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Last week in Brussels

The Commission has unveiled the Fit for 55 package. It is a seventeen-proposal package. Something that could go down in history.

In general, at the European level, the drastic conversion of refining, the ban on internal combustion cars in 2035, the ETS extended to maritime transport, the combustion of fossil fuels for heating buildings and road transport, are certainly among the most sensitive points. A "long and bitter" debate is expected. 

Timmermans stressed the key role of the Czech Republic in the implementation of the package - the Czech presidency of the Council is scheduled for the second half of 2022, after the French.

On ETS, the Commission also proposed to phase out free emission allowances for the aviation sector, which is already covered by Eu ETS, and move to full auctioning of allowances by 2027 to create a stronger price signal to drive emissions reductions.

On energy taxation (ETD), the Commission reported that adjusting minimum taxation levels to the carbon content of energy carriers ... will make cleaner fuels financially more attractive and further incentivize the shift to renewable energy. The Commission added that some sectors, such as aviation and maritime transport, are currently completely exempt from energy taxation in the EU. These anomalies give the wrong incentive and should be rethought". The Commission also proposed to remove exemptions granted by EU member states.

A key part of the package is the proposal for a "Carbon Border Adjustment Mechanism" (Cbam), but the final text will almost certainly change depending on diplomatic contacts in preparation for COP26. For now, the proposal is that steel, aluminum, cement, electricity, iron and fertilizers imported from non-EU countries pay a price for the higher CO2 emissions incorporated in the production of the exported product, if these are higher than those for the same production process in Europe. The price of the Cbam certificate, set by the European Commission, will be equal to the average price of CO2 calculated on previous auctions of the Ets mechanism. After a transitional phase, Cbam is expected to have full implementation in 2026.

"Global cooperation and European ambition can and will go hand in hand. We are fully open to global cooperation and that is why we have introduced a transition period in the introduction of the Cbam," said Economy Commissioner Paolo Gentiloni.

Within the revision of the RED 2 directive, in addition to increasing the share of renewables in 2030 from 32% to 40%, several targets are envisaged: for the use of renewables in the consumption of buildings (49% to 2030), industry (+1.1% per year), heating and cooling (+1.1% per year), district heating (+2.1% per year) and transport (13% reduction in carbon intensity to 2030). The proposal also introduces penetration targets for advanced biofuels and biogas in the transport sector. States bordering the same sea basin should also develop a joint plan for offshore renewable production.

The European Commission also adopted the New Forestry Strategy 2030, an initiative under the Green Deal that builds on the Biodiversity Strategy 2030.

Impact on hydrogen and other hydrogen developments

The Commission’s announcements will have several ramifications on hydrogen developments throughout the continent. In European Commission’s Fit for 55 Package emerges clear the intention to keep the hydrogen leadership.

“The lowest minimum rate of €0.15/GJ applies to electricity - regardless of its use -, advanced sustainable biofuels and biogas, and renewable fuels of non-biological origin such as renewable hydrogen. Low-carbon hydrogen and related fuels will also benefit from that same rate for a transitional period of 10 years,” reads the Commission’s note on the ETD revision.

For what concerns the EU emissions trading scheme (ETS), the Commission proposed to include the production of hydrogen with electrolyzers under the EU ETS, making renewable and low-carbon facilities eligible for free allowances.

The ones above are just to examples. There will be several instruments to trigger hydrogen developments in the EU.

Not strangely, Europe is the continent contributing the most to global hydrogen developments, reads the report “Hydrogen Insights Updates” from the Hydrogen Council in collaboration with McKinsey & Company. “Globally, 131 large-scale projects have been announced since February 2021, taking the total to 359 projects. The total investment into projects and along the whole value chain amounts to an estimated $500 billion through 2030.”

Summing up developments in EUROPE, we can outline:

ArcelorMittal said that its Sestao plant in Spain would become the world’s first full-scale zero carbon-emissions steel plant.

Portugal’s Energías de Portugal (EDP) unveiled its plans to reconvert power plants in Andalusia, also to develop hydrogen projects.

EDP, technology provider TechnipFMC, and University of South-Eastern Norway are among the subjects that joined forces to develop a feasibility study for a new offshore system for green hydrogen production from offshore wind power.

Portugal and Norway are increasing energy ties.

Norway’s consultancy DNV will conduct a study to define environmental, safety, and operational risks for the world's first offshore hydrogen production facilities.

Remaining in Norway, Shell, Aker Clean Hydrogen, and Bergen-based CapeOmega have signed a Memorandum of Understanding to develop the Aukra Hydrogen Hub to a large-scale production facility for hydrogen using natural gas from the local gas processing plant at Nyhamna.

Finland’s technology group Wärtsilä has begun testing its thermal balancing engines using pure hydrogen.

Helsinki’s energy company Keravan Energia and technology company Q Power are starting a Power-to-Methane pilot plant eying the first full-scale methanation plant in Finland.

Germany’s Siemens began construction works for a hydrogen generation plant in northeast Bavaria with a capacity of 8.75 MW.

Other developments OUTSIDE EUROPE:

US’ Hyzon Motors has signed a MoU with TotalEnergies to increase hydrogen cooperation, with a focus on hydrogen refueling and vehicle supply solutions for long-haul transport to customers across Europe.

New Zealand and Singapore signed an Arrangement of Cooperation on low-carbon hydrogen on Thursday.

Developments also in Australia. InterContinental Energy, CWP Global and Mining Green Energy have launched the Western Green Energy Hub (WGEH), with the aim to reach 50 GW of hybrid wind and solar power to produce 3.5 million tons of green hydrogen or 20 million tons of green ammonia each year for local consumption and exports.

Next week(s) in Brussels

Commission President Ursula von der Leyen receives Bill Gates today, meets Austrian Chancellor Sebastian Kurz in Salzburg on Sunday.

Gates will also meet today with Economy Commissioner Paolo Gentiloni and Vice President Frans Timmermans.

Timmermans will be Thursday and Friday at the G20 Climate and Energy Ministerial in Naples. This will be the most important event of the week.

EU environment ministers are scheduled to meet informally tomorrow and the day after, with an exchange with Timmermans on the "Fit for 55" package, COP26 and biodiversity. The meeting could come in handy ahead of the G20 in Naples.

The High Representative for Foreign Affairs Josep Borrell chairs the meeting to support the Belgrade-Pristina dialogue. Several meetings of the European executive on the Western Balkans.

Closing the week was the meeting of European Affairs Ministers on the rule of law.

Next week, economy and finance ministers will exchange views on the implementation of the Recovery and Resilience Facility and adopt the second package of Council implementing decisions on member state plans.

The European Parliament will be on vacation until August 22.

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