REPowerEU – The European Parliament and the Council have assumed their standpoints

In May 2022, the Commission presented its proposal regarding REPowerEU. The purpose of the plan, which is based on the "Fit for 55" parcel , is to change Europe’s energy system by eliminating the EU’s dependency on Russian fossil fuels as well as to tackle the climate crisis. The European Parliament and the Council have now adopted their positions in order to incorporate the plan into the national recovery and resilience plans.

The proposed measures for the plan include, inter alia, collective procurement of gas, liquefied natural gas and hydrogen gas through the EU’s energy platform for those Member States which want to participate, faster permitting for renewable energy and increased production of biomethane. In a previous article, Vinge has explained the measures within the REPowerEU plan which the Commission proposed in the spring of this year.

The existing regulation governing the recovery and resilience facility (Recovery and Resilience Facility – the “RRF Regulation”) constitutes the core of the implementation of the REPowerEU plan since the Recovery and Resilience Facility will finance large parts of the plan. Accordingly, the Commission has presented proposals regarding amendments to the RRF Regulation which entail that the member states will include so-called “REPowerEU Chapters” in their recovery and resilience plans (“RRP”) within the scope of NextGenerationEU. Both the European Parliament and the Council have now adopted their respective positions regarding the amendments which the Commission has proposed to the RRF Regulation.

The Parliament’s position

On 10 November 2022, the European Parliament agreed that REPowerEU measures shall be included in the national recovery plans in order to support independence from Russian fossil fuels and expedite the green transformation. Primarily, the Parliament proposes the following amendments to the Commission’s proposals:

  • The Parliament takes the view that the contribution to the allocation for the RRF’s budget of an additional EUR 20 million should be taken from a previous auction of national emission rights within the scope of the EU’s emission trading system, instead of from the sale of emission rights from the EU’s reserve for market stability. In addition, one would also like the Commission to identify additional financing sources in order to complete the financing, for example by enabling flexibility in the use of underutilised budget sources.
  • The Parliament also encourages the member states to ensure that at least 35% of their expenses within the REPowerEU chapters are allocated to measures which have a cross-border dimension or effect, notwithstanding that such are performed by only one member state, provided that the Commission has not approved an exception for the member state under special circumstances.
  • The Parliament maintains that REPowerEU chapters should prioritise their investments in order to address energy poverty for vulnerable households as well as micro companies and small and medium sized enterprises, which was not part of the Commission’s original proposal.
  • In addition, the Parliament considers that the do no significant harm principle, which means that no measure which is included in a recovery and resilience plan shall entail considerable damage to one of the six environmental goals which have been determined in Article 17 of the Taxonomy Regulation, should be implemented on the REPowerEU chapters, unless certain terms are fulfilled and the measures are in force by not later than 31 December 2024. The Commission had proposed that the principle should not be applicable, which the Parliament thus does not support.

Link to the Parliament’s position.

The Council’s position

On 4 October 2022, the Council agreed on how to finance REPowerEU, and also the financial sources which shall be utilised for the additional EUR 20 billion in order to support the grant for the RRF’s budget, as has been proposed by the Commission.  The Council’s main amendment proposals are set out below:

  • The Council considers that the additional EUR 20 billion which is needed by way of contribution to the RRF’s budget shall be taken from a combination of sources comprising the Innovation Fund (75%) and an advance of emission rights (25%) – not from an auction of the EU’s market stability mechanism.
  • The Council clarifies that the member states will be able to request loan support up to and including 31 August 2023.
  • A s regards the do no significant harm principle, the Council also take the view that it shall be applied to the REPowerEU chapters. As regards the issue concerning exemptions which can be updated, the Council maintains that such exemptions shall aim to limit the administrative burden for the member states. However, the Council considers that the member states should submit reasoned responses to the Commission if they would like to deviate from the principle.

Link to the Council’s position.

Next steps

Now that both the European Parliament and the Council have adopted their positions, negotiations will be commenced between the Parliament, the Council and the Commission, within the so-called trilogy. The purpose is to reach an agreement as soon as possible.

The REPowerEU plan is extensive and has been met with both positive and negative reactions. Among other things, it is maintained that if the energy transition can be accelerated correctly, the plan can lead to economic benefits for the whole of Europe, make enterprises more competitive and decrease the emissions of greenhouse gases. However, certain concerns have also been expressed regarding the redistribution of sources in order to finance the REPowerEU plan, which may result in insufficient financing for other areas. The financing of the plan is of course a core issue, and it remains to be seen which financial sources will ultimately be used. The Parliament and the Council have adopted positions which differ, both inter se as well as in relation to the Commission’s original proposals.