associate Professor in Energy Law, University of Oslo:As any EU policy, it'll have. Huge impact on the Nordics because we are part of the same internal market and we are neighbors. So it will impact the regulatory framework, but as well business models in terms of price signals. So, big question is, of course, the increase of the CO2 price and what the UPN Commission will propose on that. That's that's another question, but it's also on the table and alignment of targets We see already that Norway has aligned its climate policy on the European N one, concluding bilateral agreements or the non ETS sectors with the climate cure 2030 as well. Document subject to public consultation. And it is part of the ETS. In terms of regional cooperation, it'll be important to follow up for the development of the infrastructures, and not least for financing the sustainable finance framework, which has also been revised and will be further revised. So there are many aspects of business in the Nordics that will be impacted.
Richard Sverrisson, Editor-in-Chief Europe, Montel:If I could just return to the ETS Catherine, in the past when we've had, you know, a key legislative process such as back loading, the MSR, the introduction of the market stability, reserve carbon prices were very much driven by noises coming from parliamentarians meps, saying something on Twitter, do you think that is likely to repeat itself? That in the toing and froing between the three. Key elements in the legislative package, if you like, or the way that policies formed. Do you think there will be kind of noises coming from there that could indicate one way or in the other how tight the ETS market could become?
Catherine Banet, Associate Professor in Energy Law, University of Oslo:I think so as well. That we can expect a very tough battle. We already see that. On the discussion of the EU budget, some states some member states have indicated that they will oppose some proposals or they are very ent to, to any tightening of the targets and pollen reserved as well from this UPN council conclusions related to the climate neutrality goals. So we may expect very tough discussions on that concerning the concrete proposal of the extension of the E-U-E-T-S. For example, to shipping. There are already tough discussions at the European Parliament. So we may expect more to that respect.
Richard Sverrisson, Editor-in-Chief Europe, Montel:And in terms of sector coupling,
Catherine Banet, Associate Professor in Energy Law, University of Oslo:yes. Sector coupling is the other big buzz word at the moment. In in brus. And we know that the UPN commission is working on the strategy. So it's not called sector cobbling, but s Smart. Sector integration.
Richard Sverrisson, Editor-in-Chief Europe, Montel:Okay. Of course, yeah.
Catherine Banet, Associate Professor in Energy Law, University of Oslo:Everything is smart today.
Richard Sverrisson, Editor-in-Chief Europe, Montel:Yeah. Yeah.
Catherine Banet, Associate Professor in Energy Law, University of Oslo:So this is in in the making and it'll come probably by end of this year or beginning of next year. But it is crucial because so many things are going on between the different sectors, the different energy system sectors that you really need to connect the dots. I think that the clean energy package was very much an electricity one. And we need to integrate what is going on in the gas sectors, but as well heating and cooling sector, which has not been addressed properly. And to put all these different sectors under some level playing field Now that you can produce gas from power and you can't have different types of decarbonized gases that will contribute to. Decarbonization of the energy system, but as well to other sectors. So it's both sector coupling and sector integration.
Richard Sverrisson, Editor-in-Chief Europe, Montel:Absolutely. And of course with the transport section, I mean you mentioned shipping, but of course road transport, that's a huge area of potential opportunity for. For carbon reductions, isn't it? But how do you expect the green deal to be received by sort of either by member states? I know there's always, there's always a bit of a gap between how certainly these elements are taken on board or by industry or by the energy sector itself?
Catherine Banet, Associate Professor in Energy Law, University of Oslo:It's funny you ask because on the two days ago, a US colleague asked me the same.
Richard Sverrisson, Editor-in-Chief Europe, Montel:Okay. Really?
Catherine Banet, Associate Professor in Energy Law, University of Oslo:Do you think really the other member states will well, the member states will, like and follow the proposal. Part of the proposals have been proposed by some member states already. So if you look at what has been proposed on carbon tax adjustment, it builds on proposals from France and Germany. When it comes to other member states, they may be more if we look at Eastern Europe, because it'll be tougher for them. Of course, and our competitiveness issues. Others look at the proposal as a big opportunity. So they will and Europe will take the lead on some proposals and as well, some battles, trade battles against competitor abroad. So that will be received more positively besides member states, the private sector. I think see a lot of opportunities as well.
Richard Sverrisson, Editor-in-Chief Europe, Montel:I mean, a key element here of maintaining competitiveness and a key element for industry is potentially this issue of carbon border taxes. So do you expect, or how likely is it, do you think that a part of the green deal will be the introduction of a carbon border tax to maintain the competitiveness of Europe's industry
Catherine Banet, Associate Professor in Energy Law, University of Oslo:a carbon. Border attacks on imports from countries that have less strengthened. Climate policy has been already announced by the commissioner designate so Ursula from the Lion in her political guidelines. So it is very probable that. That will come but it'll be very difficult. It won't be Z because it trigger global trade rules. So you, we are basically talking about a carbon border levy. And this is something which is very difficult to justify. Under the rules of the World Trade Organization, WTO, you need to comply with a lot of principles regarding non-discrimination, market access, furnace differential treatment that will be triggered by, for example, a products carbon print regulation under that carbon border attacks.
Richard Sverrisson, Editor-in-Chief Europe, Montel:Absolutely. So the devil really is in the detail here, isn't it? And I think that this could take years and years to iron out or come to a, to an acceptable. Legal framework for both the European and its trading partners.
