The transition to clean energy has been at the forefront of the European Union’s (EU) legislation, and the recently passed RED (Renewable Energy Directive) III reflects the same. To put things in perspective, its predecessor, RED II, set out a series of measures to help the EU reach its net zero targets by 2030 with a renewable energy target of 32 %. The newly adopted RED III, on the other hand, has set up an ambitious target of a 42.5 % share of renewables in the overall EU’s energy consumption, alongside aiming for 45%.

Teresa Ribera, Spanish Minister for the Ecological Transition, reiterated that during the Presidency of the Council of the EU of Spain,  

“It is a step forward which will contribute to reaching the EU’s climate targets in a fair, cost-effective and competitive way.” 

RED III: Mainstreaming renewable energy in industry:

In addition to the major overall target, RED III encompasses sector-specific targets for transport, industry, buildings, and the heating and cooling sector. It contains a mix of binding as well as non-binding  targets for Member States. For instance, the 42.5 % target quoted above is a binding target while the 45% target is non-binding. It is worth noting that RED III is a directive and it is incumbent on the EU Member States to transpose this directive in their national legislations. The Directive entered into force on 20 November 2023, following which member states have 18 months’ time i.e. till May 20, 2025 to transpose most of the provisions of the directive into their national legislations.

Currently, the industrial sector mainly relies on non-renewable resources as the basis for manufacturing various goods. Hard-to-abate sectors such as steel, chemicals and fertilisers account for 40 % of global  CO2 emissions. In the EU, the steel industry accounts for 5.7% of total CO2 emissions (Joint Research Centre) and the chemical industry accounts for 5% of total net GHG emissions (European Environment Agency). Establishing benchmarks becomes essential to encourage the industry to transition towards production processes reliant on renewable energy. This shift involves not only using renewable energy sources but also incorporating renewable-based products/inputs, such as renewable hydrogen and its derivatives.

For the industry sector in the EU, the Directive provides for a binding target that at least 42% of the hydrogen used is hydrogen that qualifies as RFNBOs (Renewable Fuels of Non-Biological Origin) by 2030, while raising the target ambitiously to 60 % by 2035.

A certain level of flexibility has been provided to Member States to reduce their share of RFNBOs in industrial applications by 20% in 2030, if these two conditions are complied with:

  • If the mandatory overall target of 42.5% is achieved by a Member State as a part of its national contribution and,
  • If hydrogen and its derivatives produced from fossil fuels consumed by a particular Member State is not more than 23 % in 2030 and not more than 20 % in 2035.

ReFuel EU Aviation:

The cross-border and global nature of the EU air transport sector heavily influences its operations. Civil aviation is responsible for 13.4% of the total carbon dioxide (CO2) emissions from transportation in the European Union (EU). ReFuel Aviation aims to align air transport with the EU’s climate targets for 2030 and 2050, with Sustainable Aviation Fuel (SAF) identified as a crucial tool for decarbonising aviation in the short and medium term. SAF can be produced from different feedstock sources including renewable hydrogen or biomass. So, SAF produced from renewable hydrogen are called synthetic fuels or e-fuels.

ReFuel EU Aviation establishes standardised rules for the adoption and distribution of sustainable aviation fuels.(SAF).

Key points:

  1. It is applicable to aircraft operators, to EU airports and their respective Union airport managing bodies, and to aviation fuel suppliers.
  2. As per law, fuel suppliers are required to blend increasingly higher levels of SAF. Within those SAF, there must be a minimum share of synthetic fuels, as showed in the table below. For instance, to fulfil this requirement, an estimated 2.3 million tonnes of SAF would be necessary by the year 2030 and 14.8 million tonnes by 2040. The targets are explained in the table below:
Year Share of SAF (Sustainable Aviation Fuel)
From 1 January 2025minimum share of 2 % of SAF
From 1 January 2030minimum share of 6 % of SAF
(January 2030- December 2031) Minimum share of 0.7% synthetic aviation fuels
(January 2032- December 2033) Minimum share of 1.2% synthetic aviation fuels
(January 2034- December 2034) Minimum share of 2% synthetic aviation fuels  
From 1 January 2035minimum share of 20% of SAF Minimum share of 5 % of synthetic aviation fuels
From 1 January 2040minimum share of 34 % of SAF minimum share of 10 % of synthetic aviation fuels  
From 1 January 2045minimum share of 42 % of SAF minimum share of 15 % of synthetic aviation fuels
From 1 January 2050minimum share of 70 % of SAF minimum share of 35 % of synthetic aviation fuels
  1. The eligible range of SAF encompasses i.a synthetic aviation fuels, certified biofuels, RFNBO (which includes renewable hydrogen), and recycled carbon aviation fuels.These fuels must comply with the sustainability and emissions saving criteria outlined in the legislation.
  2. It also outlines the responsibility of the aviation fuel suppliers to ensure that their aviation fuel contains the minimum shares of SAF and synthetic aviation fuel.
  3. Meeting the demand for synthetic fuels would necessitate approximately 0.4% by 2030 and 5.5% by 2050 of the EU’s renewable electricity generation.

