[POLITICO Pro Morning Energy and Climate] VIEW IN YOUR BROWSER OR LISTEN TO AUDIO By KALINA OROSCHAKOFF WITH ANCA GURZU, PAOLA TAMMA, SAIM SAEED AND ELINE SCHAART. SNEAK PEEK — SENIOR COMMISSION OFFICIALS WORK TO ENSURE CLIMATE NEUTRALITY will also be the goal of the new political leadership in the next term. — THERE’S GROWING MOMENTUM FOR THE 2050 CLIMATE NEUTRALITY GOAL ahead of Thursday’s EU leaders summit. — THE COMMISSION PUBLISHED THREE SUSTAINABLE FINANCE REPORTS, and they have bad news for coal and nuclear. Happy mid-week, everyone. Summer has come to Brussels, fingers crossed it will stay. Send tips to koroschakoff@politico.eu, ptamma@politico.eu, and agurzu@politico.eu or find us on Twitter at @paola_tamma, @AncaGurzu, and @makaoro. WE’VE PUT TOGETHER A HANDY (PROVISIONAL) LIST OF ALL THE MEPS WHO’VE ENTERED THE PARLIAMENT. DRIVING THE DAY JUNCKER COMMISSION CLIMATE LEGACY: Senior European Commission officials want to ensure that the effort to cut emissions to net zero continues in the new term. “If we agree that there is a climate urgency, institutions should adapt,” a senior EU official told us, adding all EU institutions need to change the way they work and are organized to turn the goal into reality. BREAKING DOWN BARRIERS: According to the official, the idea is to break down institutional silos where officials only work on specific policy issues (think: environment, trade, agriculture) rather than toward a broader political objective (in this case: making sure the EU hits net zero emissions by 2050). RIGHT PEOPLE FOR THE JOB: Recent appointments for senior Commission posts are aimed at putting people in place who can bring their different areas in line with the broader strategic objective of reaching climate neutrality, according to the official. Examples include Timo Pesonen, a Finn, who’s now in charge of the department for internal market, industry and entrepreneurship after running the Commission’s communication department; Sabine Weyand, the former deputy Brexit negotiator who’ll head the Commission’s trade department; and Ditte Juul-Jørgensen, Competition Commissioner Margrethe Vestager’s current cabinet chief who’ll lead the energy department. GREENING EU INDUSTRY: Commission services are already working on a strategy that will provide a manual for how to bring EU industrial growth in line with the climate neutrality target. The European Strategy and Policy Center — the Commission’s in-house think-tank — in March presented an outline of what it should look like. The current Commission hopes to present an industrial strategy by the end of the year, but it will be up to the next Commission to decide and deliver it. CLIMATE POLITICS PRO-CLIMATE NEUTRALITY CAMP GROWS AHEAD OF EU LEADERS SUMMIT: More countries are now backing a net zero emissions goal by 2050, ahead of Thursday’s EU leaders summit. Slovak President Zuzana Čaputová on Tuesday supported the 2050 target and pledged to phase out coal by 2023. Late on Monday Bulgarian Prime Minister Boyko Borissov did the same in a phone conversation with U.N. Secretary-General Antonio Guterres; Hungary’s Innovation Minister László Palkovics said the country’s goal for 2050 is climate neutrality. He cautioned, however, that “there is no climate neutrality without atomic energy,” according to local media. By our count this leaves six members — Croatia, the Czech Republic, Estonia, Lithuania, Poland and Romania — which haven’t expressed support for the 2050 target. MONEY FOR A YES: Striking an agreement during the European Council on Thursday seems now a question of time … and money. The climate neutrality debate “has implications for funding,” the EU official told us. UK AND ITALY SUBMIT COP26 BID: The U.K. and Italy on Tuesday announced a joint proposal for next year’s COP26 climate talks. The U.K. will host the formal COP session, while a preliminary gathering, the pre-COP, would take place in Italy. AIRPLANE BUILDERS HUNT FOR CLIMATE SOLUTION: The aviation industry is keen to reduce its environmental footprint — only it doesn’t quite know how, Saim reports from the Paris air show. Demand for flying is rising steadily, the number of aircraft is expected to double by 2040, and emissions are growing at about 5 percent a year. Meanwhile, the industry has committed to cutting emissions in half by 2050 relative to 2005 levels. Read more here, or see below. TRADE DEAL WITH SOUTH AMERICA RAISES CLIMATE CONCERNS: Europe’s credibility as a climate leader risks being shredded in the Amazon rainforests if Brussels concludes a landmark South American trade pact this month. France’s President Emmanuel Macron has called for a “balanced” pact in line with the Paris climate agreement, but EU lawmakers, NGOs and scientists warn the deal’s green clauses are toothless and will allow increased deforestation. The story here, or see below. **WHAT ARE YOUR BIGGEST CONCERNS AS A PUBLIC AFFAIRS PROFESSIONAL? Political/regulatory risks, stakeholder engagement or internal positioning of your PA team? Whichever it is, you shouldn’t have to face it alone: JOIN US ON SEPTEMBER 27 IN PARIS AT THE GLOBAL PUBLIC AFFAIRS FORUM to share experiences and benchmark best practices together with Global C-level PA peers from a wide range of industries. REGISTER TODAY AT GPAC@DII.EU OR BY PHONE AT +33 1 43 12 85 58.