Catherine Banet, Associate Professor in Energy Law, University of Oslo:Exactly. That will be a difficult battle. That will be a legal as well exercise. So good stuff for lawyers. But it is important to include that in the discussion of the EU Green deal, which is as well a growth strategy to protect the competitiveness of. The companies of the industries and therefore it is part of the package.'cause if you increase the targets and at the same time you don't protect the European industry, they may leave Europe. So that's the carbon leakage risk and they made it to outcompete them compared to international competition
Richard Sverrisson, Editor-in-Chief Europe, Montel:You mentioned. Gas, I mean, the decarbonization of the gas sector is also gonna be crucial for Europe to meet. Its 2030 and its 2050 targets. How do you see this progressing
Catherine Banet, Associate Professor in Energy Law, University of Oslo:in a way? It's funny the way gas has reentered the discussion area. Lately. But it is important because it's part of the energy market. And I said clean energy markets was very much on electricity, but we see that through gas we can as well decarbonize sectors. Quickly more quickly maybe than having a full electrification at once. So it'll play a role in the short term as well. And here leads very quickly to a discussion of the different types of gases that can be used, decarbonize natural gas through, for example, carbon capture with permanent storage, but as well the production of low carbon gases. Including hydrogen.
Richard Sverrisson, Editor-in-Chief Europe, Montel:I mean, hydrogen's a bit of a buzz word at the moment. And it's you know, some are talking about a speculative bubble in term for in the equity markets concerning the companies that you know, hydrogen companies. What's the regulatory framework here for hydrogen?
Catherine Banet, Associate Professor in Energy Law, University of Oslo:First, we have been talking about hydrogen for a while. I really think so. 10, 15 years ago we were already talking about the hydrogen society. But now, yeah, with the new thinking and new technologies, it's again possible to think about deploying really hydrogen, a larger scale. Because what is interesting with hydrogen is that can really increase. Its share in the decarbonization of the energy mix because it's very flexible, it's diverse, it's an energy carrier, it's a feedstock, it's a fuel, and it can make the bridge between the different energy carriers and sectors. And it is really at the crossroad of several technologies. That are relevant for the energy transition. It can also facilitate the integration of renewable renewables to a larger scale and to brain flexibility in the system in terms of grid balancing and seasonal storage. The other advantage that we have in Europe, a huge gas infrastructure. So that we can use that network for hydrogen transport with with through the repurposing of infrastructures. So you don't necessarily need to build new infrastructure, which is always controversial in Europe in terms of legal framework. That is something that the PN commission is working on because. Clearly the gas directive which is still from 2009, was not thought elaborated with hydrogen in mine. So those rules may apply to hydrogen, but there will be a need for adaptation also to include a higher share of hydrogen to just to incentivize hydrogen integration into the system.
Richard Sverrisson, Editor-in-Chief Europe, Montel:'cause of course, as. You know, many countries have announced a coal exit. You have an influx of very, very cheap gas coming into Europe. You know, gas has become in focus as a way to sort of decarbonize. It's certainly cleaner than coal, but in the long term question marks around it's permanence, especi, especially if you're being net zero carbon by 2050. But you does the regulatory, does the Green deal sort of say much about this, or do you expect it to, to contain elements?
Catherine Banet, Associate Professor in Energy Law, University of Oslo:Not yet, but it will also, in terms of definition of what is low carbon gas. And what will be acceptable. In terms of emission reduction and as well in terms of investment. And that's the discussion we had just now around the new project Finance through the project of common interest under the fourth list. There was a lot of noise about the gas project that we supported through that list and we know that there will be a tightening of the rules. Regarding sustainability in terms of emissions for those cases, but as well in terms of financing, it's already in the making for the project.
Richard Sverrisson, Editor-in-Chief Europe, Montel:So in, in a sense, the target of a lot of policy of the decarbonization been the coal sector. Now it's almost the natural gas sector with hydrogen potentially being, being the solution here.
Catherine Banet, Associate Professor in Energy Law, University of Oslo:Yes, exactly.
Richard Sverrisson, Editor-in-Chief Europe, Montel:And, and that's something that the green deal. Would address.
Catherine Banet, Associate Professor in Energy Law, University of Oslo:And the financing framework is also key here. You need to know where you put your money in. So both the sustainable finance framework. But as well the revision of all stated guidelines, for example, that will be key to make the framework consistent.
Richard Sverrisson, Editor-in-Chief Europe, Montel:Do you think they'll be loosened then state aid guidelines or tightened or made more specific?
Catherine Banet, Associate Professor in Energy Law, University of Oslo:That is a big question. Would it be tighter? Would it be broader living, more discretion to the member state? Or will they be even more descriptive than they are? Today because they're very detailed
Richard Sverrisson, Editor-in-Chief Europe, Montel:or were the hydrogen producers moved to the uk.
Catherine Banet, Associate Professor in Energy Law, University of Oslo:Oh, let's see, let's see. We don't know yet.
Richard Sverrisson, Editor-in-Chief Europe, Montel:We dunno yet. We dunno what the frame was gonna look like. Still negotiating. Absolutely. Catherine, thank you very much for enlightening us on what to expect from the green deal and beyond. I hope we can continue this discussion when we have more clarity and more details emerge. But thank you for joining the podcast this week.
Catherine Banet, Associate Professor in Energy Law, University of Oslo:Thank you very much.
Richard Sverrisson, Editor-in-Chief Europe, Montel:Well listeners, that's all for us. Remember to keep up to date with all our stories on Montel News and follow us on Twitter, LinkedIn, and subscribe on Apple Podcasts and Spotify. Goodbye.