Climate law, taxonomy, PCIs on the agenda for second half of 2021

LONDON (ICIS)–Several key pieces of regulation that will affect gas infrastructure in the coming decades will continue their legislative path in the second half of 2021.

Here is a closer look to what is coming up.

CLIMATE LAW

New energy transition targets will become legally binding for the EU as a bloc after the European Parliament and Council approved them in June. These targets include:

– a reduction of CO2 emissions by at least 55% by 2030 compared to 1990, much steeper than a previous 2030 target mandating a 40% cut

– net zero emissions by 2050, negative emissions afterwards

A 2040 target will be proposed by the European Commission in 2023 or 2024.

An even more ambitious 2030 target of a 57% cut to CO2 could be implemented as the commission will propose legislation increasing so-called carbon sinks, such as forests.

The commission will issue recommendations to EU countries whose actions are inconsistent with the 2050 target. Member states will have six months to notify the commission on how they intend to implement the recommendations or else explain their reasoning for not doing so.

TAXONOMY

The commission is expected to announce two more delegated acts accompanying the EU rule book on sustainable investments. This rule book, known as taxonomy regulation, establishes criteria determining whether an economic activity is sustainable. This is meant to help drive investments in such activities.

A first delegated act announced in April and applicable from 1 January 2022 did not classify natural gas and nuclear projects as sustainable investments. The council and parliament have until 7 October to decide whether to veto or not the first delegated act or to ask for another two months of reflection. Any decision to object requires a majority of at least 72% of member states representing 65% of the EU population.

Another delegated act covering natural gas as a transitional activity will be adopted later this year. The commission will consider other specific legislation for gas activities which contribute to CO2 emissions cuts but cannot meet the taxonomy criteria.

KEY INFRASTRUCTURE PROJECTS

The EU funding eligibility criteria for energy projects of common interest (PCIs) will change to be more in line with the bloc’s climate neutrality goal.

PCIs are selected based on their ability to enhance EU member states’ diversity and security of supply and improve interconnections between them. A list is compiled every two years, with the next one due in autumn 2021 . This could include LNG terminals in Greece and Croatia and expansions of the south corridor (TAP and TANAP pipelines).

The commission aims to draw this list under the current selection criteria but with tighter sustainability criteria, and apply the new selection criteria to the 2023 list. The commission proposed to allocate €796m to energy PCIs in 2022.

The council wants to retroactively exclude gas projects from future PCI lists from 1 January 2021, but projects that convert gas transport or gas storage infrastructure to allow them work with a blend of hydrogen and gas or hydrogen and biomethane would be eligible for funding until 31 December 2029, provided some conditions are met.

These criteria would not apply to Cyprus and Malta-based gas projects currently under development or planning and which are on the previously agreed list of EU-funded projects. They would keep their eligibility for funding until completion so as to end the two islands’ isolation from the rest of the bloc.

The parliament’s energy committee is expected to adopt its position in mid-July, with the full parliament likely to vote on this position in September. The parliament and council will then start negotiations with a view to adopt the new criteria by the end of the year.

INTERCONNECTION CAPACITY

The European Network of Transmission System Operators for Gas will assess market demand for incremental capacity.

Network users will be invited to submit to the concerned transmission system operators non-binding demand indications for incremental capacity.

This is meant to help determine where in the EU there is a need for more interconnection capacity and plan the needed expansions.

The specific deadlines transmission system operators must follow are set here .