Pro-decarbonization energy policies, the new face of Europe

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Between global agreements and European and national energy policies, the path to decarbonization is set. There are important goals in sight to cope with climate change and put ourselves out of energy dependence on nonrenewable sources. However, a change of course and commitment is needed from everyone, including businesses.

The European Union’s ambitious decarbonization and climate change goals require strong choices to be made by states, at all levels. They involve institutions, public administrations, private citizens and, of course, businesses, which have a crucial role in achieving these goals.

The legislative package of European measures for “Fit for 55” was completed in October 2023 ahead of COP28, the United Nations climate conference held between November 30 and December 12 in Dubai, United Arab Emirates, and now the legislation, which aims to reduce our greenhouse gas emissions, is in place.

Union goals

As is well known, the European Union, with the “Fit for 55” package unveiled in July 2021, set itself ambitious climate targets for 2030, requiring itself to reduce net greenhouse gas emissions by at least 55 percent below 1990 levels by that date and then maintaining full neutrality by 2050 as its ultimate goal. The package was updated when the European Commission proposed an additional stimulus for renewable energy and energy efficiency in the REPowerEU plan. The latter, launched in May 2022 in response to the upheavals in the energy market after the outbreak of war in Ukraine, is a set of actions aimed at saving energy, pushing clean energy production, and diversifying the Union’s energy supply. Thanks to the REPowerEU plan, Europe has introduced a cap on the price of gas, succeeded in placing a global cap on the price of oil as well, managed to reduce dependence on Russian fossil fuels, decreased its own energy consumption by 20 percent, and doubled the deployment of renewable energy.

Overall, then, the final legislative package envisions achieving a 57 percent reduction in net greenhouse gas emissions within the next six years. It is certainly a central element of the European Green Deal, but-as a note from the European Commission explains-work continues, both to advance other initiatives and legislative proposals and to implement legislation in member countries. One such process, for example, concerns the implementation of the Energy Products Taxation Directive, which is also part of the “Fit for 55” package.

At the corporate level, moreover, the European Parliament and Council last Dec. 14, a note from the latter explained, reached a provisional agreement on the directive on “corporate sustainability due diligence.” According to this directive, large EU and non-EU companies, which are, however, active in the territory of the Union, will have to take measures to prevent, identify and mitigate any negative impact on human rights or the environment. In addition, they will have to ensure that their business model is compatible with the Paris Agreement’s goal of limiting global warming to 1.5°C.

Apply the directives

“The evolution that awaits us in the coming years involves achieving very specific results,” explained Dario Di Santo, director of Fire Italia, in introducing the webinar “White Focus 2023. Industry transition and decarbonization: applications and incentive tools” organized in late November by White Energy group.

“The Green New Deal must be the applied and the European Fif for 55 and REPowerEU packages must be translated into practice,” he says. “All with the obviously primary aim of succeeding in reducing greenhouse gas emissions, decarbonizing the economy by 2050 and, in this way, also mitigating as much as possible the effects of climate change, which-beyond extreme events that now cause more and more frequent damage-is also a problem of transformation of land resources, water availability and for crops, which can only affect a country like ours with a strong agrifood vocation.”

In all this, he recalls how the new directives are pushing both energy efficiency and the implementation of renewables in an important way. “We have important growth targets that, at the moment, have been indicated within the PNIEC-the National Integrated Energy and Climate Plan-which includes a strong push toward solar photovoltaics and, in part, wind as electric renewables, and a major role on thermal renewables for heat pumps.” Specifically, the assumption is to reach 100 GW by 2030 for photovoltaics, exceed 60 GW for wind, and achieve a contribution from thermal renewables of 7 Mtoe; as well as more development of biofuels, particularly biomethane.

Photovoltaics is spreading, even in our country, which says Gianluigi Mele, founder and managing director of White Energy group, “is leading the way toward achieving the goals linked to the Green Deal.” The most recent data from SolarPower Europe,” he explains, “speak of a steady growth in installed capacity: from 2.5 GW in 2022 to almost 5 GW in 2023, while by 2024 it is expected to reach 6.5 GW. These are important figures “that show how, within the process of electrification of the country on the photovoltaic side, something is moving, as we are approaching the expected trend to reach the targets.”

However, the PNIEC also mentions energy efficiency, on which it includes a target for final consumption in the range of 100 Mtoe and is, Di Santo explains, “the first of the two points in the national plan where there is no agreement with the EU targets-the directive, in fact, set the 2030 target at 92 Mtoe-the other is that of emissions in sectors not covered by Emission Trading. These are both targets that it is convenient to push, both because they are linked and because the one on emissions, if not met, carries an automatic year-by-year penalty.”

