The European regulatory framework

Recovery Plan

To contribute to the revitalization of the European economy following the pandemic, the European Commission, the European Parliament and European leaders agreed a Recovery Plan to help the European Union emerge from the crisis and build a greener, more digital and more resilient post-COVID-19 Europe. The Plan has a total value of more than €1,824 billion and provides for reinforcing the multiannual financial framework for 2021-2027 by €1,074 billion to rapidly direct investment where it is most needed (strengthening the Single Market, driving the green and digital transition and intensifying cooperation in areas such as health and crisis management) and establishes a new instrument – Next Generation EU – worth a total of €750 billion, to temporarily (2021-2024) increase the resources available in the EU budget and support an immediate response to the crisis by kick-starting the European economy through sustainable and resilient growth.
With particular regard to Next Generation EU, the most significant resources are focused on the Recovery and Resilience Facility, which provides for the allocation of €672.5 billion (€312.5 billion in the form of grants and €360 billion in loans) to support investments and essential reforms for a lasting recovery (with a focus on investments connected with the green and digital transitions).
In this context, the Member States are called upon to prepare National Recovery and Resilience Plans (NRRPs), which must pursue the general objective of economic/social cohesion and resilience, mitigate the impact of the crisis and support the green and digital transition, in line with the seven flagship areas(1) indicated in the guidelines published by the European Commission in September 2020. The NRRPs should be submitted by April 30, 2021 but many Member States have already initiated discussions with the Commission over draft plans (this was possible from October 15, 2020).

The European Green Deal

Following the European Green Deal communication presented at the end of 2019, in the 1st Half of 2020 the European Commission published a series of legislative and non-legislative initiatives aimed at implementing the principles set out in the communication, which we discuss below.

European Climate Law
The proposal for a European Regulation, presented by the Commission on March 4, 2020 and currently under discussion in the Trilogue between the Commission, the European Parliament and the Council, would make the objective set in the European Green Deal to make the European economy and society climate neutral by 2050 legally binding. This means achieving net-zero greenhouse gas emissions (balance between emissions and absorption) for EU countries as a whole, mainly by cutting emissions, investing in green technologies and protecting the natural environment. Once approved, this would incorporate the objective of climate neutrality for 2050 in Union legislation for the first time.
The European Commission proposal also includes the goal of reducing greenhouse gas emissions by 50-55% by 2030, supported by the Commission’s Communication (and Impact Assessment) of September 2020, a target that was also approved by the European Council in December 2020. A more ambitious reduction target of 60% is currently being proposed in the European Parliament.
To pursue this objective, the proposal for an EU Regulation also provides that all European policies should be revised to ensure they contribute to achieving climate neutrality and the more ambitious intermediate target in 2030, so that all sectors of the European economy do their part. By 2021, the European Commission will propose a review of all policy instruments necessary to achieve the additional reductions planned for 2030.

Industrial Strategy
The new Industrial Strategy was presented on 10 March 2020. It is intended to maintain the global competitiveness of European industry, make Europe climate neutral by 2050 and shape Europe’s digital future. The strategy proposes a series of initiatives (legislative and non-legislative) to support all the players in European industry, from large to small businesses, research centers and start-ups. Actions include comprehensive measures to modernize and decarbonize energy-intensive industries, to support sustainable and intelligent mobility industries, to promote energy efficiency and to ensure a sufficient and secure supply of low-carbon energy at competitive prices. The Industrial Strategy also envisages the launch of a series of new alliances, such as the European Clean Hydrogen Alliance, to accelerate the decarbonization of industry and maintain industrial leadership, followed by an alliance for low-carbon industries, one for industrial clouds and platforms and one for raw materials. In addition to a complete series of actions, both horizontal and in favor of specific technologies, the Commission will systematically analyze the risks and needs of the various industrial ecosystems. In performing this analysis, the Commission will work in close collaboration with an open and inclusive industrial forum, which will be set up by September 2020.

