Brussels – Almost everyone likes the objective, but the measures are far less popular. The new Action Plan for Electrification presented today (17 July) by the European Commission, alongside the review of the Emissions Trading Scheme (ETS), garners widespread consensus on the need to accelerate the replacement of fossil fuels with electricity, but it has sparked a row over the rules governing the carbon market and the balance between climate ambition and industrial competitiveness.
Is the idea of the continent going electric well received?
The European Environmental Bureau (EEB) welcomes the plan, which aims to introduce a binding electrification target in the forthcoming Energy Union package, reduce the price gap between electricity and gas, and promote technologies such as heat pumps, electric vehicles, and batteries. According to Davide Sabbadin, the EEB’s climate and energy manager, “the Commission is right to recognise that electrification requires much more than simply installing new heat pumps.” The association welcomes the launch of the Better Homes Partnership, the integrated approach combining energy efficiency, renewables, and storage, and “zero-upfront-cost models to make clean heating accessible to more households.” However, one criticism remains: Brussels “has missed the opportunity to steer Member States towards heat pumps using natural refrigerants,” which are already available and less vulnerable to future restrictions on PFAS.
Along the same lines, the Italian think tank ECCO. “The Plan provides an effective framework for promoting electrification, by far the most cost-effective route to decarbonisation,” says researcher Francesca Andreolli, while calling for the new target to be made legally binding as soon as possible and coordinated with the targets for renewables and energy efficiency.
BusinessEurope is also backing the initiative, albeit with some reservations. “Electrification will be essential to achieving climate neutrality, but it is not the only path to decarbonisation,” notes Director-General Markus Beyrer. The attempt to reduce electricity costs and grid charges is welcomed, particularly for energy-intensive industries, while the idea of linking grid tariffs to consumption flexibility raises concerns; according to the association, this measure risks penalising businesses with stable demand. BusinessEurope also believes it is essential to preserve the role of low-emission gases in sectors that are difficult to electrify.
According to the think tank Strategic Perspectives, the plan is, above all, a geopolitical response. “The EU cannot control global gas and oil markets, but it can reduce its exposure,” says Neil Makaroff. The target of 46 per cent electrification by 2040 would enable a two-thirds reduction in gas demand and a halving of oil demand. Now, he adds, it needs to be made binding to send “a clear message to investors, businesses, and citizens: Europe is choosing electricity over gas and oil.”
ETS: the controversial issue
Reactions to the revision of the ETS have been far more controversial.
Transport & Environment considers the inclusion, for the first time, of some international flights in the European carbon market, the inclusion of private jets and the support for clean fuels in maritime transport to be positive developments. But the compromise is deemed insufficient. “For the first time, international flights will be regulated by the EU, but the longest and most polluting ones will remain exempt,” notes Diane Vitry, director of the aviation section. “This must be just a starting point.” Kädi Ristkok, director of the Energy and Climate section, is even more forthright: “Europe has a problem of energy dependence, not with the ETS.” Weakening the system, she argues, risks “making it almost impossible to meet the 2040 climate target.”
BusinessEurope takes the opposite view, stating that “the Commission has recognised the urgent need to reform the ETS” in order to adapt it to new market conditions without compromising industrial competitiveness. However, doubts remain regarding the new conditions for free allowances and the role of international credits.
ECCO, on the other hand, sees “a balance between the effectiveness of the instrument and the needs of the industries that are most difficult to decarbonise,” explains Davide Panzeri. The slowdown in the linear reduction factor after 2035 is deemed consistent, but could lead to “an oversupply of allowances and depress the price of CO₂,” making a further review necessary in 2033.
On the Italian political front, the Minister for the Environment Gilberto Pichetto Fratin is championing the overall approach: “We welcome the decision to strengthen the measures supporting industrial decarbonisation.” However, the issues of benchmarks and free allowances remain unresolved, and “a balanced regulatory framework” will be needed to safeguard the competitiveness of sectors exposed to international competition. The president of Confindustria, Emanuele Orsini, is categorical, however, describing the European proposal to revise the ETS as “unsatisfactory.” He argues: “We had expected a thorough overhaul, which has not materialised. The Commission’s proposal is limited to measures with only marginal effects in the short term and does not address the structural weaknesses of the system in the global context.” Finally, his verdict: “This is not the transition model that Europe should be pursuing.” For this reason, Confindustria, together with BDI and MEDEF, has submitted to the President of the European Commission a proposal for a fundamental review of the ETS to “reduce CO₂ prices, which are driving up both energy and production costs.” The three associations, which “represent almost 500,000 businesses in the European Union’s three main economies—Italy, Germany, and France—have jointly called for the rules to be adapted to different industrial specific characteristics and for them to cease exacerbating competitive disparities between Member States.”
Strategic Perspectives is critical. According to its editor-in-chief Linda Kalcher, the ETS reform is “a Trojan horse“: “It looks like a gift to businesses to delay emissions reductions, but in reality it puts them at a disadvantage compared to their Chinese competitors, who are accelerating the transition.”
On the institutional front, the Irish Presidency of the Council of the EU has come out in support of the revision of the ETS. Minister Darragh O’Brien described the European system as “a tool that has proven its effectiveness and continues to adapt to new climate targets,” confirming that the review will be a priority during the presidency to strengthen competitiveness and decarbonisation. The Chair of the European Parliament’s Environment Committee, Pierfrancesco Maran, also reiterated that “the ETS remains a pillar of European climate policy” and that the revenue generated by the system must continue to fund decarbonisation and industrial competitiveness.
English version by the Translation Service of Withub