** SUSTAINABLE FINANCE COMMISSION GREEN FINANCE PLAN IS OUT: The Commission on Tuesday published three sustainable finance reports: the so-called taxonomy report — an EU-wide standard for sustainable investments — another on a green bonds standard, and one on climate-friendly benchmarks. The taxonomy lists activities that, according to Commission experts, contribute “substantially” to cutting emissions and do no significant harm to other environmental objectives including transitioning to a circular economy, protecting ecosystems and preventing pollution. KEEPING FOSSIL FUELS OUT: The taxonomy set an emission cap of 100 grams of carbon dioxide per kilowatt-hour for power generation investments, with an aim to reduce this cap every five years “in line with a trajectory to net-zero [carbon emissions] in 2050.” This effectively excludes investments in new fossil fuel infrastructure, except in conjunction with carbon capture and storage, as well as investments to improve the efficiency of existing fossil-powered plants which “ultimately undermine climate mitigation objectives, such as coal-powered electricity generation.” NUCLEAR POWER IS ALSO NOT LISTED AS A SUSTAINABLE INVESTMENT because, despite being a low-emission power source, it creates unavoidable environmental harm and pollution. “It was not possible … to conclude that the nuclear energy value chain does not cause significant harm to other environmental objectives,” experts wrote. TRANSPORT FUELS: Sustainable investments include only clean cars such as electric or hydrogen. Pure biofuels are also in. That’s angering NGOs. “Investing in such fuels such as palm oil diesel will not get us to net zero by 2050 as it will cause environmental damage upstream,” according to Samuel Kenny from NGO Transport & Environment. WWF also warned against making the investment screening criteria voluntary. ENERGY MARKETS NATIONAL PLANS IN THE SPOTLIGHT: The European Commission on Tuesday announced the results of its first review of draft energy and climate plans by EU members. The plans are meant to set out how the bloc will reach its 2030 targets for emission reductions, renewable energy, and energy savings. Countries have until the end of the year to take the Commission’s recommendations on board and finalize their plans. ENERGY SUBSIDIES UNDER SCRUTINY: The Commission wants to know what energy subsidies EU members hand out at home — especially for fossil fuels — and whether there are plans to phase them out. There is no mandate to end such subsidies by a fixed date, “but there is a clear political commitment EU-wide to do so,” a Commission official said. Still, countries weren’t keen on the exercise, and failed to provide relevant information in templates they were meant to fill out. HITTING THE RENEWABLES TARGET: Based on the countries’ plans, the EU as a whole is only about 1 percentage point short of meeting its goal of having renewables power 32 percent of energy needs by 2030. But it’s more mixed at national level. The Commission has its own formula to calculate how much each country should contribute to the renewable target — have a look here for an overview of what the Commission says each country could achieve, and what they actually plan for. AMBITIOUS COUNTRIES: Five countries — Estonia, Denmark, Lithuania, Portugal and Spain — are considered “significantly ambitious” since they plan to exceed their contributions by at least 5 percentage points. LESS AMBITIOUS COUNTRIES: Germany and Greece propose hitting their expected share, while Belgium, Bulgaria, Cyprus, the Czech Republic, Finland, France, Hungary, Ireland, Latvia, Malta, Poland, Romania, Slovenia, Slovakia and the United Kingdom all fall short on their expected contribution. More EU members are less ambitious on boosting energy savings, which means there is a wider gap with the 2030 goal. RENEWABLES FALLING WIND AND SOLAR COSTS: Bloomberg New Energy Finance (BNEF) on Tuesday projected that “deep declines in wind, solar and battery technology costs will result in a grid nearly half-powered by renewable energy by 2050.” Wind or solar already “represent the least expensive option for adding new power-generating capacity” in about two-thirds of the world. BNEF forecast that electricity demand will increase 62 percent, resulting in global generating capacity almost tripling between 2018 and 2050, attracting $13.3 trillion in new investment. COAL SLUMP: Coal’s share in the global power mix is expected to fall from 37 percent today to 12 percent by 2050, and oil as a power-generating source “is