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EU Update – June 2021

30/06/2021

Political compromise found on Climate Law proposal
Negotiators from the European Parliament, the Council of the EU and the European Commission ended the latest round of negotiations on the 21^st of April with a compromise on the European Climate Law proposal. Following the agreement, the European Parliament adopted its position on 24 June and the Council on 28 June. As regards decarbonisation targets, the agreed 2030 target will amount to at least a 55% greenhouse gas emissions reduction, a mediation between the more ambitious asks of the European Parliament and the more conservative stances of the European Commission and Member States. The institutions also agreed to propose an additional interim emission reduction target for 2040 which will be proposed within six months of the first global assessment of the Paris Agreement planned for 2023. Concerning the overall target of carbon neutrality by 2050, Member States secured provisions that it will have to be attained by the EU as a whole, and not by all EU countries individually. EU institutions also agreed to establish an independent scientific advisory body, the “European Scientific Advisory Board”, to advise policymakers on the alignment of EU policies with the EU’s climate neutrality goals. The Commission will continue to facilitate climate dialogues and will assist in drawing up roadmaps towards climate neutrality for all sectors that request it.

Updated European Industrial Strategy
On the 5^th of May, the European Commission released the updated version of the EU’s Industrial Strategy that was originally published in March 2020, the day before the WHO declared COVID-19 a pandemic. In order to address the new circumstances of the COVID-19 crisis as well as the green and digital transformations, the Commission has conducted additional analyses and has concluded the following:

1. The Strategy proposes a Single Market Emergency Instrument that would ensure the free movement of persons, goods and services in case of future crises. It would also help address critical product shortages, such as minerals that are essential for the energy transition.
2. An analysis on ‘Europe’s strategic dependencies and capacities’, carried out in highly dependent ecosystems, including energy intensive industries (e.g. raw and processed materials and chemicals) showed that 137 currently imported products are relevant to support the green and digital transformations. Several of these identified raw materials have already been assessed as critical in the context of the EU’s regular monitoring of critical raw materials. Out of these, 34 products are potentially more vulnerable given their low potential for further diversification and substitution with EU production.

The strategy also aims to reinforce Europe’s industrial and strategic autonomy, for example through the Action Plan on Critical Raw Materials presented in September 2020.

Formal approval of the EU’s Own Resources Decision
Based on the formal notification of all EU Member States to the Council, the European Commission is set to borrow approximately €80 billion on the capital markets in 2021 under the Recovery and Resilience Facility (RRF). These long-term bonds are set to finance part of the EU’s recovery from the COVID-19 pandemic under a financial envelope of €672.5 billion. The Own Resources Decision, which was adopted on 14 December 2020, formally entered into force on the 1^st of June 2021 after Member States confirmed it was in line with their constitutional requirements. The Commission is expected to begin the borrowing in June and make payments to Member States in July. For this each country will have to have submitted their National Recovery and Resilience Plans (NRRP). Until now, 22 governments have sent in their plans, which are currently being reviewed by the Commission based on the previously set criteria of at least 37% of spending targeting the Green Deal and 20% the digital transition of EU economies. Despite NRRPs claiming to reach these thresholds, several Members of the European Parliament’s Greens Group warn that a number of plans do not adhere to the targets set by the Commission and plan to invest money in projects with negative climate effects.