European Commission President Ursula Von der Leyen is preparing for the final sprint of her term of office. With the upcoming European Parliament elections in May 2024, several files of strategic importance for key industrial sectors are under finalisation, and Brussels revealed that around 70 acts related to climate issues still have to be delivered in the upcoming two years. Last December, within the framework of the Spanish semester presidency, Zabala Innovation’s Brussels office was invited to a lunch debate with Directorate-General for Climate Action (DG Clima) Director General Kurt Vandenberghe, just returned from the COP28 in Dubai.
The Green Deal legislative framework, designed since its inception as an “agenda for growth and innovation”, guided the last four years of European policies. Ambitions have been clearly set out under Von der Leyen’s mandate, especially with Fit for 55 package, including the revision of the EU Emissions Trading System, the Sustainable Finance Disclosures Regulation or the Circular Economy package.
Currently, the EU has “no option but to stay on the course of what the European Green Deal indicated”, Mr Vandenberghe says during the debate. Indeed, after the massive effort to design the legislation suited to face the environmental, social and economic challenge for the next decade, the Director General disclosed that, from 2024, the European Commission will have to focus more on an “implementing agenda”. Investments will have to follow proportionately, to the extent that the Director General hopes that the next Commission will be an “investment Commission”. This is a point strongly endorsed by the whole R&I sector in the EU, as it should be implemented through increased funding for backing up innovative projects, scale-up actions and an overall increased support to industry and research.
Spring 2024 thus appears as the last moment for the release of crucial and most eagerly awaited studies and reports in the framework of the European Green Deal, before in the end of the current Commission mandate. This final wave of publication is expected to have impactful repercussions over EU climate, environmental and energy policy, and the related allocation of EU funds within its R&I programmes like Horizon Europe (but also for the next Framework Programme), Innovation Fund, MSCA, EIC, LIFE and beyond.
Reports to come
As a means to provide an insight over the most important policy files still under work, DG Vandenberghe disclosed an overview of the most awaited reports.
First EU Climate Risk Assessment
In 2023, climate change has further exacerbated its negative effects, and unprecedented empirical data is a proof of this. Last year stands out as the hottest ever recorded, as global temperatures surged to alarming levels, underscoring the urgency of addressing the climate crisis. The Arctic and Antarctic regions are witnessing a dramatic and consequential reduction in ice caps, and ocean temperatures have experienced a disconcerting ascent, with ocean heat disrupting marine ecosystems and exacerbating the frequency and intensity of extreme weather events.
However, only 30% of climate change risks are covered by some form of insurance. In order to provide a more precise picture of the current and future climate change impacts and risks relating to the environment, economy and wider society in Europe, DG CLIMA and the European Environment Agency started to work on the first EU Climate Risk Assessment report in May 2022. Its publication, now expected for March 2024, will be the first overall work featuring complex climate risks such as cross-border, cascading and compound risks.
The importance of this report for the EU funding programmes sector will be seen in the more ambitious goals that EU projects will be able to set and achieve(also thanks to unified data and indicators it will provides), in the Horizon Europe Missions (Climate Change Adaptations, Oceans, Cities, Soil), but also Horizon Europe Clusters, the entire Life+ programme, or within Circular Bio-based Europe Joint Undertaking and Partnership for Research and Innovation in the Mediterranean Area funded projects. This cause-consequence causality in the policy reports and related funding programmes ambition is of the utmost importance, as the EU climate agenda is also its economic and financial agenda, a message well highlighted by Mr Vandenberghe.
EU strategy for Carbon capture and storage
In the presentation of theDirector General, industrial competitiveness and innovation were indicated as key for the EU economy. This is an extremely important point, also stressed in the latest State of the Union speech by President Von der Leyen, always supported by research and industry representatives all over Europe.
According to Vandenberghe, energy intensive industries have the potential to significantly increase their efforts, especially the steel and aluminium sectors, where the technologies for decarbonisation already exist, but need significant funding to be scaled up, both from the private and public side. It also needs to be added that increased funding alone is not sufficient, but it should go hand-in-hand with a rethinking on the main business cases for the companies involved in R&I efforts in the sectors that are fundamental and strategic for the EU economy.
Carbon capture and storage (CCS) can be applied on several energy intensive industrial installations, while carbon capture and utilisation (CCU) technologies allow reusing captured carbon, increasing its circularity and potentially reducing its emissions to the atmosphere. They are both recognised by the EC as technologies that play an important part of the EU decarbonisation effort, and increasingly regulated and target of public funding by the European institutions and national governments. Furthermore, CCUS can also be used to produce low-carbon hydrogen in the first stage of implementation of the EU Hydrogen Strategy, which is another relevant point at industrial level for EC funded projects in this field.
