Why is RED such a big deal?
All of the files in the ‘Clean Energy for All Europeans Package’ will have a significant impact on one or many parts society. For business however, the RED will set rules which can essentially determine the future – and in some cases, success or survival – of certain industries: how much market space for biofuels? First or second generation? Do we continue to subsidise renewable energy, and to what extent? What energy sources are admissible for use in heating and cooling, or in transport?
The most striking illustration of why the RED is a big deal is probably the biofuels and renewable energy experiences which ensued from the previous (2009) version of the Directive, which resulted in heavy over-subsidisation of both types of energy with serious implications for energy producers, investors, and related sections of industry.
European Regulators are cautious of not repeating these mistakes. Against this backdrop here are our four main predictions for this year’s trilogues:
Expect concessions, not compromises
The experiences last year in the Council and particularly in the Parliament showed that the RED remains a very divisive file. A comparison between the positions of Council, Parliament and the Commission proposal illustrates that on some points compromises may be difficult to find – notably percentages of various energy sources in transport, the infamous article 25. The Parliament and Council both have clear red lines.
On the plus side, the two institutions have red lines on different issues: for the Parliament, taxation of renewable self-consumption is a no-go, for the Council, any one-size-fits-all requirement will be blocked. We can thus expect the final text to be more of a mix-and-match of the three positions, and less of a happy middle. To add another layer of complexity to the negotiations, the Governance, Renewables and Efficiency files are scheduled to be discussed in parallel – meaning there will also be scope for inter-file bargaining and more stubbornness in defending red lines.
One big space to watch will be the Parliament and how its position evolves. While Jose Blanco’s report was well backed in the ITRE committee and saw few substantial changes from the Plenary vote, Bas Eickhout’s reports in both TRAN and ENVI were controversial – with the TRAN committee rejecting the opinion altogether. The ENVI report, although adopted, faced major surprises during the committee adoption and left many MEPs unhappy. With ENVI having shared or exclusive competence for the Parliament’s position on a number of points, it will be interesting to see whether the Parliament’s delegation is able to hold its ground as a block. If not, the Parliament’s internal division will weaken its negotiating power and shift the balance in favour of the Council and Commission.
Commission to take the lead
The Commission already starts in a strong position in these trilogues. The Bulgarian Presidency has indicated that it intends to finalise the RED talks (as well as Governance and Efficiency) during its six-month term, which will require a great deal of legislative expertise and skilful negotiation juggling. This is no small feat for a country holding the rotating Presidency for the first time – particularly in light of the political salience of the energy files. It is thus widely expected that the Commission will hold the reigns on the RED file and will lead the work in suggesting compromises and brokering a deal.
Targets left till last
Finally, in classic trilogue fashion the most controversial points will likely be left till last, i.e. targets for renewable energy (both overall and in transport). While several details will need ironing out, particularly the level of target, we can expect at least a stronger push than in the initial Commission proposal. The Council has been uncharacteristically ambitious on these points, proposing a target for renewable energy in transport (14%) which is even higher than the Parliament’s (12% ) and voicing no major opposition to the Commission’s proposed collective target of 27% for renewable energy consumption in 2030 (the Parliament, on the other hand, proposes 35%) . On this point, however, it is likely that the institutions will have to settle on a half-way compromise rather than concessions – the issue of too politically visible for either side to be seen to be caving in.
Any predictions for these trilogues must however be taken with a pinch of salt. The Winter package has taught us to expect the unexpected – the Estonian Presidency’s speed in reaching a general approach on market design, for instance, took many people by surprise. The sheer size and diversity of the European Parliament’s delegation for the RED talks also makes it much harder to predict where the bargaining power will lie. But overall, there are clear indications that there will be an ambitious push to overhaul the EU’s energy mix and bring Europe closer to meeting its climate goals – a good omen for the mobility package which is also making its way through the co-decision maze.