The Energy Sector and the Green Transition

Quo vadis, EU (Law)? 3rd edition: The Green Transition 2/4

The second panel of the day discussed the specific topic of the green transition in the energy sector. The discussion, chaired by Valeria Caforio (Bocconi University), took place between Prof. Miriam Allena (Bocconi University), Matteo Villa (ISPI) and Prof. Ilaria Espa (Università Svizzera Italiana).

The European Energy policies: a Disruption of the Traditional Legal Principles

The first who intervened was Professor Allena, associate professor at Bocconi University. Her presentation focused on the European energy policies; the aim was to show how over the years a very reach regulation has come to place and how the energy policy is increasingly linked to the green transition due to its fundamental role in slowing down climate change, which is indeed a priority of the Commission’s environmental policy. With the imperative of the green transition, the European legislator is, indeed, setting a new framework to regulate effectively renewable energies. The novelty is that it undertook a different approach which pose under discussion the traditional legal principles and the traditional legal tools, in particular the principle of the separation of powers. A clear example of that can be appreciated by looking to the way climate change litigations have affected policies and regulations. What happened is that Courts stepped in the shoes of regulators: Courts has been exercising an unknown influence in the regulation through their decisions. 

Professor Allena made a reference to the provision which constitutes the basis of the European Energy policies, specifically to article 194 of the TFEU. This article establishes that the Union policy on energy shall aim to ensure the functioning of the energy market; to ensure security of energy supply in the Union; promote energy efficiency and energy saving and the development of new and renewable forms of energy; and promote the interconnection of energy networks. But a particular focus should be on paragraph two of this provision, which provides that the measures adopted by the EU shall not affect a Member State’s right to determine the conditions for exploiting its energy resources and its choice between different energy sources and the general structure of its energy supply. It follows that there is a general freedom of MSs to decide whether to choose either renewable energy or gas, fossil-based, nuclear energy supplies. Therefore, article 194 TFEU clarifies the shared nature in the energy matter which is at the same time compromised by the fact that MSs’ competence may be affected under the environmental legal basis, for instance by measures that aim mainly at promoting the adoption of renewable energy supply. 

Over the years, on the basis of this provision, a new regulation of energy has come into place. Limiting the analysis to the renewable energy, Directive 2001/77/EC was the first directive regulating the promotion of electricity produced from renewable energy sources. In 2008 the EU Commission proposed a binding legislation to implement the so-called 20-20-20 strategy, which was the European climate strategy for the new decade. It aimed at cutting greenhouse gas emissions by 20% compared to 1990 levels; increasing energy efficiency by 20%; increasing the share of renewable energy sources in final energy consumption by 20%. This proposal became law in 2009 when the EU enacted the so-called Energy Package (see Directive 2009/28/CE). In 2016 the Commission published a Communication entitled Clean Energy for all Europeans which relevance derived from the fact that it acknowledged that the energy union was the sole way for the EU to have a global effective contribution on lowering carbon economy. It was the first time that the energy transition has been linked to the broader concept of the “green transition”. This Communication was the basis of a subsequent legislation on energy efficiency standards and implementation of renewable energy supplies (see the Directive 2018/2001/EU). It is clear that the legal framework in which the energy transition takes place is within an ecological transition, and the ecological transition imply a deep transformation of both traditional legal orders and society in general. To sum up, we are witnessing an overturn of the traditional legal system due to a far-reaching ecological transition policy. 

Lastly, Professor Allena reflected on the effects that energy policies have on national legal systems. In the context of permitting procedures to authorize new power plants construction, a new directive of the European Parliament set a very clear criterion which pubblic agencies have to apply in the approval: the prevalence of the interest in the construction of the plant over others, such as the protection of landscape - also under its value as a legacy for future generation, - or the plan’s long-term effects on the environment. This regulation is controversial because the European Parliament stepped in and took the place of public agencies by deciding the criteria that they have to follow to solve the conflict between conflicting interests at stake, even though under the principle of separation of power is clearly not for the European Parliament to do so. Professor Allena stated how this trend is particularly interesting and controversial in many ways; on the one hand, because the traditional legal principles are undermined and, on the other, because it should be not for pubblic authorities but for politician to make such a decision. This permitting procedure can be implemented properly only in light of the general principles of environmental law; in particular, of the sustainable development principle and precautionary principle. In conclusion, professor Allena remarked that the energy transition in the context of the green transition has a disrupting effect in the traditional legal systems; which is interesting both from a theoretical prospective because stimulates professional to investigate it, but also from the practical prospective because demands new practical solutions. 

EU green transition: Law vs Implementation?