Communication on “Shaping Europe’s digital future”
On February 19, 2020, the Commission presented strategies for data and artificial intelligence (AI). This communication introduces a series of legislative and non-legislative initiatives, with the aim of developing technology at the service of citizens and creating a fair and competitive digital economy. The areas involved in these initiatives are manifold: creation of digital skills, regulation of competition and platforms (through a proposal for a Digital Services Act) and climate neutrality by 2050.
In more detail, the aim of the data strategy is to ensure that the EU takes on the role of model and guide for companies made more autonomous thanks to data. The strategy essentially aims to create a true European data space and a single market for data, in order to unlock so far unused data to enable their free movement within the European Union in all sectors, thus benefiting businesses, researchers and governments. The Commission proposes to establish a regulatory framework for data governance, access to data and reuse of data between businesses, between businesses and government and within government. The Commission intends to support the development of technological systems and the next generation of infrastructure, which will allow the EU and all operators to take advantage of the opportunities offered by the data economy.
In the White Paper on Artificial Intelligence, the Commission called for a reliable framework based on excellence and trust. In a partnership between the public and private sectors, the goal is to mobilize resources along the entire value chain and create the right incentives to accelerate the adoption of solutions based on AI. The document calls for clear rules to govern high-risk AI systems without imposing excessive burdens on less risky ones. The White Paper also underscores the fact that strict EU rules must continue to apply to protect consumers, to address unfair commercial practices and to protect personal data and privacy.

Sustainable and Smart Mobility Strategy
On December 9, 2020, the Sustainable and Smart Mobility Strategy was presented by the European Commission together with an action plan comprising 82 initiatives. The strategy lays the foundation for how the EU transport system will need to achieve its green and digital transformation and become more resilient to future crises. As indicated in the European Green Deal, the goal is to achieve a 90% reduction in emissions by 2050, thanks to an intelligent, competitive, safe, accessible and affordable transport system. All modes of transport will need to become more sustainable, with green alternatives widely available, which is why the strategy sets specific milestones.
By 2030, at least 30 million zero-emission cars will be on European roads, 100 European cities will be climate-neutral and zero-emission marine vessels will be market-ready. By 2035, zero-emission large aircraft will be market-ready. Finally, by 2050, nearly all cars, vans, buses and new heavy-duty vehicles will be zero-emission, rail freight traffic will double and the multimodal trans-European Transport Network will be fully operational for sustainable and smart transport with high-speed connectivity.

Hydrogen Strategy
The EU Hydrogen Strategy was presented on July 8, 2020. The strategy seeks to foster an integrated energy system in which hydrogen plays a role in the decarbonization of industry, transport, construction and power generation across Europe. The priority of the strategy, through investments, the creation of a suitable regulatory framework, the creation of a market and measures to support research and innovation, is to develop renewable hydrogen, produced using mainly wind and solar energy. In the short term, the strategy also includes the use of other low-carbon forms of hydrogen to rapidly reduce emissions and support the creation of a market. The strategy aims to support the installation of at least 6 GW of renewable hydrogen electrolyzers in the European Union and the production of up to 1 million metric tons of renewable hydrogen between 2020 and 2024, 40 GW of renewable hydrogen electrolyzers and the production of up to 10 million metric tons of renewable hydrogen between 2025 and 2030 and the large-scale deployment of hydrogen-based solutions in all hard-to-decarbonize sectors from 2030.

EU strategy on energy system integration
In conjunction with the Hydrogen Strategy, the EU strategy for energy system integration was also presented on July 8, 2020. The aim of the strategy is to transform today’s energy system, in which each sector (transport, industry, gas, construction) constitutes a separate silo, by creating new intersectoral connections, exploiting technological advances in order to achieve climate neutrality by 2050 in the most cost effective way. The strategy lists 38 actions to achieve this more integrated energy system and is based on three pillars: a more circular energy system, centered on energy efficiency, accelerating direct electrification of end-user sectors and the promotion of clean fuels, including renewable hydrogen, biofuels and sustainable biogas in sectors that are difficult to electrify.

