This week in EU policy: Carbon leakage, vehicle circularity and a competitive green transition

It’s been a big week for policy around the industrial transition, with European Parliamentarians last week calling for the EU to actually get to work implementing the Clean Industrial Deal. At the same time, the UK government has released its industrial strategy – the first in eight years . Among its pages are a target for doubling the current investment in clean energy industries to €35bn over the next ten years and plans for cutting red-tape with the EU to speed up cross-channel trade and investment. And that's not nearly all this week.

1. Council of the EU adopts position on vehicle circularity

The news: The Council – one of the EU’s two legislative bodies – has announced its long-awaited position on automotive vehicle circularity – with requirements for recycling end-of-life vehicles and mandatory targets for recycled plastics content, with similar targets for metals and CRMs (hopefully) to follow.

What happens now: The European Parliament, the other legislative body, has to establish its own position, then the two will enter talks on a final deal.

What it means for impact companies and investors: A major part of the European Green Deal is getting more circularity in businesses and industries, and the auto-industry is one of the main targets for that ambition. The Council’s position would introduce progressive requirements for recycled plastic content  in cars over a decade. That’s good news for any impact companies working in that sector. But the real target is steel and other metals, with climate lobbies urging similar requirements be introduced. Brussels climate advocacy group Transport and Environment are in particular warning that if Europe doesn’t get those requirements right then the opportunity will be "squandered." If they do get those requirements right, then it could prove a goldmine for any company working on material circularity.

2. Parliament calls for modernising the EU’s electricity grid

The news: Members of the European Parliament (MEPs) voted overwhelmingly to call for a massive ramp-up in investment for Europe’s electricity grid, in particular increasing cross-border transmission capacity.

What happens now: The Commission will propose a European Grids Package by the end of 2025.

What it means for impact companies and investors: We all remember the blackouts across the Iberian peninsula. That event served as a reminder that Europe still has a long way to go before it reaches a proper continent-wide Energy Union. However, there’s much in this for the impact scene. “Europe’s power networks are confronted with new and significant challenges,” reads the adopted report. “They will need to serve growing demand linked to clean mobility, heating and cooling, electrification of industry and the kickstart of low-carbon hydrogen production.” With the EuroParl taking a strong position, eyes now turn to the Commission. If the Grids Package is ambitious enough, it would be a massive boost to both the home-grown renewables sector and to industries looking to decarbonise. Investors in particular ought to pay attention, because a lot of investments made now around the grids could prove timely.

3. Simplification watch: deal reached on carbon border adjustment mechanism

The news: The Council and Parliament have reached an agreement – long expected – to simplify the carbon border adjustment mechanism (CBAM), with a threshold that will exempt 90% of importers and cut red tape.

What happens now: The deal still needs to be endorsed by both legislative chambers before it comes into force. That’s expected in the next days/weeks.

What it means for impact companies and investors: Well, it’s more simplification which, as we’ve discussed a lot in these roundups, is a compromise between making things easier for businesses and competitiveness, and watering down climate ambitions. This one’s a little different, however. The CBAM is designed to stop companies offshoring the more carbon-intensive aspects of their production processes, thereby staying in line with emissions targets. Watering that down doesn’t sound like great news for the climate or for the impact sector. But the EU are insisting that despite that generous minimal threshold, the CBAM is still going to cover 99% of C02 emissions from iron, steel, aluminium and cement imports. One to watch.

4. Member States' 'Social Climate Plans' are due

The news: The end of June marks the deadline for member states to submit their plans for the Social Climate Fund, which is designed to funnel resources to people most affected by building and transport decarbonisation.

What happens now: The Commission will assess the plans and begin doling out payments to individual member states, depending on whether targets within the plans are achieved.

What it means for impact companies and investors: The Social Climate Fund aims to make sure that people in situations of energy or transport poverty are not left behind by the green transition, particularly as regards the costs of the transition. Locally-focussed impact companies would do well to pay attention to the opportunities that may arise from this, particularly when it comes to renewables integration and green building renovations. It also seems a good thing for the impact community overall – with vulnerable communities better supported through the transition, that should get more people onboard.

5. Coming up: Research and Innovation for a Competitive Green Transition

The news: The Commission is hosting an event focussed on research and innovation for a competitive green transition.

What happens now: The event is being livestreamed today – here.

A look at the programme shows a lot that will interest impact investors and startups. The event’s second day, Tuesday the 24th, is being kicked off with a speech from Ekaterina Zaharieva, the commissioner for Startups, Research and Innovation. Then there are a series of panel talks on science advocacy, public-private collaborations for green innovation, promoting green startups and scaleups, and unlocking green capital. Plenty there to get you thinking.