virtually eliminated.” At the same time, wind and solar grow from 7 percent of generation today to 48 percent by 2050. The share of hydro, natural gas, and nuclear “remain roughly level on a percentage basis.” NO MORE SUBSIDIES: Projected renewables growth to 2030 can be done without the need for direct subsidies. But policy changes will still be need to help reform power markets “to ensure wind, solar, and batteries are renumerated properly for their contributions to the grid,” BNEF said. EUROPE IN THE LEAD: Europe is set to decarbonize “its grid the fastest with 92 percent of its electricity supplied by renewables in 2050.” The U.S. (which has a lot of cheap gas) and China (which has a lot of modern coal plants) “follow at a slower pace.” Still, there are limits to what solar and wind can do; they’ll be “capable of reaching 80 percent of the electricity generation mix in a number of countries by mid-century, with the help of batteries, but going beyond that will be difficult.” Other technologies, such as nuclear, biogas-to-power, green hydrogen-to-power and carbon capture and storage, would be needed, too. ENERGY SHOTS Russia’s Gazprom said Tuesday that U.S. LNG isn’t currently replacing Russian gas on European markets, reports Reuters. Poland’s government proposed draft regulations Tuesday offering big electricity consumers relief from surging power bills. Reuters. POLITICO PRO ARTICLEs AEROSPACE INDUSTRY HUNTS FOR A CLIMATE SOLUTION — By Saim Saeed PARIS — The giants of airplane manufacturing came together on Tuesday at the Paris air show to show they are serious about reducing their industry’s environmental footprint — only to say they don’t quite know how. “Climate change and sustainability is the existential challenge of our generation, and I don’t think we have the solution,” said Paul Eremenko, chief technology officer of United Technologies Corporation (UTC), which owns engine manufacturer Pratt & Whitney. The industry is under growing pressure to figure something out. Demand for flying is rising steadily, the number of aircraft in the sky is expected to double by 2040, and emissions are growing at about 5 percent a year. However, the industry has committed to cutting emissions in half by 2050 relative to 2005 levels. “Speaking for all of my counterparts up here, we don’t know how that’s going to happen,” Greg Hyslop, Boeing’s CTO, said at an industry panel that gathered Airbus, General Electric, UTC, Dassault, Safran and Rolls-Royce. While the industry is doing well — Boeing struck a deal to sell 200 of its troubled 737 MAX aircraft on Tuesday while rival Airbus used the air show to launch its new long-range A321XLR aircraft and announced the first sales — there are growing political and regulatory challenges on the horizon. “Our biggest common challenge is to master the impact of our own success,” said Grazia Vittadini, Airbus’s CTO. In an effort to show policymakers and consumers that the industry is doing its part, the manufacturers on Tuesday put out a joint statementpromising to boost airplane and engine efficiency, to encourage the growth of sustainable fuels, and to experiment with new technologies like electric planes and new designs as part of the industry’s commitment to cut emissions. AN OLD-FASHIONED PROBLEM But many of those technologies are far from commercial application, and will have a marginal impact on rapidly cutting emissions. Eremenko said electric aircraft will be limited to local transport, and will not replace commercial airplanes any time soon. “For the foreseeable future, hydrocarbons remain a couple of orders of magnitude beyond where battery technology or fuel cell technology can get us to,” Eremenko said. With technology unlikely to rescue the industry from its carbon conundrum, the emphasis is shifting to regulation and taxes. Aviation is hoping to avoid the imposition of carbon dioxide standards as is happening for cars and trucks. “Right now, the industry’s going through an assessment to see what kind of targets should be introduced. That’s been the variable before we get into a legislative framework,” said Rolls-Royce CTO Paul Stein. General Electric’s chief engineer Eric Ducharme said the targets set by the U.N.’s International Civil Aviation Organization — set to come into force next year and requiring airplanes to be 3 percent more efficient by 2028 — are enough. “If we don’t meet those production standards that are being set” then older airplane and engine combinations will be retired, he said. But green groups are skeptical that the ICAO standards will be enough. Andrew Murphy, aviation manager with Transport & Environment, called the ICAO targets “pointless” because manufacturers can already exceed them. That leaves an opening for politicians to get involved, and they are under growing pressure to take action. Last month’s European Parliament election saw a rise in support for green parties, and other political groupings