The obligations for enterprises

The targets to be achieved are undoubtedly ambitious, Fire’s director continues, “but beyond that there is, on the one hand, an understanding on the part of many companies of the importance of moving in this direction, and on the other hand, a whole series of tools and demands pushing in the same direction.”

There are already a number of initiatives in this regard, “such as the financial reporting directive that comes into force from 2024 and will produce its first effects, as obligations, from 2025 for companies that were already subject to the non-financial reporting directive. From the following year it will be extended to an initial number of companies that are not obligated today and, from the following year, also to SMEs (small and medium-sized enterprises).”

There is provision for the presence within the corporate balance sheet of a specific part dedicated to sustainability that clearly highlights everything related to it, i.e., both the environmental part and the social and governance part. “And it is clear,” Di Santo further emphasizes, “that it is closely related to the rational and efficient use of energy, and the use of renewable sources.”

Another tool is the taxonomy, which pushes banks, financial institutions and investment funds to take into account these aspects and the adoption by companies of scientific paths and technologies capable of contributing to decarbonization.

Not only that, new requirements for energy audits and energy management systems have also been placed in the Energy Efficiency Directive, “in particular, all companies with annual consumption above and 2,400 TOE will be required to have an ISO 50001-certified energy management system within the next four years.” Di Santo recalls that there will be many companies that will have to adapt to this requirement but that, beyond the obligation, it will also be a great opportunity for them, “companies that adopt a management system obtain great energy and economic benefits that pay back the investment needed to certify in a short time.” Finally, regarding the energy audit obligation-which today concerns large energy intensive companies-“it will be extended to all companies that reach 280 TOE of consumption, including SMEs.” Thus, it will no longer be a distinction based on the size of the company, but rather a matter of whether or not a certain threshold of consumption is exceeded. The distinction will then, of course, be made by the national transposition of the directive.

Ultimately, Di Santo concludes, “there is every basis for moving in the direction of a better and more rational use of energy.”

Alternative energy in Europe

According to SolarPower Europe’s “European market outlook for solar power 2023-2027” report, installations of solar power sources in Europe in 2023 have reached a record 56 GW, with an annual growth rate of at least 40 percent for the third year. The report, published in December, shows that Germany is back on top of the European ranking with 14.1 GW of solar installed during the year, followed by Spain, with 8.2 GW. Italy, on the other hand, ranks third with 4.8 GW, followed by Poland, which installed 4.6 GW, and the Netherlands with 4.1 GW.

These figures highlight how important solar has been in enabling European countries to cope with the energy crisis triggered by the Russian-Ukrainian war. The International Energy Agency (IEA) had in this regard published a recommendation that some 60 GW of solar power should be installed by 2023 to offset the phasing out of Russian gas. In fact it came in just below this threshold.

Precisely to prevent European consumers from again having to face the dangerous consequences of tensions in gas markets with uncontrolled price increases, the IEA at the end of 2022 had indicated five actions needed to be able to close the gap between gas supply and demand in the European Union. Actions that affect, in particular, industrial consumers; after all, it is they who are most at risk of gas supply cuts.

The five tools, which the Agency had outlined in its report “How to avoid gas shortages in the European Union in 2023” published in December 2022, are still highly relevant and are indicative of an energy policy that needs to change its face. Specifically, these actions, which affect the different countries of the Union differently, concern energy efficiency, in industry for 2 billion cubic meters (bcm – billion cubic meters) and in buildings for 6 bcm; the development of renewable energies, particularly solar photovoltaic and wind power for 8 bcm; consumption behavior change for 5 bcm; supplies, distinguishing between gas flaring-which consists of burning excess natural gas extracted along with oil without energy recovery-and methane capture for 4 bcm, and biomethane for 1 bcm; and finally heat electrification for a high 2 billion cubic meters (bcm).

What emerged from COP28

At the United Nations Climate Change Conference COP28, which took place in Dubai, United Arab Emirates, from Nov. 30 to Dec. 12, 2023, an agreement was reached to accelerate emissions reductions toward net zero by 2050. 

The participating countries made a multi-pronged commitment and set out some urgent actions: phasing out fossil fuels and a 43 percent reduction in global emissions, tripling renewable energy capacity and doubling energy efficiency; all by 2030.