25 August 2021
In light of the armed conflict in Ukraine, Europe had to act quickly to end its geostrategic dependence on Russian fossil fuels. The REPowerEU Action Plan initiative responds to this goal of an energy independent Europe by 2030. This article aims to highlight the emergence of the REPowerEU plan and to analyse some of the issues raised by its implementation.
The emergence of the REPowerEU plan
The impetus of the geostrategic context
The European Union (EU) has had no choice but to find a strategy to break away from Russian hegemony in energy imports. 100 billion a year is paid to Russia for the supply of fossil fuels. This obvious dependence has often been challenged, but it is the war in Ukraine that has given Europe the final incentive to take action.
As a result, the European Commission (EC) has had to adapt to cease being a source of funding for Russia, to move away from Russian fossil fuels by 2030 and to redefine an energy strategy closer to European values and the Green Deal. To achieve these objectives, the Commission will have to find alternatives to Russian imports, equivalent to 40% of gas, 27% of oil and 46% of coal imported into the EU.
In response to this new challenge, the REPowerEU Plan: Joint European Action for More Affordable, Secure and Sustainable Energy was presented in a Commission Communication of 8 March 2022.
Towards a European energy sovereignty
The different packages of European sanctions are a first step towards achieving this energy independence. The various economic sanctions include a ban on imports of coal and oil from Russia and a ban on new investments in the Russian energy sector.
The REPowerEU energy plan, developed in line with the “Fit for 55” package of proposals, is based on two pillars:
– Diversification of gas supply, through increased imports of liquefied natural gas (LNG) and pipeline imports from non-Russian suppliers, as well as increased levels of biomethane and hydrogen.
– Faster reduction of dependence on fossil fuels in homes, buildings and industry, and in electricity systems, by increasing the share of renewable energy.
To achieve these ambitious targets quickly, the Commission estimates that additional investments of €210 billion by 2027 are needed.
The questioning of the implementation of the REPowerEU plan
The first source of funding is the abandonment of Russian fossil fuel imports, which could save the EU up to 100 billion euros per year; but the plan will be financed mainly through national recovery plans. The financial envelope of the Recovery and Resilience Facility (RRF), the key instrument of the NextGenerationEU recovery plan, already makes €225bn available in loans.
The Commission proposes to complement the RRF with
– €20 billion in grants from the sale of EU Emissions Trading Scheme (EU ETS) allowances, which will be auctioned so as not to disrupt the market.
– €26.9 billion from the Cohesion Fund made available as voluntary transfers to the RIF.
These transfers allow Member States to take some of the funds they pay into the Cohesion Fund and the European Agricultural Fund for Rural Development and use them to finance REPowerEU. But this prospect is not well received by the European Parliament’s Committee on Regional Development (REGI), which is putting up a barrier. Its chairman Younous Omarjee said: “The question of transfers has already been negotiated and closed (…). The already existing possibility of transfers of 5% represents a sufficient contribution of cohesion policy to the objectives of REPowerEU, especially since the initial position of the European Parliament was to reject any transfer.”
In a Communication of 18 May 2022, the EC announced that it would extend the possibility of transfers from 5% to 12.5% under the REPowerEU plan, provided that the Member States had used the 5% transfer possibility already available. Despite the concerns of the REGI Committee, the European Parliament states in its resolution of 23 June 2022 (2021/2251(INI)) that it “(…) welcomes, in this context, the proposal to encourage the optimal use of loans available under the RRF”.
Sharing the same fears as the REGI Committee, the Regions of France sent a letter to their President of the Republic on 20 May explaining that REPowerEU could be the “Trojan horse” of a form of renationalisation of cohesion policy.
What will be the impact of this larger transfer for local and regional authorities, associations and other structures benefiting from European programme funds, which will see part of their funding withdrawn?
As the 27 defend different positions on energy, it is certain that the implementation of this energy plan, particularly the legislative aspect, will be the subject of long debates. The Commission seems confident, but there are already many critics about the ambitions and constraints of the REPowerEU plan: absence of a common action plan, fossil fuels still too present, risk for energy security due to the diversification of supply, insufficient cost estimates, project qualified as too ambitious.
It is also important to avoid hasty investment decisions that would only perpetuate European dependence. The bulk purchase of LNG from the United States, which clearly states that it wants to replace Russia as its main supplier, or the purchase of photovoltaic panels from China, which had prevailed in the last negotiations. Don’t these investments just shift the source of dependence?
On the energy market, Europe is obviously dependent on imports because the resources on European soil are insufficient, at least in the short term. Therefore, even if some of the criticisms are well-founded, the European Commission has no choice but to act quickly to counterbalance the end of the Russian-European energy partnership.