For this reason, Brussels will publish on 6th February 2024, the EU strategy for CCUS, as a communication provisionally titled Net-zero industrial carbon management strategy. This communication follows a public consultation opened last summer on this issue, after a first communication and another proposal prepared by the European Commission.
For the R&I efforts for industrial projects, this strategy will have a practical positive impact on the constantly increasing role of the Innovation Fund, for the small-, mid- and large-scale projects but also for the European Hydrogen Bank auction launched under this programme’s umbrella. CCUS will serve as relevant technology also for the industry-related topics within Horizon Europe, especially the ones within the partnerships Processes4Planet and Batt4EU, with Zabala Innovation involved and well positioned in both these fields.
Report on the EU Industrial Competitiveness
Mentioned for the first time during the State of the Union speech last autumn, the report on industrial competitiveness will look at the challenges that industry and companies are facing in the EU Single Market. The report will be authored by a panel led by Mario Draghi, former ECB President. Announcing this report, President Von der Leyen motivated the necessity of this study with the assumption that Europe will do “whatever it takes to keep its competitive edge” in the industry sector.
We now know that the report will be published in June or July 2024, and the European Commission already considers it will be very influential on the international scene, given the authors’ panel credibility and the relevance of the topics discussed.
In the European Commission view, EU industry cannot lose its competitive advantage on a successful environmental transition of its economy. However, as explained by Director General Vandenberghe, since the EU Green Deal publication in 2019, numerous factors at international level have changed: the USA moved from an anti-scientific presidential leadership to a democratic one, that strongly supports its national economy through the Inflation Reduction Act, which is “a good opportunity for EU companies as long as they continue focusing on making business also in Europe”.
China has become the production and investment leader on clean tech and has strong ambitions also in the climate change mitigation challenge, which could spark a positive competition at global level. African countries, gradually affirming their presence on the international scene, aspire now to be the “continent for the solutions” against climate change, and need substantial investments to diversify their economies. In all of these macro regions, regulations impact EU industries and have significant effects on the environment at local and global level.
As Zabala Innovation is currently coordinating the SET-IndEU project, supporting the SET Plan Implementation Working Group on Sustainable and Efficient Energy use in Industry, and regularly works with hundreds of industrial actors from all over Europe, we will analyse attentively this report to study its effects combined with the latest legislative acts such as the Net Zero Industry Act and the European Critical Raw Materials Act. Its publication will further provide valuable insights on several sectors that are essential for R&I scale-up in Europe.
Assessment over National Energy and Climate Plans
During the lunch with DG Vandenberghe, it was also anticipated that, on 18th December 2023, the European Commission would have published the updated assessment of the National Energy and Climate Plans (NECPs) for the period 2021-2030, together with individual assessments and country-specific recommendations for the 21 Member States that submitted their draft plans in time, which finally happened. The documents are available per country on the European Commission website.
Zabala Innovation, together with the European Energy Research Alliance, is promoting the ETIPs FORUM, a bottom-up initiative to foster communication among the 11 European Technology and Innovation Platforms (ETIPs) and assimilated associations. Under this umbrella, some ETIPs have launched a collaboration to define joint recommendations on the revised NECPs, which will provide valuable data and advice to the European Commission.
Conclusion
By combining the several points sown by the Director General as food for thought, and analysing the insights provided, it can be deducted that the European Green Deal has been really meant to give an innovation shock to the EU economy, as “its growth stands on innovation”.
Mr Vanderbenghe’s message was positively received and endorsed by all the R&I field, in particular in the admission that “the agenda for the next decade should really about de-materialisation, which is about doing more with less material inputs, while the one for this decade should be on decarbonisation, especially of the energy sector”. In his words, sectors like agriculture and food&drink have to do significant more efforts. Carbon removals will have to skyrocket, both through natural and industrial technologies, and circular economy to be implemented at large scale in every EU economic sector.
These three priorities, if implemented well, will have strong tangible impacts over European society, and will result in a competitive benchmark for EU R&I projects, demo sites and scale-up activities. As the European economy has thrived on competition, cooperation and solidarity, these keywords will remain the standards for implementing a large-scale environmental transition, that will be successful simply based on the terrifying comparison with the cost of non-action, that we are increasingly seeing in the daily news and in our lives. The imperative for cooperation and concerted action to curtail greenhouse gas emissions and foster sustainable practices has never been more pressing: for this, EU funding programmes have already allocated substantial funding, and European researchers, innovators and entrepreneurs will have the shared opportunity and responsibility to maximise the impact of these funds.