Just Transition Fund
The Just Transition Fund (JTF) is a funding instrument included within the Just Transition Mechanism (JTM), aimed at supporting Member States in reducing the economic and social impacts of the transition to a climate-neutral economy. The total resources (2021-2027) at the Community level allocated to the JTF amount to €17.5 billion, of which €7.5 billion from the EU’s multiannual financial framework for 2021-2027 and €10 billion from Next Generation EU.
The resources are allocated between the Member States by the Commission, and Italy would be eligible for about €900 million, with just under €800 million going to Spain and Greece and about €2 billion to Romania (at 2018 prices). The JTF will support workers, businesses and regional authorities in the green transition and will finance a large number of initiatives, including the remediation and decontamination of brownfield sites, investments in renewables and energy efficiency, upskilling and reskilling, and sustainable mobility. The Member States are called upon to present national transition plans that cover one or more territories within the country that are most strongly impacted by the transition to a green economy.

Sustainable Finance
In March 2020, the Taxonomy Expert Group presented its final taxonomy report and a guide on recommendations for a European Green Bond standard. With regard to the taxonomy, in June the European Parliament approved the EU taxonomy regulation. The European Parliament’s approval followed the adoption of the text by the Council on June 10, 2020. The Commission must now adopt delegated acts on the European taxonomy that establish the technical screening criteria for determining whether a specific economic activity substantially contributes to achievement of one or more of the EU’s environmental goals. The adoption of the delegated acts, initially scheduled for the end of 2020, was postponed to the early months of 2021. As regards the Green Bonds, after the issue of the guidelines, a public consultation was held in June-October to support the Commission in assessing certain key aspects relating to the Green Bond Standard. In the conclusions of the European Council meeting on December 10 and 11, the leaders of the Member States called on the EU to promote the development of common global rules for green finance. In this context, the Council invited the Commission to present the legislative proposal on the EU Green Bond Standard by June 2021 at the latest.

State aid decisions

On March 19, 2020 and as subsequently amended on April 3, May 8 and June 29, 2020, the European Commission adopted a temporary framework for addressing the impact of the COVID-19 pandemic in order to support Member States with regard to the use of State aid to provide the necessary liquidity to the economic system, including SMEs, to facilitate its application to all sectors and types of business affected by the crisis (with the exception of the financial sector and for companies already in difficulty at the end of 2019) and to help stabilize the European economy while preserving the single market.
On May 28, 2020, the European Commission approved a support scheme for the generation of electricity in the Canary Islands, Balearic Islands, Ceuta and Melilla within the State aid framework for the provision of services of general economic interest (SGEI).
The Commission approved the scheme until the end of 2029 for the Canary Islands, Ceuta and Melilla and 2025 for the Balearic Islands. In order to ensure the long-term security of supply, Spain has undertaken to build a second subsea connection between the mainland and Majorca by 2025. The mechanism will compensate electricity generators fulfilling a public service obligation for the additional cost of providing these services and ensure the establishment of competitive procedures for the development of new generation plants and/or decarbonized solutions.
On September 22, the Vice President of the European Commission and Commissioner for Competition Margaret Vestager announced a “Call for Contributions” on the role of competition policy in supporting the objectives of the European Green Deal. The document, which was sent to the European Commission on November 20, 2020, concerns the control of the State aid, antitrust and merger regulations and the possible introduction of a “Green Bonus” for measures supporting decarbonization.
On November 12, 2020, the European Commission published the Impact Assessment on the revision of the guidelines on State aid for environmental protection and energy (Energy and Environmental State aid guidelines - EEAG).
On November 23, the Commission published a further roadmap for the revision of the Communication on Important Projects of Common European Interest (IPCEI) in order to develop the hydrogen industrial chain and the European gigafactory.
On December 21, the European Commission published 11 templates relating to the rules governing State aid for the seven flagship areas of the Recovery and Resilience Facility.

(1) (i) Power Up; (ii) Renovate; (iii) Recharge and Refuel; (iv) Connect; (v) Modernize; (vi) Scale-up; (vii) Reskill and Upskill.