How will the problem evolve?

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forest biomass, in order to avoid the risk of biomass sourcing from primary and highly biodiverse forests: b) applying the EU sustainability criteria to smaller installations (below the current threshold of 20 MW) in order to regulate a larger share of biomass use, thus avoiding possible ‘environmental leakage’ risks.

According to JRC data, the majority of woody biomass for energy use comes from timber residues and waste produced either from the forest-based industries and post-consumer wood (49%), or from timber logging (17%). At the same time, 20% of total woody biomass supply comes from stemwood, of which at least half is from coppice forests. About 4% of total woody biomass use for energy comes from industrial quality stemwood. This finding highlights the need for Member States to further promote the cascading use of woody biomass when designing their support schemes for bioenergy. In this respect, the Biodiversity Strategy has also called for the use of whole tree harvesting for energy production – whether produced in the EU or imported – to be minimised³⁴. Inefficient biomass combustion is also a source of air pollution³⁵. According to the World Health Organisation, residential heating with solid fuels (coal or wood) is an important source of particulate matters and carcinogenic compounds, especially in Central Europe. In particular, biomass combustion in old and inefficient households and other small installations could compromise local and regional air quality objectives. While REDII does not include specific air quality criteria for biomass combustion, it should be noted that air pollution of fuels is effectively addressed through EU environmental legislation including a number of different measures³⁶. Under the energy legislation, the Eco-design Directive has been identified as the most appropriate tool to set stricter emission requirements for new solid fuel boilers and space heaters, which are applicable since 1 January 2020.

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level of the Renewable energy directive unchanged would put additional burden for increased decarbonisation on other instruments such as the Energy Efficiency Directive as well as other instruments such as the Emissions Trading System, and the LULUCF and Effort Sharing Regulations. This could increase economic costs and distributional impacts especially in sectors included in the ETS. It would also fail to incentivise the market to invest more in renewables and innovate sufficiently.

In heating and cooling, the low ambition shown by many of the Member States in their NECPs in relation to the indicative renewable heating and cooling target and the indicative renewable district heating and cooling target set in REDII would continue. The current target ambition, coupled with no additional measures to tackle long-entrenched barriers across the whole heating and cooling sector means there would be slow progress, technology lock-in and lack of engagement from citizens, consumers and investors to contribute to the decarbonisation of this sector.

In transport, it is clear that several Member States have high ambition for greening road transport, in particular by looking into policies strongly discouraging the use of cars and vans with internal combustion engine. Direct electrification with renewable electricity, in conjunction with deep integration of electric vehicles in the electricity system, are considered to be the main options to reduce GHG emissions of cars and light duty vehicles. However, there are other transport modes, such as aviation and maritime but also long-haul transport, which cannot today be easily electrified and where renewable and low-carbon fuels including renewable hydrogen will be needed to replace fossil fuels, complementing energy efficiency improvements, modal shift and electrification efforts.

Such innovative fuels will not be sufficiently promoted by other means such as ETS.

Renewables are developing strongly in the power generation sector through lower technology costs and stable ETS prices, but this is not enough to decarbonise the electricity sector at the pace required to cut emissions in the EU by 55% by 2030. New market avenues to develop additional renewable power generation, e.g. through merchant projects or corporate PPAs, are emerging, but still at a limited scale and in only a few Member States. The use of measures for cross-border cooperation has been limited in the past. With a view to 2030, very few Member States included concrete plans in their NECPs to implemented cross-border cooperation projects in the future, and this leads to lost opportunities. With regard to offshore renewable energy, the sector has shown great progress over the past years. However, to complement the provisions on grid related planning and cooperation addressed in the proposal for the revised TEN-E Guidelines, more ambition and increased efforts on deployment plans, joint projects and regional cooperation on renewable offshore generation are essential in order to tap the huge potential offered by offshore energy needed by 2030 and beyond and to do so in a cost-effective way.

As there are no specific requirements on industry to increase the level of renewable energy use under REDII, it is to be expected that the uptake of renewable energy will continue to stagnate as it has done over the past decade, and GHG emissions from industry will not decrease.