are reading that as a danger signal, fearing that they haven’t done enough to show they are taking a tough line on climate action. The Netherlands is proposing an EU-wide initiative to tax aviation, either by imposing a ticket charge or by ending the tax exemption enjoyed by aviation fuel. Europe’s finance ministers and regulators are meeting in The Hague later this week to discuss the idea. The industry isn’t keen on an initiative that could result in a drop in demand for flying. Michael Gill, executive director of the Air Transport Action Group, an industry lobby, doubted that aviation taxation would result in big carbon savings and warned it would prevent manufacturers from investing in new technologies. The changing regulatory and fiscal environment does mean one thing — the era of ever-cheaper tickets is coming to an end. “There will be a cost of transitioning to cleaner aviation … there will be an impact on the ticket,” said Stéphane Cueille, the CTO of Safran, a French aircraft engine and aerospace company. *** EU’S GREEN TRADE PROMISES FACE REALITY CHECK IN THE RAINFOREST — By Arthur Neslen and Hans von der Burchard Europe’s credibility as a leader on climate change risks being shredded in the Amazon rainforest if Brussels concludes a landmark South American trade pact this month. Brazilian President Jair Bolsonaro is pushing for the Mercosur trade bloc to finalize an accord with the EU before the end of June, but EU lawmakers and scientists warn that the deal’s green clauses are toothless and will give carte blanche for increased deforestation and human rights abuses. Under Bolsonaro, Amazon deforestation has reached a record level and Brazilian indigenous leaders say the accord will cause “blood to be spilled” as more forests are cleared to make way for ranching and sugar cane plantations. Fully aware of the environmental sensitivities of the deal, France’s President Emmanuel Macron has called for a “balanced” pact in line with the Paris climate agreement and Trade Minister Jean-Baptiste Lemoyne last month promised to push green issues within the trade talks. Despite such promises, however, a person involved in the deal told POLITICO that environmental provisions in the current text are no more robust than those in the EU-Mexico trade pact, which lacks real enforcement powers. In the sustainability chapter of the Mexican deal, a panel of experts could be convened to give a binding opinion on alleged environmental or human rights abuses, but they would not have powers to levy sanctions, if a party had breached its commitments. “The main safeguard we have is the same as the Mexico language, that partners shouldn’t lower standards to attract trade and investment,” said an EU official close to the negotiations. “Sometimes the court of public opinion is more powerful than a €10 million fine. The fact that the report is independent shouldn’t be underestimated.” EU trade chief Cecilia Malmström insisted on Monday that the EU-Mercosur trade deal would contain environmental clauses that were “as ambitious as possible” and included “a reference to deforestation.” Despite the lack of enforcement powers, she said the deal was still a useful platform: “A trade agreement cannot … solve all the miseries of the world. But we can get a context to discuss these issues,” she said. For the Commission, a Mercosur deal is a massive prize after 20 years of stop-start negotiations that would open up leading Latin American economies (Argentina, Brazil, Paraguay and Uruguay) to European cars and machinery. In terms of tariff reduction, it will be the EU’s biggest trade accord. But the EU faces an uphill battle to win round its critics. More than 340 civil society groups will on Tuesday call for a suspension of the trade talks over the issue of environmental clauses. “We are living through a climate emergency and we will oppose any trade deal that risks the destruction of the Amazon to produce beef for our tables, meat that will also undermine European agriculture,” said Green MEP Molly Scott Cato. ANGST ABOUT THE AMAZON The EU has promised to end deforestation in its commodity supply chains by 2020, but practice has often fallen short of ideals, according to a letter signed by 600 environmental scientists in April. Laura Kehoe, an Oxford University scientist who organized the letter, told POLITICO that any trade deal that did not prevent deforestation “would be a slap in the face of the school kids striking for the climate.” If the Mercosur pact “fails to protect the Amazon and its people, the EU’s climate and humanitarian commitments will lose all credibility,” she added. EU officials argue that beef exports will rise “by well under 1 percent of Mercosur production” while soy imports would be unaffected as zero tariffs already apply. “So keep it in perspective,” one source cautioned. Brazil is a particular source of concern: Ranching, soy production and mining have driven Brazilian