BRUSSELS: The Council agreed its position (general approach) on the REPowerEU proposal, a plan to phase out the Union’s dependency on Russian fossil fuel imports. It aims to strengthen the strategic autonomy of the Union by diversifying energy supplies and boosting the independence and security of the Union’s energy supply.
In practical terms, the proposal seeks to add a new REPowerEU chapter to EU member states’ national recovery and resilience plans (RRPs) under NextGenerationEU, in order to finance key investments and reforms which will help achieve the REPowerEU objectives.
“Today we achieved a major step forward in strengthening Europe’s autonomy from Russia’s fossil fuels. I want to thank my colleagues for agreeing to significant concessions in order to reach this Council compromise position. Given the geopolitical context since Russia started its military aggression against Ukraine, and given the latest attacks on energy infrastructure in Europe, I am sure it is necessary to push for a fast agreement on this proposal. And the Czech Presidency is fully determined to deliver on our promise to radically overhaul the Union’s energy sector and end our dependence on Russian fossil fuel imports.”
Zbyněk Stanjura, Minister of Finance of Czechia
In its position, the Council modifies the origin of the funds for REPowerEU as well as the allocation key of the additional € 20 billion proposed by the European Commission.
As regards the sources of financing of the additional € 20 billion, instead of auctioning from the EU Emissions Trading System (ETS) Market Stability Reserve, the Council opts for a combination of sources: the Innovation Fund (75%) and frontloading ETS allowances (25%). The Council’s aim is to not disrupt the functioning of the EU ETS system while ensuring a credible revenue stream.
The Council modifies the allocation key by introducing a formula which takes into account cohesion policy, member states’ dependence on fossil fuels and the increase of investment prices.
In its position, the Council limits the obligation for member states to submit the REPowerEU chapter only to cases where they wish to request RRP additional funding in the form of RRF loans from NGEU, non-repayable support from new revenue or newly transferred resources from shared management programmes and thus not upwards updates of maximum financial contribution.
In addition, the Council allows including in the dedicated REPowerEU chapter measures of the Council Implementing Decision that are no longer achievable in case of a downward June 2022 update of a maximum financial contribution.
Furthermore, the Council clarifies that member states shall be able to request loan support until 31 August 2023.
In its position, the Council also includes the possibility of voluntary transfers from the Brexit Adjustment Reserve (BAR), as well as from the Just Transition Fund (JTF).
Concerning possible derogations from the ‘do-no-significant-harm’ principle for investments improving the energy infrastructure and facilities to meet immediate security of supply needs for oil and gas, a careful balance was struck which aims to limit the additional administrative burden for member states. The Council does oblige member states to provide a justification to the Commission when they wish to derogate from the ‘do-no-significant-harm’ principle.
On 18 May 2022, the European Commission proposed the ‘REPowerEU’ package which modifies the Recovery and Resilience Facility (RRF) regulation and other legislative acts. It provides for targeted amendments to finance investments and reforms with the objective of diversifying energy supplies and reducing dependence on fossil fuels. This will be achieved by adding in the RRPs dedicated chapters including new reforms and investments and ensuring synergies and complementarity between measures funded under the RFF and actions supported via other national or Union funds.
In concrete terms, the legislative proposal submitted in conjunction with the REPowerEU plan aims at making the RRF the strategic framework for REPowerEU initiatives, maximising complementarity, consistency and coherence of policies and actions taken to accelerate the reduction of dependence on fossil fuels and mitigate its socio-economic costs and impacts during the transition.
The Commission proposal introduced:
1) Amendments of the RRF regulation:
An increase in the RRF financial envelope with € 20 billion in grants from the sale of EU Emission Trading System allowances. The allocation key related to distribution of these new funds among the 27 member states remains the same as in the original RRF regulation (reflecting impact of COVID-19 crisis on the economies of the member states);
An obligation for the member states modifying their RRPs to also submit a dedicated REPowerEU chapter;
A targeted exemption from the obligation to apply the do-no-significant-harm (DNSH) principle for reforms and investments improving energy infrastructure to meet immediate security of supply needs for oil and gas;
An obligation to communicate to the Commission within 30 days after the entry into force of the regulation, whether member states intend to request loan support to enable the possibility to reallocate loans, including increasing the maximum amount in exceptional circumstances;
A new assessment criterion catering for the specific objectives of REPowerEU;
Reporting obligations regarding the REPowerEU chapter
2) Amendment of decision (EU) 2015/1814 prolonging the current intake rate of allowances to the Market Stability Reserve until 2030 and providing a possibility to release and auction a portion of allowances held therein and allocate the generated revenue towards the RRF.
3) Amendment of directive 2003/87/EC establishing modalities for the auctioning of allowances released from the Market Stability Reserve and transfer of the generated € 20 billion revenues to the Recovery and Resilience Facility.
4) Amendment of regulation (EU) 2021/1060 providing a possibility for member states to transfer up to 7.5% of their national allocation to the RRF, in addition to the existing 5% transfer possibility, to support reforms and investments included in the REPowerEU chapter.
5) Amendment of regulation (EU) 2021/2115 providing a possibility for member states to deliver part of the European Agricultural Fund for Rural Development (EAFRD) through the RRF, to support reforms and investments included in the REPowerEU chapter.
Now that the Council has set its position on the proposal, it is ready to start trilogues with the European Parliament in order to agree as soon as possible on a final version of the text.