Lobbyist and legislative flurry

The European Commission is preparing new energy and climate legislation – possibly running into thousands of pages – which it will propose in July.

Listen to a discussion on the new rules for the carbon market, the CO2 border tax as well as for renewables and energy efficiency.  What kind of changes will lobbyists manage to impose on the final laws over the coming months?

Guest: 

• Siobhan Hall, Brussels Correspondent, Montel.

Transcript

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Richard Sverrisson, Editor-in-Chief Europe, Montel: 0:28

Hello listeners and welcome to the Montel Weekly podcast. Bring Energy Matters in an informal setting. This week we return to Brussels to preview the flurry of new legislation being prepared by the European Commission already delayed to mid-July. The package will form the framework of the EU objective of cutting emissions by at least 55% from 1990 levels by 2030, and achieving climate neutrality by 2050. Helping us to make sense of the proposals is Siobhan Hall our Brussels correspondent. A warm welcome to you, Siobhan.

Siobhan Hall, Brussels Correspondent, Montel: 1:03

Thank you, Richard.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 1:04

Good to have you on board today, but also as a reporter, covering all the important, the all important Brussels beat for Montel News. How is life in Brussels these days?

Siobhan Hall, Brussels Correspondent, Montel: 1:12

We are moving into the final flurry of lobbying to try and steer the European Commission on the proposals that we are expecting. In the middle of July for the fit for 55 package, which is the name given to it. Because, like you said, it's all about trying to achieve this new target, this new stricter target of cutting emissions by at least 55% on 1990 levels by 2030. So it's busy.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 1:38

So there's a flurry of packages or proposals, but it's also, as you say a massive sort of lobbying endeavor. What, what does that entail?

Siobhan Hall, Brussels Correspondent, Montel: 1:46

So when we talk about lobbying, the, one of the main things that we see is. Position papers. So we see organizations coming out with what they would like to see in the proposals coming up, and they also have private meetings with the commission, and they will also be talking to members of the European Parliament because it is members of the European Parliament and officials from national governments that will ultimately. Make the decisions and what will be in the final proposals. So there's a two-prong approach. First, you would like the, as a, from a lobbyist perspective, you're trying to get the commission to propose something that is close to what you want in the first place. And then you want to lobby the MEPS to ensure that they will agree to what has been proposed. So something that I have noticed a lot in my many years of reporting in Brussels is that once the commission's proposal comes out. It is very rare that what the commission proposes is what is agreed. So it's very much a starting point. And that makes the next 18 months to two years very interesting because we will see. Organizations, if they haven't managed to get the European Commission to put it into the proposal, they'll be lobbying hard their national governments and their members of the European Parliament to make sure, or to try and make sure that what they want is in what gets put into binding legislation. So some interesting times ahead.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 3:07

Very interesting. But where does the main kind of lobbying activity occur? Before the proposals on the table or after, or is it bit a mixture of the two?

Siobhan Hall, Brussels Correspondent, Montel: 3:16

I would say it is continuous. Okay. So if you're a lobbyist and your goal is to get what you want into the proposal, then you start early and you don't stop until they take the final vote. Honestly, you'll see lobbying, continuing. Right up until the final votes in the Parliament and to confirm what is binding legislation so it never stops. It's continuous.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 3:38

I've, heard talk of a sort of revolving door at at the commission building with all the lobbyists coming continuously in and out. But, so it's surprising that they have their time to to work on these proposals in a way. But, so it appears really that the political machine hasn't really slowed down in during the pandemic then Chevon.