forest clearances, which last year claimed 3.2 million acres of tree cover — more than the rest of South America put together. “There are some measures taken in Brazil that we certainly do not agree with,” Malmström said. Since his election last year, Bolsonaro has been accused of accelerating deforestation by weakening Brazil’s environment ministry, blocking indigenous land rights’ claims, deregulating rainforest protections and encouraging farming and mining expansion in the Amazon. The Brazilian government said that its authorities had adopted “several actions” to fight illegal deforestation and curb illegal exploitation of indigenous land since Bolsonaro’s election. A government spokesman said that on June 5, “Operation Sovereign Amazon brought together 165 federal environmental agents [in] the largest force ever assembled for a mission of this type, with the mandate to perform law enforcement actions — including arrests — in seven states.” Protected areas cover 41 percent of the Amazon, “an area almost equivalent to that of the entire European Union,” the spokesman added, stressing Brazil was committed to “sustainable development and the prevention of illegal deforestation.” But official figures show that deforestation in Brazil soared to a record high in May with 739 square kilometers of rainforest cleared. Indigenous groups say that 19 hectares of rainforest are now being lost every hour in the Amazon. Much of the logging takes place in a legal gray zone. To reach the rainforest, loggers first have to get past the indigenous people who live there, and that is spurring a surge in human rights abuses, according to Dinaman Tuxá, an indigenous leader. “We have many reports of violence from around the country,” Tuxá said. “Militias are being put together — by local agro-industry interests we suspect — to control indigenous people,” he said. One such group in Bahia had threatened to assassinate a leader and four members of his family, Tuxá said, while in his own community, 53 leaders were under protection from state agencies that have been stripped of funding and staff. “I, for example, have to constantly change my route when I’m going home in order to keep safe,” he said. In 2017, Brazil recorded the highest death toll of environmental defenders anywhere in the world, with the 57 murders and 32 land invasions that indigenous group APIB counts since January being “just the tip of the iceberg,” according to Tuxá. “Accords like this only raise the level of violence against indigenous people,” he said. “We need to tell the EU that signing this free trade agreement could lead to genocide in Brazil. If they sign this agreement, blood will be spilled.” The word “genocide” has a broad definition in Brazil, covering assassinations, the enforced transfer of children and serious damage to a group’s physical or mental integrity. Survival International believes that uncontacted tribes face “annihilation” under Bolsonaro, who was quoted in a newspaper in 1998 saying: “It’s a shame that the Brazilian cavalry wasn’t as efficient as the Americans, who exterminated their Indians.” PARLIAMENTARY PUSHBACK Even if the EU and Mercosur build sufficient momentum for a political deal later this month, the deal could still run into severe headwinds in the European Parliament and in some 40 or so national or regional assemblies that will need to approve it. Last month’s European election has given far greater voice to Europe’s Greens, and the center-left Socialists and Democrats are also pushing for Europe to use its leverage as the world’s biggest trade bloc to enforce environmental and labor standards. Bernd Lange, a senior trade lawmaker from the Socialists and Democrats group, said that advisory groups made up of interested parties including green campaigners should be able to force a meeting of the panel of experts established in trade deals, or even launch EU-Mercosur consultations. Under the current system, only the EU and Mercosur can trigger such high-level steps. “We need to change the approach in order to have a clear level of escalation,” he said. Jérémy Décerle, a member of the European Parliament, issued a statement on behalf of Macron’s Renaissance EU group on Monday, calling on EU officials to be “very careful” about any trade deal. “Under no circumstances” could such agreements oblige the import of commodities produced “in contradiction with the principles of sustainability promoted by Europe at international level,” he said. Some leaders of Mercosur countries “seriously offend the values we hold,” he continued. _This daily newsletter is part of POLITICO’s premium policy service: Pro Energy and Climate. From climate change, emissions targets, alternative fuels and more, our specialized journalists keep you on top of the topics driving the Energy and Climate policy agenda. Email pro@politico.eu for a complimentary trial._
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