Regarding buildings, on average, the percentage use of renewables in buildings is 23.5%. Without new measures to increase the use of renewable energy in buildings generally and to encourage the move away from oil and coal- boilers, emissions from the buildings sector will be very slow to decrease.

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In terms of energy system integration, the further penetration of electricity and other decarbonised energy carriers such as renewable and low carbon fuels is expected to be moderate and uneven.

Without further action to improve integration of the energy system, the burden of decarbonisation would continue to fall predominately on the power sector, and the substantial potential for decarbonisation and increased renewable energy use in end-use sectors, such as buildings, heating and cooling, transport and industry, would be partly foregone. Regarding the system integration of variable renewable electricity, the Clean Energy Package has introduced a number of provisions ensuring that electricity markets are fit for renewables. However, such provisions could be complemented by more sector-specific measures aimed at reaping the full benefit of distributed assets, such as heat pumps or electric vehicles and stationary batteries, for the integration of variable renewables.

In hard-to-decarbonise sectors such as maritime, aviation and industry, the current framework will offer limited incentives to promote innovative fuels such as RFNBOs and low-carbon fuels by 2030. While REDII sets a target of 3.5% for advanced biofuels in transport, high upfront capital investment needs and higher costs for RFNBOs and low carbon fuels will not allow them to penetrate these sectors before 2030 and thus provide the basis for a more significant uptake after 2030. Renewable and low-carbon fuels (including hydrogen) can be promoted most effectively if they can be easily distinguished from more polluting energy sources. Without a certification system and the provision of information to the market and policy makers about the environmental and energy efficiency performance of energy carriers, the promotion of promising energy solutions would be jeopardised.

REDII extended the EU bioenergy sustainability framework to cover also large-scale use of biomass and biogas in heat and power and it included new risk-based criteria for forest biomass and for agriculture biomass. It also includes minimum GHG saving criteria for biofuels for transport and biomass/biogas in heat and power and minimum efficiency criteria for biomass based electricity production. In addition, it requires Member States to design their support schemes with due regard to the waste hierarchy to avoid undue distortions of the raw material market, and not to support waste to energy in case they have not met the separate sorting obligations under the Waste Framework Directive. However, these criteria will be effective only from the transposition deadline in June 2021 and there is no information on their effectiveness.

The use of bioenergy is projected to increase moderately between 2020 and 2030 (in some scenarios biomass consumption is even projected to decrease, mitigating possible conflicts with biodiversity objectives). Post-2030 sustainable bioenergy is set to gain increasing importance, particulary in the electricity, transport and industry sectors, with the view to contribute to carbon neutrality goal by 2050³⁹. While the EU sustainability criteria have been reinforced under REDII, they do not fully address the risks of sourcing forest biomass from primary and highly biodiverse forests (unless they are protected by national or international competent authorities). In addition, the exemption of installations equal or above 20MW still leaves a large share of biomass unregulated (25% of commercial woody biomass plus households use for space heating). Furthermore, thanks to the Renovation Wave, the replacement rate of inefficient biomass boilers is projected to increase, with related reduced emissions. Finally, Member States provide important financial support to bioenergy production. In 2018 the total EU27 biomass support amounted to 10.3 billion EUR, and biogas

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received 3 billion EUR, and when subsidies could not directly assigned to any of the two (biomass-biogas), the support amounted to 1.5 billion EUR. Without a reinforced application of the cascading principle, this national financial flows could lead to undue distortions of the raw material market, and even divert high quality wood to energy market, with associated negative impacts on resource efficiency, biodiversity and carbon sinks. The projected reduction of biomass use by households for local space heating, due to more efficient housing and higher electrification, will result in a reduction of related air emissions.

3. WHY SHOULD THE EU ACT? 3.1. Legal basis

The proposal is based on Article 194(2) of the Treaty on the Functioning of the European Union (TFEU), which provides the legal basis for proposing measures to develop new and renewable forms of energy, one of the goals of the Union’s energy policy, set out in Article 194(1) (c) TFEU. REDII, which will be amended by this proposal, was also adopted under Article 194(2) TFEU in 2018.

It is an initiative in an area of energy, which is a shared competence between the EU and the Member States.