Siobhan Hall, Brussels Correspondent, Montel: 3:55

Oh, no. I think obviously everyone has had to adapt to working more online. In some respects. It gives some people more. Equal access in a way, because previously commission officials would be asked to travel to speak at various events, and now they're not traveling. And so that means they can be present in many online events, many more online events than they could fiscal events. But it does mean, so as someone who covers the Brussels feet. We all miss having chats around the table during a coffee break of an event. We miss the personal interactions and we look forward to those going back again. Absolutely. But in the meantime, yeah, the work doesn't stop. It just moves to a different platform, so

Richard Sverrisson, Editor-in-Chief Europe, Montel: 4:40

you got, you don't get that sort of personal touch with the relevant people during the press conferences and briefings, et cetera. Then.

Siobhan Hall, Brussels Correspondent, Montel: 4:46

Yeah.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 4:46

Yeah. That's a, the big loss, hopefully we can get back to that before too long. But Sivan, the commission delayed the fit for 55 package. What were the reasons behind that? Are they clear at all?

Siobhan Hall, Brussels Correspondent, Montel: 4:57

Yeah, so as you said at the beginning, it's a flurry of proposals. I think at the moment it's going to be 12 different proposals. That's a big amount of legislation to propose all at the same time. And when the commission comes with proposals, they have to go through various internal processes before they can be adopted by the commission as an official proposal. And in this case. Some, a couple of the proposals, so I think it was the renewable energy directive and the energy efficiency directive. They weren't going to be able to complete the internal processes in time to meet the original date, which was the 30th of June. So they had the option to either split it into two smaller packages. Or the delay two weeks and put, keep them as one big package. They do love a big package. I'll say that about the commission. They really do love to bring it all out on the same day. It doesn't make it easy for the people who have to cover it, but they do like to do it all at once.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 5:50

Exactly. I, that was the old winter package or the clean energy that, that was over a thousand pages, wasn't it?

Siobhan Hall, Brussels Correspondent, Montel: 5:55

Yeah. And this one I think will be, I think this one is bigger. Yes. So they just came from. Spending, three, three years changing the power markets and everything to do with that electricity to meet, to accommodate more renewables. And now they're coming again to change many aspects, many of which have only just been agreed to be changed anyway, you talk about a revolving door for the lobbyists and the commission. It can feel a bit like it's a revolving door for legislation. Just as you finish one part, then you have to start again. There are people here calling for improvements to the Clean Energy package, which. In many respects it's not been fully implemented yet. So they're calling for changes before the most recent changes have been implemented.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 6:39

So a bit like painting the further fourth bridge then, Siobhan

Siobhan Hall, Brussels Correspondent, Montel: 6:42

Exactly. That was the other thing I was thinking of.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 6:44

Exactly. Yes. And obviously makes the job of, us journalists, but also analyst. Et cetera, who have to then sift through these thousands of pages of legislative proposals, makes it quite a hard task, even though maybe they summarize'em in, in, in press releases. But I'd like to start off, Sean, because there, there seems, there's been a lot of talk of a green deal and the recovery fund. Are these two things the same thing or are they different?

Siobhan Hall, Brussels Correspondent, Montel: 7:06

So the European Green deal is the overarching framework. For the EU to meet its goal to have net zero emissions by 2050. So that's a policy goal. And then the recovery fund is driven by the need for the EU to rebuild its economy after the COVID-19 pandemic. And there is a link because. The money from the recovery fund has to be spent on a proportion of the money from the Recovery fund has to be spent on projects that will help the EU meet the European Green Deal objectives. So the idea is that we recover. But as we recover in a particular direction, which goes in the same direction as European Green deal. So there's gonna be more money for projects that will cut emissions for projects that promote renewables, that promote energy efficiency, those kind of projects. So that's the link between them.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 8:05

Okay. I mean that, it's good to clarify 'cause I don't think maybe a lot of listeners appreciate the difference or how they actually are connected. What kind of money are we talking? Are we talking several, we must be talking hundreds of billions of euros In the recovery fund.

