The European Union reached an agreement early Wednesday morning (14 December) on a new law that makes energy projects eligible for financing under the EU’s €800 billion recovery fund, agreed two years ago in the wake of the COVID-19 pandemic.

The plan, called REPowerEU, “is going to enable us to finance the necessary investments” to diversify energy supplies and accelerate Europe’s exit from Russian oil and gas, said Zbyněk Stanjura, the Czech Finance Minister who represented the 27 EU member states in the negotiation.

The deal, which still needs to be formally endorsed by EU institutions, means EU member states “will be able to add a new REPowerEU chapter to their national recovery and resilience plans” submitted to Brussels in order to tap into the €800 billion fund, according to a statement from the EU Council.

The European Commission’s REPowerEU plan was presented on 18 May with the objective of eliminating all imports of Russian fossil fuels “well before 2030”. Meeting that objective will require a total investment of €300 billion by the end of the decade, the EU executive said at the time.

Europe is still overly reliant on Russia for its oil and gas, said Peter Liese, a German centre-right MEP who was part of the Parliament negotiating team. “We paid more than the Russian military budget since the war started. And we need to get rid of this,” he told journalists at a press conference on Wednesday.

Projects eligible for financing will include those aimed at accelerating the integration of renewable energies into the grid, boosting energy efficiency in buildings, as well as supporting electricity storage and zero-emission transport, such as railways.

Thirty per cent of the funding will be allocated to cross-border projects, said Siegfried Mureşan, a Romanian MEP who was among the Parliament’s co-negotiators.

More controversially, funding will also cover energy security objectives, including investments in liquefied natural gas (LNG) as well as “oil infrastructure and facilities” – although oil investments will be strictly limited to “immediate security of supply needs” and available only to the three EU countries that are currently heavily dependent on Russian oil, the statement said.

Other eligible projects include investments in the production of biomethane and fossil-free hydrogen, as well as those addressing energy poverty.

€20 billion fresh money from EU carbon market

There will also be fresh money to finance the REPowerEU objectives, with an additional €20 billion in grants available to EU countries and financed from the bloc’s carbon market, the Emissions Trading Scheme (ETS).

Of that sum, €8 billion (40%) will come from frontloading national allowances auctioned under the ETS while €12 billion (60%) will be taken from the carbon market’s innovation fund, according to a statement from the European Parliament.

To compensate for this, “MEPs obtained a commitment from the Council and Commission to replenish the Innovation Fund to above its current size, with €2 billion already agreed” and the remainder to be decided as part of the ongoing negotiations to reform the ETS, the Parliament said.

Funding under the REPowerEU programme will be available retroactively starting from 1 February 2022, while projects will need to be completed by 31 December 2026 in order to be eligible, said Eider Gardiazabal Rubial, a Spanish MEP who was among the Parliament’s three co-negotiators.

As Europe moves away from Russian fossil fuels, some investments need to be made to adapt oil infrastructure, the Spanish MEP admitted, saying those projects will be exempt from the Do No Significant Harm (DNSH) principle underpinning EU funds.

However, she said the exemption is “very clearly circumscribed” and will be granted only if there are “genuinely no feasible alternative” and for projects that are “strictly necessary to maintain energy security”.

Projects “must not undermine the EU’s 2030 and 2050 climate targets” she added, saying EU member states benefitting from the exemption will be requested to “take compensatory measures” to make sure Europe “does not take a step backwards but a step forward” in the fight against climate change.

Source: Euractiv.com