On August 16, 2022—one year ago today—President Biden signed the Inflation Reduction Act (“IRA”), the most significant clean energy and climate law in U.S. history. As we described in a series last summer, the IRA created durable tax credits and other fiscal programs to revitalize domestic manufacturing and incentivize clean energy solutions in nearly every sector of the economy. The IRA’s one year anniversary is a key opportunity to take stock of what the law has propelled and what is expected around the corner.
As part of “A Green Deal Industrial Plan for the Net Zero Age” to respond to the US Inflation Reduction Act (IRA) (see our alert), the European Commission (the “Commission”) adopted on 9 March 2023 its Temporary Crisis and Transition Framework for State Aid measures to support the economy following the aggression against Ukraine by Russia (the “TCTF”). The text amends the Temporary Crisis Framework last amended on 28 October 2022 (see our blog).
These are the three most important things you need to know about the TCTF:
- To avoid that an investment would be located outside the European Economic Area (EEA), EU countries may support investments in the manufacturing of relevant equipment for the transition towards a net-zero economy, such as batteries, solar panels, wind turbines, heat pumps, carbon capture usage and storage (CCUS), as well as their key components and critical raw materials necessary for their production. They may even grant aid matching foreign subsidies to support those investments, provided that they are located in the poorer areas of the EU.
- EU countries’ possibilities to grant aid for accelerating the rollout of renewable energy are extended to any renewable technologies, including hydropower, and no longer require a bidding process to select the aided projects that are considered as less mature.
- The TCTF is not a subsidy program, and it is up to EU Member States to provide public funding.
The EU’s Green Deal Industrial Plan for the Net-Zero Age
The US Inflation Reduction Act (the IRA) has raised concerns in the EU about the potential impact on international investment – particularly the possibility that such investment will be pulled into the US, rather than directed to the EU and may encourage ‘green industries’ to relocate production to the US. The EU has been working on an appropriate response that would increase the attractiveness of the EU as a green investment destination without breaching either WTO rules or its own State Aid rules.…
On 30 May 2022, the European Union (“EU”) adopted the revised Regulation on guidelines for trans-European energy infrastructure (No. 2022/869) (the “TEN-E Regulation 2022”), which replaces the previous rules laid down in Regulation No. 347/2013 (the “TEN-E Regulation 2013”) that aimed to improve security of supply, market integration, competition and sustainability in the energy sector. The TEN-E Regulation 2022 seeks to better support the modernisation of Europe’s cross-border energy infrastructures and the EU Green Deal objectives.
The three most important things you need to know about the TEN-E Regulation 2022:
- Projects may qualify as Projects of Common Interest (“PCI”) and be selected on an EU list if (i) they fall within the identified priority corridors and (ii) help achieve EU’s overall energy and climate policy objectives in terms of security of supply and decarbonisation. The TEN-E Regulation 2022 updates its priority corridors to address the EU Green Deal objectives, while extending their scope to include projects connecting the EU with third countries, namely Projects of Mutual Interest (“PMI”).
- PCIs and PMIs on the EU list must be given priority status to ensure rapid administrative and judicial treatment.
- PCIs and PMIs will be eligible for EU financial assistance. Member States will also be able to grant financial support subject to State aid rules.
On July 14, the European Commission presented its legislative proposal for a Carbon Border Adjustment Mechanism (“CBAM”). This long-anticipated tool is intended to make importers pay for the greenhouse gas (“GHG”) emissions embedded in the covered goods that they market in the EU. A Covington webinar on the main elements of the proposal and related policy considerations is available here.
Continue Reading Will the EU CBAM Cover More Than What You Think? Complex Goods, System Boundaries, and Circumvention Under the Commission’s CBAM Proposal
The European Commission is currently discussing a draft of a proposal for a Carbon Border Adjustment Mechanism (“CBAM”) Regulation that it is expected to present on July 14, 2021. A CBAM was already announced in the European Commission’s Communication for a Green Deal and is intended to protect the EU’s domestic industry that is at risk of carbon leakage—to create a level playing field—and to serve as a policy tool to encourage third countries to reduce their greenhouse gas (“GHG”) emissions.
Continue Reading Twelve Things to Know About the Upcoming EU Carbon Border Adjustment Mechanism
Last week, the European Commission launched a public consultation on the possible adoption of a new EU Carbon Border Adjustment Mechanism (“CBAM”). This consultation is yet another of the initiatives that the Commission is taking to roll out its ambitious European Green Deal (for a recent overview webinar see here). Manufacturers in virtually all industrial sectors and their trade associations would be wise to assess the potential impact of the CBAM on the products they market in Europe and to consider participating in the public consultation and comment process.
Continue Reading The Green Deal at the Border: Public Consultation on the EU Carbon Border Adjustment Mechanism Launched