Siobhan Hall, Brussels Correspondent, Montel: 8:16

Yes. Yes we are. So the plan is for the recovery fund to have. 672.5 billion euros available to help national governments spend on projects to help them recover, boost their economies after the pandemic. And within that, the European Commission wants the government to spend around 249 billion. So that's about 37%. On projects that will help the EU reach the European Green Deal objective to have net zero emissions by 2015.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 8:53

How does this work? How is the money allocated? Is it grants? Is it loans? Do some countries get, will get? Some countries get more than others or some technologies more? It's

Siobhan Hall, Brussels Correspondent, Montel: 9:02

going to be allocated via grants and loans, and it is gonna be linked to the country's national energy and climate plans and essentially. The national governments have to send in a request. The money saying what they want to spend it on. And the commission will review it all before allocating money. So that's how the commission's going to make sure that some of the money or enough of the money is allocated to green projects, those reports from the, or those requests from the national government. So coming at the moment, so we won't know and for a few weeks or months yet how the money will be allocated actually. But it's an interplay between. National governments request what they want and then the European Commission reviews it.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 9:48

Is there a process in places where we can test to see that the funds were allocated properly and correctly?

Siobhan Hall, Brussels Correspondent, Montel: 9:54

Yes. All EU money has to be audited and checked afterwards. That tends to happen quite a long time afterwards. But because the European green deal is such a big political priority for the European Commission, I know that I would expect the commission to be really broadcasting. The projects that are being supported in order to fulfill the European Green Deal objectives. So I would expect to see quite a lot of information about that coming out from both the commission and the national government.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 10:24

No, it's fascinating. We've already seen, as you mentioned, some of the reports already. Come in from national governments, Italy, Spain, for example and a quite a large focus on on, on green hydrogen, and other renewable projects. So it's, yeah, a lot of money floating around here potentially to create a boom in renewable energy. Maybe that's what the commission wants.

Siobhan Hall, Brussels Correspondent, Montel: 10:41

Absolutely. If you're going to have an economic recovery. Political message is invest in technologies that will get us to net zero emissions by 2050, but will also drive jobs and growth now.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 10:54

So build back better in a sense.

Siobhan Hall, Brussels Correspondent, Montel: 10:56

Yes.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 10:57

If we go into the, to the nitty gritty of the fit for 55 package, one of the key elements here and one of a vital importance, for many listeners who'd be watching out for what it means for. For the EU et s and what are the reforms there that are envisaged Siobhan?

Siobhan Hall, Brussels Correspondent, Montel: 11:12

Yeah, so the ETS reform is going to be very interesting because in order to meet the higher 55% overall emissions target, the ETS is going to have to cut more emissions and cut them faster than originally planned. And so there are various ways of doing that, and we don't know yet which combination of ways the commission will choose. But you can make the linear reduction factor higher, so you are cutting emissions at a faster rate. You could be making changes to the market stability reserve where you are putting more allowances in than were planned to reduce amount of allowances available in the market. You could have a one-off reduction in the allowances, which is a way to tackle, as we all know, the big surplus that has built up over the years. All of these different approaches have different sectors and people lobbying for and against them. So as we know, the ETFs is a very sensitive subject because it's not just energy companies, it's also industrial companies. And so there's always a very lively debate about the role of free allowances and who gets free allowances. We know the commission is looking at proposing a carbon border adjustment mechanism, and this is interesting because it's looking at creating a pool of virtual allowances that would be linked to the ETS. And so you would have potentially a new market for people trading carbon to trade in you There are potentially going to be options for trading in both markets, hedging across both markets, and it's gonna be very interesting also because the carbon border adjustment mechanism is bringing a carbon price to people outside the eu. So it's gonna be very interesting to see how they react. They react with carbon pricing systems of their own or whether they try and block or refuse to comply with the carbon border adjustment mechanism. So it is gonna be very interesting. It's a very politically sensitive area, but what's interesting is that they first came up with the idea of or France came up with the idea of a carbon border. Attacks more than 10 years ago, and it went nowhere, but suddenly people are thinking this is an idea that could fly. So there has been, it's not a new idea. But now people are confident enough to go through all the effort of actually proposing it. So that's interesting.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 13:50

Is there anything to do with the lack of I mean with the UK exit from the eu that there's more of a, or is that completely irrelevant here? I, as in the fact that, they're making progress with this carbon border tax.

