THE STATE OF THE EUROPEAN UNION Towards a new legislative term

THE MEMBER STATES HAVE TO MAKE SOME FAR-REACHING DECISIONS: WHAT CAN A COMMON EUROPEAN INDUSTRIAL STRATEGY LOOK LIKE IN THE CLIMATE-NEUTRAL AGE? 97 sion and conversion measures have been launched. As a result, however, there is now a cacophony of fund- ing programmes as well as legislative projects at both the European level and in the Member States. Not all of these are well coordinated and some are in conflict with others. Given the magnitude of the task, this develop- ment is not surprising. Nevertheless, it is dangerous in two ways. Firstly, the sometimes erratic actions could hamper the success of the energy transition. And sec- ondly, the hasty introduction and subsequent changes of far-reaching reforms, profoundly impacting everyday life, are leading to growing uncertainty and political frustration among the population. Cutting this Gordian knot will not be easy. There is a lot of political work in progress and the years of inactivity have massively in- creased the pressure on the current reform agenda. This poses an epoch-making challenge for political leaders. The deep interconnection of policy reforms increases the scale of the challenge. It is not just a question of making a few adjustments here and there. Energy and climate policy are intimately linked to European indus- trial and economic policy, indeed to the future of Euro- pean business per se. This link between energy, climate, industry and the economy may still be the most visible. However, security policy, trade policy, development pol- icy and fiscal and tax policy cannot be separated from energy and climate policy either. Europe needs a new and comprehensive approach to mainstreaming climate transformation. The individual policy fields must be more deeply embedded in a common leitmotif that prioritizes climate-neutrality, innovation and competitiveness, and delivers greater participation by the workforce and the general public. As is often the case, this applies both at the level of the Member States as well as at the Euro- pean level. Progress at Fit for 55 What is the state of the EU in terms of energy and cli- mate policy in the second year after Russia’s invasion of Ukraine? On the one hand, central points of the Fit for 55 programme have been specified and found ex- pression in ambitious legislative projects. In addition, further reform projects such as the Net Zero Industry Act and the Critical Raw Materials Act were formulated in a short time. While these may so far resemble ambi- tious drafts rather than concrete and financially secured projects, their significance as symbols for structural and pan-European policy should not be underestimated. They underline the need for a joint response to current challenges, which must be based on a close interaction between the state and the economy. In 2023, the climate policy targets were also further refined. This includes an increased target for energy ef- ficiency: By 2030, the EU must reduce its energy con- sumption by at least 11.7%. Additionally, more ambi- tious goals were set for the share of renewable energies in total energy consumption, with a target of 42.5% by 2030 and an additional 2.5% as a benchmark. For buildings, the minimum share of renewable energies was established at a minimum of 49% by 2030. A grad- ual increase of renewables in the generation of heating and cooling is also envisaged, with a binding increase of 0.8 % per year at national level until 2026 and of 1.1 % from 2026 until 2030. The binding target for the use of green hydrogen in industry and transport is to be 42.5 % in 2030, rising to 60 % by 2035. Setting these targets is important as it provides perspective and clear policy direction. At the same time, however, the rollout of the necessary infra- structure must keep pace. At the moment, this is a bot- tleneck in the climate policy in Europe. One example is the production and supply of hydrogen. The correspond- ing market is only just being established. Networking within the EU and in neighbouring regions is still in its infancy. An additional Achilles’ heel, as already de- scribed, is the sluggish expansion of the grid, which is also not in line with the ambitious transformation goals. Reform of the European Emissions Trading Scheme (ETS) was also agreed upon. This involves reforming the existing scheme, establishing a separate emissions trading scheme for transport and buildings, creating a Climate Social Fund of over 80 billion euros, introduc- ing the Carbon Border Adjustment Mechanism (CBAM) and rules for emissions trading in aviation and shipping. Belgium and Bulgaria abstained, while Hungary and Po- land voted against the reform. The creation of an ETS2 for heat and transport was particularly controversial. As a compromise, the 80-billion-euro Climate Social Fund