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4.114. In 2021, the European Commission published the Fit-for-55 package, aiming to ensure EU policies align with the climate-related goals of the European Green Deal and the Climate Law, which includes an intermediate target of 55% GHG emission reduction by 2030 and becoming climate-neutral by 2050 (Section 1). The package contains the Fit-for-55 communication as well as 16 energy- and climate-related legislative proposals that are currently in various stages of discussion. The proposals relating to energy primarily focus on emission reductions through multiple channels such as, inter alia, phasing out coal, accelerating the roll-out of renewables, increasing energy efficiency, and decarbonizing gas across various industries. The package also includes proposals to increase and broaden targets for emissions reductions; revise the Emissions Trading System, including expanding it to other sectors and complementing it with the Carbon Border Adjustment Mechanism; and establish a Social Climate Fund to cushion the impact of the introduction of the emissions trading in the building and road transport sectors on the vulnerable. Member States will be required to update their national energy and climate plans by 2023 and 2024, and to publish a national Social Climate Plan.

4.115. An important element of the transition to more sustainable energy use relates to efforts to increase energy efficiency, which the European Green Deal stresses as one of the priorities. Amendments to the Energy Efficiency Directive (Directive 2012/27/EU) in 2018 increased the ambition of the improvement target to at least 32.5% by 2030 (relative to modelling projections for 2030). As part of the Fit-for-55-package in 2021, the Commission proposed a new Energy Efficiency Directive that would establish a more ambitious target for 2030 based on a 2020 baseline projection, according to the Commission (the REPowerEU Plan upped this target further (Section 4.4.5)). If adopted as proposed, a separate reform of the current Energy Taxation Directive (ETD) would, inter alia, set minimum excise duty rates for energy products based on their energy content and environmental performance and eliminate the current mandatory excise duty exemptions for fuels used for waterborne navigation, including fishing (Section 4.2.2).

4.116. In the revised Renewable Energy Directive, the European Union has also established a target for a renewable energy share of at least 32% of gross final consumption by 2030. The Directive also establishes a minimum share per member State, applicable since 2021. In 2021, the Commission proposed to increase this target to 40% , with the REPowerEU Plan proposing to increase this target further (Section 4.4.5). At the same time, the biodiversity strategy aims to limit the use of whole trees, food, or feed crops for energy. In mid-2022, based on a Commission Delegated Regulation, labelling of investments in gas and nuclear power plants, subject to strict conditions, was included in the EU taxonomy for sustainable activities (Section 4.5.1.2.4) that favour the transition to a carbon-neutral economy with effect from January 2023 [141]. At the end of 2022, the Council agreed to faster permit granting processes for renewables (Section 4.4.5).
[141] Commission Delegated Regulation (EU) 2022/1214. The Taxonomy Regulation (Regulation (EU) 2020/852) and delegated regulations outline which economic activities and investments qualify as contributing to a low-carbon transition.

4.117. The Horizon Europe programme for research and innovation replaced the Horizon 2020 framework (Section 3.3.1.1) and continues to promote energy and climate-related research. The programme allocates approximately EUR 15.1 billion for research and development in the areas of climate, energy, and mobility for the period 2021-27. (...)

4.118. In February 2022, the Commission adopted new Guidelines on State Aid for climate, environmental protection and energy as spelled out in the European Green Deal to facilitate achieving the Deal's objectives, specifying 14 potentially compatible types of specific aid measures. On 20 July 2022, the Commission also amended the state aid Temporary Crisis Framework (Section 3.3.1.2) to include measures aimed at accelerating the roll-out of renewable energy and some aimed at decarbonizing industrial processes, as outlined in the REPowerEU Plan. Detailed data on state aid provided to the energy transition were not yet available. In 2020, the total state aid expenditure for environmental protection including energy savings amounted to nearly EUR 80 billion.

4.120. During the review period, the composition of primary energy production continued to shift towards renewables, which accounted for 41% of total primary energy production in 2021 (up from 35% in 2018) (Table 4.9), while the share of energy generated from all fossil fuels declined. It was too early to identify trends in changes of the composition following the war in Ukraine. Renewable energy sources accounted for 38% of the electricity produced in 2020 (up from 33% in 2018), making it the largest power source of electricity for the first time. Nuclear energy accounted for roughly one quarter of the electricity produced.

4.121. In terms of final energy consumption, (...) The share of renewables and biofuels increased from 10.8% in 2018 to 11.7% in 2021, continuing its upward trend (Table 4.9). Overall, the share of renewable energy in gross final consumption of energy reached 22.1% in 2020 and 21.8% in 2021.

Table 4.9 Energy balances
(% unless otherwise indicated)
- Primary production (ktoe): (...)
• Renewables and biofuels: (2015) 30.5, (2016) 31.7, (2017) 32.9, (2018) 34.5, (2019) 36.8, (2020) 40.7, (2021) 40.9; Hydro: (2015) 4.4, (2016) 4.6, (2017) 4.0, (2018) 4.6, (2019) 4.5, (2020) 5.2, (2021) 5.0; Geothermal: (2015) 1.0, (2016) 1.0, (2017) 1.1, (2018) 1.1, (2019) 1.1, (2020) 1.2, (2021) 1.1; Wind: (2015) 3.4, (2016) 3.6, (2017) 4.2, (2018) 4.3, (2019) 5.1, (2020) 6.0, (2021) 5.6; Solar thermal: (2015) 0.7, (2016) 0.7, (2017) 0.7, (2018) 0.7, (2019) 0.8, (2020) 0.8, (2021) 0.8; Ambient heat: (heat pumps): (2015) 0.9, (2016) 1.1, (2017) 1.7, (2018) 1.8, (2019) 2.0, (2020) 2.4, (2021) 2.3; Bioenergy: (2015) 18.8, (2016) 19.4, (2017) 19.9, (2018) 20.5, (2019) 21.7, (2020) 23.1, (2021) 23.6
• Non-renewable waste: (2015) 1.9, (2016) 2.1, (2017) 2.1, (2018) 2.1, (2019) 2.2, (2020) 2.4, (2021) 2.3
(...)
• Renewables and biofuels: (2015) 0.4, (2016) 0.5, (2017) 0.5, (2018) 0.6, (2019) 0.6, (2020) 0.8, (2021) 0.9; Non-renewable wastes: (2015) 0.0, (2016) 0.1, (2017) 0.1, (2018) 0.1, (2019) 0.1, (2020) 0.1, (2021) 0.1
- Final consumption (ktoe): (...)
• Renewables and biofuels: (2015) 9.9, (2016) 9.8, (2017) 10.3, (2018) 10.8, (2019) 11.1, (2020) 11.7, (2021) 11.7
• Non-renewable waste: (2015) 0.4, (2016) 0.4, (2017) 0.4, (2018) 0.5, (2019) 0.5, (2020) 0.6, (2021) 0.5
(...)

4.125. (...) A key policy remains the completion of an Energy Union, aiming to increase energy security, sustainability, and competitiveness, whose five dimensions remain in place to (...) (iv) decarbonize the economy; (v) and promote research and innovation in low-carbon and clean energy technologies, to support the energy transition and improve competitiveness.

4.126. (...) The European Union Agency for the Cooperation of Energy Regulators (ACER) continues to work towards the integration and completion of the internal markets for electricity and natural gas. The role that ACER will play in the future hydrogen and decarbonized gas markets remains under discussion, according to the Commission.