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EU Council agrees on additional 20 bln euros to achieve the REPowerEU objectives

The European Council agreed on a common position on the REPowerEU proposal, a plan to phase out the Union’s dependency on Russian fossil fuel imports.
In practical terms, the proposal seeks to add a new REPowerEU chapter to EU Member States’ national recovery and resilience plans (RRPs) under NextGenerationEU, in order to finance key investments and reforms which will help achieve the REPowerEU objectives.

“Today we achieved a major step forward in strengthening Europe’s autonomy from Russia’s fossil fuels,” said Zbyněk Stanjura, Minister of Finance of Czechia. “A great achievement for the Czech presidency,” he said, “because at the beginning of this year our dependency on Russian gas was around 97 per cent. The REPowerEU will help Europe reduce dependency on Russian fossil fuels as soon as possible.”

In its position, the Council modified the origin of the funds for REPowerEU as well as the allocation key of the additional 20 billion euros proposed by the European Commission.

As regards the sources of financing of these additional funds, instead of auctioning from the EU Emissions Trading System (ETS) Market Stability Reserve, the Council is opting for a combination of sources: the Innovation Fund (75 per cent) and front-loading ETS allowances (25 per cent). The Council’s aim is to not disrupt the functioning of the EU ETS system while ensuring a credible revenue stream.
The Council modified the allocation key by introducing a formula which takes into account cohesion policy, Member States’ dependence on fossil fuels and the increase in investment prices.

In its position, the Council limited the obligation for Member States to submit the REPowerEU chapter only to cases where they wish to request RRP additional funding in the form of RRF loans from NGEU, non-repayable support from new revenue or newly transferred resources from shared management programmes and thus not upwards updates of maximum financial contribution.

Concerning possible derogations from the do-no-significant-harm principle for investments in improving the energy infrastructure and facilities to meet immediate security of supply needs for oil and gas, a careful balance was struck which aims to limit the additional administrative burden for member states. The Council is obliging Member States to provide a justification to the Commission when they wish to derogate from the ‘do-no-significant-harm’ principle.

Ministers also discussed the role of financial markets regarding the high volatility of energy prices and potential policy measures, based on a presentation by the Commission.

“Slovenia believes that [current measures] are not enough, we should try to find the way to fight the reasons for this crisis and I am talking about the fact that on the energy market high energy prices are not the only problem but also the high volatility of the prices which brings the market participants into serious liquidity problems,” stated Klemen Boštjančič, Minister for Finance of Slovenia. “We should regulate the market which does not function as it should.”

The exchange confirmed that most Ministers can agree to targeted changes, for example by widening the pool of eligible collateral and better use of so-called circuit breakers or price collars, as well as by adapting the temporary framework for state aid. Work on an additional LNG gas price benchmark to be established by the private sector ahead of the next filling season (before the end of March 2023) was also supported.

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