FuelEU Maritime :

The EU’s maritime sector’s contribution to total CO2 emissions is roughly around 3% or over 135 million tonnes of CO2 in 2022. Without effective policy intervention, there is a risk that emissions will increase at an unprecedented rate.
FuelEU Maritime seeks to enhance the adoption of sustainable fuels within the maritime industry, with the goal of diminishing the environmental impact associated with this sector. The new rules will apply from 1 January 2025.

Key points:

  1. This regulation applies to ships of above 5000 gross tonnage, which can be container ships or passenger ships irrespective of their flag.
  2. From 2025 onwards, the annual average greenhouse gas (GHG) intensity of the energy consumed on a ship trading within the EU or European Economic Area (EEA), must be reduced by the following percentages as per the timelines mentioned below. This regulation does not set out targets on specific technologies but on the GHG intensity of the energy consumed on board by a ship.
Reduction by 2%From January 1st, 2025  
Reduction by 6%From January 1st, 2030
Reduction by 14.5%From January 1st, 2035
Reduction by 31%From January 1st, 2040
Reduction by 62%From January 1st, 2045
Reduction by 80%From January 1st, 2050
  1. To promote the early adoption of sustainable fuels, the FuelEU Maritime Initiative mandates that Renewable Fuels of Non-Biological Origin (RFNBOs) will count twice towards a ship’s greenhouse gas (GHG) reduction until the conclusion of 2033. Furthermore, RFNBOs must make up a minimum of 1% of all fuels used by 2031. Should the 2031 target not be met a 2% target will be introduced in 2034, contingent upon the Commission’s assessment that there are no issues regarding the availability, cost, or distribution of RFNBOs.
  2. Ships are required to use on-shore power supply for their electricity needs requirements when docked at the quayside unless they utilise an alternative zero-emission technology. This aims at reducing air pollution at ports.
  3. Vessels that do not adhere to the annual greenhouse gas (GHG) limits will face penalties under the FuelEU penalty system. The penality will be calculated based on the quantity and cost of renewable fuel that was supposed to be utilised to fulfil the specified mandates. The penalty should be proportionate to the extent of the non compliance and removes any economic advantage of non-compliance.
  4. The monitoring and reporting must be comprehensive, encompassing the energy consumption of ships both at sea and at berth.

Concluding remarks:

Hydrogen/PtX will play a vital role in defossilisation of hard to abate sectors as reflected in the RFNBO’s sub-targets and incentives in the different pieces of legislation. RED III and complementary regulations like ReFuel Aviation and ReFuel Maritime represent a notable milestone for the EU and a clear signal to market participants as they strive to advance towards a more sustainable future.

Sources:

  1. Clifford Chance (2024), ‘Low-carbon fuels: Decoding EU Legislation for the Transport sector’ can be accessed at https://www.cliffordchance.com/briefings/2024/02/low-carbon-fuels–decoding-eu-legislation-for-the-transport-sect.html
  2. EY “EU Council adopts new renewable energy rules and rules for promotion of sustainable aviation fuels under Fit for 55”, can be accessed on https://www.ey.com/en_gl/tax-alerts/eu-council-adopts-new-renewable-energy-rules-and-rules-for-promotion-of-sustainable-aviation-fuels-under-fit-for-55
  3. FuelEU Maritime (2023). The full legal text can be accessed on Regulation – 2023/1805 – EN – EUR-Lex (europa.eu)
  4. ReFuel Aviation (2023). The full legal text can be accessed on Regulation – EU – 2023/2405 – EN – EUR-Lex (europa.eu)
  5. Renewable Energy Directive III, can be accessed Directive – EU – 2023/2413 – EN – Renewable Energy Directive – EUR-Lex (europa.eu)
  6. Samantha Gross (2021), ‘The challenge of decarbonising heavy industry’, can be accessed at https://www.brookings.edu/articles/the-challenge-of-decarbonizing-heavy-industry/

All news and events
Subscribe to our newsletter and stay up to date with news and events.
BMWK Logo
IKI Logo
giz Logo