Siobhan Hall, Brussels Correspondent, Montel: 14:02

No, the UK was always one of the biggest proponents of emission cuts and pro renewables and market-based systems in the eu. So I think it's more because we see other big economic blocks like China or Japan looking to commit to cutting emissions by 2050 and looking at ways that can be done. So the EU is not the only country. Looking to cut its emissions by 2050. That's part of the wider air international climate agreement.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 14:34

Absolutely. But it's not ver controversial, is it? There's, the WTO is not quite sure how to handle this in terms of global trade.

Siobhan Hall, Brussels Correspondent, Montel: 14:40

So until the commission make the proposal, it's really difficult to. Know how people will react and from our perspective is people interested in energy and carbon markets. Some of the debate is about whether it's gonna be fair for less developing countries, but it's for energy and electricity perspective. It's probably the nearer neighbors who are more, more relevant. It is controversial and it'll be interesting to follow, but until we know what's in the proposal. Yeah. And I heard someone say, if members of the WT O don't complain about it, it won't be doing its job. Okay. It has to come out and people have to complain about it and it'll work its way through. We don't know yet whether it'll fly or not, but it'll be interesting to follow its progress.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 15:26

Absolutely. As you said, as you mentioned earlier, Siobhan, saying the proposals that come out are very different from the ones that's actually passed and goes through the whole process so that would be interesting to see what they end up with. But there's another aspect here we've talked about on an earlier pod about carbon contracts for difference. That's part of the ETS reform as well, right?

Siobhan Hall, Brussels Correspondent, Montel: 15:44

As far as we know, or we suspect the commission is going to be looking at coming with a European approach to carbon contracts for difference. Carbon contracts for difference are also turning out to be controversial. Because there are some lobbyists who are concerned that a carbon contract for difference is going to help industrial companies reduce their carbon. Emissions more quickly, which would then undermine demand for allowances in the et TS market and therefore potentially push down on carbon prices in the et TS market. And the difficulty there is that it's the carbon prices in the et TS market that are supposed to be sending the economic signal to encourage everyone to reduce their emissions. There are concerns that the carbon contracts for difference whilst being potentially an effective way to get industrials to cut their emissions more quickly in their sector, it might have adverse impacts on other sectors that it would reduce the pressure on other sectors to cut their emissions. So that's an interesting debate. It would be interesting to see how that turns out.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 16:54

There's an added element also to, to the renewables directive and then the energy efficiency directive that, there's an argument there that you reduce demand for the key policy instrument, which is the ETS by lowering demand for carbon allowances.

Siobhan Hall, Brussels Correspondent, Montel: 17:07

Yeah. So this is not a new debate. This happens every time. There's a talk of reforming everything and yeah, it's the same principle. So what we see in the renewables directive and the energy efficiency directive. And the commission has already estimated that it would need to increase the targets in both areas in order to meet the overall 35% emissions reduction target. So for renewables, the forecast from the commission was that the renewables share target, we'd have to go up from the currents. At least 32% to 38 to 40%, so several percentage points higher and something similar in the energy efficiency directive. At the moment, it's 32.5%, the target for 2030, and the commission estimated it would have to go up to 36 or 37% by 2030, and obviously. Increasing your share of renewables and improving your energy efficiency is reducing your carbon emissions. So there is this interplay between the renewables targets, the energy efficiency targets, the ETS reforms. There's also an energy taxation directive, which could encourage people to switch to lower carbon. Fuels and energies. So there's a lot of different interactions going on. It's not always clear at the end. It's not an exact science. I think that's the best way to put it.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 18:31

Those are things the policy wonks have to work out and iron out, I think, and our job is to make sure that the listeners and readers are informed of the latest changes to these directives. What's coming with the renewables directive there, Siobhan, is that we've just had quite a few changes as you mentioned in recent years. What's new with the latest proposals or can we expect?