The second presentation has been of Doctor Matteo Villa, Senior Research Fellow at ISPI, and co-heads the ISPI Data Lab, monitoring geopolitical and geo-economic trends. In particular, his work deals with the quantitative side of the analysis of the green transition process. His discussion reflected on the EU green transition: Law vs Implementation? He started by making reference to the 20-20-20 objectives and Fit in 55 Package which set targets toward the green transition. The data on EU’s GDP and capita emissions reveal that the energy transition is happening; indeed, by 1990 until 2020 the reduction of 20% has been achieved, and, at the same time, the GDP has steadily increased. This result, nevertheless, is just a first step in the long path to net zero objective. The next goal set by law is the 2030 target of lessen by 55% the GMG emissions. What Doctor Matteo Villa emphasized was that the green transition should accelerate but this objective must be affordable for both the society and companies. Looking at the growth in EU solar generation, data show that it doubled in 2022, but this is a consequence also of the Russian invasion of Ukraine which has led to the steeply increase of gas energy costs. Today among Europeans, the price to foster the energy transition is perceived as being too high and national governments do not know how to react. But did Russia invasion accelerate the transition? Doctor Villa answered this relevant question by acknowledging that in the European context it did accelerate it, except in Italy. Today, exist many laws to promote and prioritize green transition energy solutions, but public authorities do not implement them effectively. This transition is on the one hand market lead because prices are more competitive than in the past, but it is also regulation lead; indeed, the solar energy deployment has accelerated in the past two years but as a consequence of the incentives from the national laws. The acceleration, in some national context, is therefore artificial. 

In the European regulatory context, Council Regulation (EU) 2022/2577 lays down a framework to accelerate the deployment of renewable energy. It contains the (rebuttable) presumption that renewable energy projects are of overriding public interest and that shorter and faster permit for solar energy equipment on existing structures should be granted. Moreover, it promotes and accelerates the deployment of small-scale solar installation, including renewables self-consumers and collective self-consumers and provides for a simplification of the permit-grant framework for the repowering of renewable power plants (max 6 months). There are some exceptions to EU legislation for the integration of renewable into the electricity system, under two conditions: (1) the project is located in a dedicated renewable or grid area; (2) such area has been subject to a strategic environmental assessment (SEA). So, even though the law defines a clear green transition objective, Dottor Matteo Villa by presenting the Italian case shows how the public authorities have had great difficulties in implementing them. Indeed, in Italy fist the time limits imposed for the green transition have not been respected by the administrative agencies, faster and simpler permit granting procedures are in place in Italy since 2011 and so relevant amendment did not take place, and lastly no area has never been subjected to the SEA. To conclude, in Europe there is a rich legislative framework which foster green transitions, but there are cases, such as the Italian one, that encounter barriers at the implementation level due to administrative difficulty in adopting effective local regulatory instrument. 

The Interplay Between Energy Security and Sustainability in the EU Trade Agreements

Lastly, the floor has been left to Professor Ilaria Espa, teaching at the Università Svizzera Italiana. In the context of the bigger theme of the green transition, her presentation focused on the interplay between energy security and sustainability in the EU trade agreements. In particular, she made clear thatthere are two regulatory approaches that can be undertook: on the one hand, the security-driven approach under which trade rules are used to promote energy trade to address security concerns; it focuses on the access to energy goods and services. On the other hand, there is the sustainability-driven approach: here the trade rules are used to promote environmentally sustainable energy trade to foster climate change action; the focus is on facilitating energy transition. The key questions should be: how and to which extent can energy disciplines in (EU) preferential trade agreements contribute to both?

The landscape of energy disciplines in EU trade agreements sees on one hand the security-driven disciplines primarily informed by the objective to secure greater access to energy supplies, infrastructure and markets. On the other hand, there are sustainability-driven disciplines primarilyinformed by the objective to foster the deployment of renewable energy and energy efficient technologies. 

It is possible to integrate sustainability consideration in security-driven provisions by granting the access to energy resources and raw materials, to energy transport infrastructure and the organization of energy markets. For instance, by providing for the access to energy resources, the regulation can provide an obligation to carry out environmental impact assessments prior to granting exploration authorizations. The alternative approach concerns energy sustainability-driven provisions. In particular, those focus on the non-tariff barriers in the areas of renewable energy and/or energy efficiency specifically and on tariff (and non-tariff) barriers on environmental goods and services more generally. Those provisions are a legal shelter for green subsidies related to the transition to a low-carbon economy and introduce a commitment for a fossil fuel subsidy reform. The provisions track tariffs and non-tariff barriers to trade and investment. In particular, by non-tariff barriers in area of renewable energy it’s clear the commitment to use international standards as a basis for technical regulations, standards and conformity assessment procedures and cooperation between regulators and/or standardization bodies to promote regulatory convergence and the development of common standards. Among provisions related to tariff barriers on environmental goods and services, they generally commit to “facilitate and promote” trade and investment in environmental goods to enhance sustainable development and /or climate change and commit to eliminate duties on extensive lists of environmental goods, including renewable and low carbon energy, energy efficiency and climate change mitigation and adaptation technologies. 

In the conclusion, the professor remarked the untapped potential; most energy-specific provisions respond to classical energy security concerns, but sustainability considerations are being increasingly integrated into security-driven provisions (win-win), Moreover, progressively there is a standard (although not standardized) incorporation of energy sustainability-driven provision, with various level of ambition. In both cases, most ambitious innovations concern a limited number of agreements. More advanced energy disciplines are essential to increase PTA’s contribution to environmentally sustainable trade and to climate change action. The conclusion of open plurilaterals contracts could help accelerate norm diffusion and contribute to progress of WTO-led initiatives on environment sustainability.