Siobhan Hall, Brussels Correspondent, Montel: 18:51

So when we look at what is going to be new in the renewables energy directive, apart from the targets having higher targets, the commission is also looking at ways to support corporate power purchase agreements. As a way to promote renewables. There will also have to be some changes to the guarantees of origin system because one of the ways of moving away from fossil fuels is very likely to increase the use of. Hydrogen, preferably green hydrogen. And so there's going to be issues there about how you certify green hydrogen and guarantees of origin are likely to be part of that. And there's also talk the introducing a some kind of credit trading system. For the renewable power used in electric vehicles, again, as a way to promote using more renewable power, particularly in, in transport. So there's quite a lot of new ideas coming out there.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 19:51

The date is the 14th of July, is it?

Siobhan Hall, Brussels Correspondent, Montel: 19:53

Yes.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 19:53

Yeah. Sounds it's gonna be quite a busy day for you, Siobhan.

Siobhan Hall, Brussels Correspondent, Montel: 19:55

It will be, yeah.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 19:57

And maybe the week or the weeks following that before. And then you will take a, be able to take a well-earned break.

Siobhan Hall, Brussels Correspondent, Montel: 20:03

Yes.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 20:04

Just to finish off today, Siobhan, let's talk about the taxonomy, the EU taxonomy and taxonomy. Even. This was quite controversial and in the end there was a bit of a fudge, or they kicked the final decision into the long grass regarding whether gas or a nuclear was green or sustainable energy. Isn't that right?

Siobhan Hall, Brussels Correspondent, Montel: 20:22

Yeah. So the taxonomy, which is a way for the European Commission to give. Potential investors an idea of what can be considered sustainable or not. The taxonomy turned out to be extraordinarily controversial, and there is a very big debate about whether gas and nuclear, like you say, could be considered sustainable for nuclear. There are some more reports being carried out and the commission hopes to have the information. More information from experts, more by the end of the summer. And then if it finds a way to say that NU Nuclear should be on the list, then that list would've come out later this year. So the issue with gas is that for some countries. It is sustainable, or it could be considered sustainable to move from using mainly coal to gas as an interim step before moving to an actual low carbon, proper low or zero carbon fuel. And so the commission is going to try and look for ways to see how that could be assessed, what criteria that could be met to make sure that could actually be considered sustainable. But. Here in Brussels, there is a very big anti Gass lobby who sees natural gas is locking us into a fossil fuel future. And so the commission is having to think very hard about how it can ensure that natural gas is used as a bridging technology or a transitional fuel and that it's not locking in. Fossil fuel, the use beyond 2030 and 2015.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 21:57

And I think that's also the feeling in Germany where the green party is very strong and should there be a green candidate, assuming the job of chancellor in, in the country following the election in September, then there could be quite a change of policy towards gas. So I think that's something that we'll also be watching closely. But Siobhan, thanks. Ever so much for joining the Montel Weekly podcast today and previewing what's this flurry of legislation that's coming our way. And I look forward to reading all your reports and stories on this incredible amount of legislation that's coming in July. So thanks again.

Siobhan Hall, Brussels Correspondent, Montel: 22:30

Thank you, Richard. I look forward to writing about it as well.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 22:34

Perfect. Perfect. So listeners, you can now follow the podcast on our own Twitter account, aply named the Montel Weekly podcast. Please direct message any suggestions. Questions or, let us know if you think you have a good idea for a guest on the show, you can also send us an email to podcast@montelnews.com. Lastly, remember to keep up to date with all that's happening in energy markets on Montel News. You can subscribe on Apple Podcasts and Spotify, or wherever you get your podcasts from. Thank you and goodbye.