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Document 52024PC0282

Proposal for a COUNCIL DECISION on the position to be taken on behalf of the European Union on the review of Article 6 of the Arrangement on Officially Supported Export Credits

COM/2024/282 final

Brussels, 9.7.2024

COM(2024) 282 final

2024/0156(NLE)

Proposal for a

COUNCIL DECISION

on the position to be taken on behalf of the European Union on the review of Article 6 of the Arrangement on Officially Supported Export Credits


EXPLANATORY MEMORANDUM

1.Subject matter of the proposal

This proposal concerns a decision establishing the position to be taken on the Union's behalf in the context of the review of Article 6 of the Arrangement on Officially Supported Export Credits (the ‘Arrangement’).

2.Context of the proposal

2.1.The Arrangement on Officially Supported Export Credits

The Arrangement is a gentlemen's agreement between the EU, the US, Canada, Japan, Korea, Norway, Switzerland, Australia, New Zealand, Türkiye and the United Kingdom (the ‘Participants’), which provides a framework for the orderly use of officially supported export credits. In practice, this means establishing a level playing field between Participants (whereby competition is based on the price and quality of the exported goods and services and not on the financial terms provided), while working to eliminate subsidies and trade distortions related to officially supported export credits. The Arrangement entered into force in April 1978, is of indefinite duration, and although it receives the administrative support of the OECD Secretariat, is not an OECD Act 1 .

The Arrangement is subject to regular updates, taking into account financial market and policy developments affecting the provision of officially supported export credits. The Arrangement has been transposed, and hence been made legally binding in the EU by Regulation (EU) No 1233/2011 of the European Parliament and of the Council 2 . Revisions of the terms and conditions of the Arrangement are incorporated into EU law through Delegated Acts pursuant to Article 2 of Regulation (EU) No 1233/2011.

2.2.The Participants to the Arrangement and decision making

The European Commission represents the Union in meetings of the Participants, as well as in the written procedures for decision-making by the Participants. Decisions on all amendments of the Arrangement are taken by consensus.

2.3.The envisaged act of the Participants

A mandated review of Article 6 of the Arrangement is under discussion at the level of the Participants to the Arrangement, on the basis of proposals from the Union and a number of other Participants. These proposals share the aim of aligning the Arrangement with international climate goals by extending an existing ban on support to unabated coal-fired power plants in Article 6 to the fossil fuel energy sector as a whole, except in limited and clearly defined circumstances.

The change is supported by the scientific evidence. According to the International Energy Agency (IEA) in its “Net Zero by 2050” analysis 3 , no new investment into fossil fuel supply should happen after 2021 in a net zero pathway. Furthermore, commitments to make the necessary policy changes were already taken by many OECD governments and export credit agencies in different ways: at national level, with the adoption of phase-out policies, and also in multilateral statements such as the COP 26 Statement on International Public Support for the Clean Energy Transition. In April 2023, G7 Climate, Energy and Environment Ministers recalled their commitment to align official international financing with the goals of the Paris Agreement, noting also the need to take account of national security and geostrategic interests. The value of IEA’s analysis, along with that of the United Nations intergovernmental Panel on Climate Change (IPCC) has been recognised by the Council in its Conclusions of March 2022 that state that Members States would, by the end of 2023 establish “their own science-based deadlines for ending officially supported export credits to fossil fuel energy sector projects, unless in limited and clearly defined circumstances that are consistent with a 1.5°C warming limit and the goals of the Paris Agreement.” 4

The envisaged act would establish a general rule that officially supported export credits and tied aid may not be granted for the fossil fuel energy sector except in limited and clearly defined circumstances that are consistent with a 1.5°C warming limit and the goals of the Paris Agreement. It would not set out the nature of those circumstances but allow discretion to Participants in their approach. Discipline as to the use of this flexibility would be ensured by transparency obligations.

3.Position to be taken on the Union's behalf

As it is crucial that the OECD export credit community adequately translates climate policy objectives into the Arrangement rules and into practical measures, the Union will push for agreement on this phase out in the coming meetings. Several other Participants are likely to push in the same direction and others announced this year that they would end support to unabated fossil fuel energy sector. The Union should be able to take a position on the review of Article 6 to the Arrangement. The Annex to this proposal for a Council Decision contains the latest EU proposal for a landing zone of the agreement. The Union’s position should be to join the consensus on an OECD Decision, if it is in line with this landing zone.

4.Legal basis

4.1.Procedural legal basis

4.1.1.Principles

Article 218(9) of the Treaty on the Functioning of the European Union (TFEU) provides for decisions establishing ‘the positions to be adopted on the Union’s behalf in a body set up by an agreement, when that body is called upon to adopt acts having legal effects, with the exception of acts supplementing or amending the institutional framework of the agreement.’

The concept of ‘acts having legal effects’ includes acts that have legal effects by virtue of the rules of international law governing the body in question. It also includes instruments that do not have a binding effect under international law, but that are ‘capable of decisively influencing the content of the legislation adopted by the EU legislature’ 5 .

4.1.2.Application to the present case

The envisaged act is capable of decisively influencing the content of EU legislation, namely Regulation (EU) No 1233/2011 of the European Parliament and of the Council of 16 November 2011 on the application of certain guidelines in the field of officially supported export credits and repealing Council Decisions 2001/76/EC and 2001/77/EC. This is because of Article 2 of this Regulation, which states that "[t]he Commission shall adopt delegated acts in accordance with Article 3 to amend Annex II as a result of amendments to the guidelines agreed by the Participants to the Arrangement". This includes amendments of annexes to the Arrangement.

Therefore, the procedural legal basis for the proposed decision is Article 218(9) TFEU.

4.2.Substantive legal basis

4.2.1.Principles

The substantive legal basis for a decision under Article 218(9) TFEU depends primarily on the objective and content of the envisaged act in respect of which a position is taken on the Union's behalf.

4.2.2.Application to the present case

The main objective and content of the envisaged act relate to export credits, which is within the scope of the common commercial policy. Therefore, the substantive legal basis of the proposed decision is Article 207 TFEU.

4.3.Conclusion

The legal basis of the proposed decision should be Article 207(4), first subparagraph, TEFU in conjunction with Article 218(9) TFEU.

5.Publication of the envisaged act

As the envisaged act will amend the Arrangement, it is appropriate to publish it in the Official Journal of the European Union after its adoption.

2024/0156 (NLE)

Proposal for a

COUNCIL DECISION

on the position to be taken on behalf of the European Union on the review of Article 6 of the Arrangement on Officially Supported Export Credits

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 207(4), first subparagraph, in conjunction with Article 218(9) thereof,

Having regard to the proposal from the European Commission,

Whereas:

(1)The guidelines contained in the Arrangement on Officially Supported Export Credits (the ‘Arrangement’) have been transposed, and hence been made legally binding in the Union by virtue of Regulation (EU) No 1233/2011 of the European Parliament and of the Council 6 .

(2)In accordance with Article 6 of the Arrangement, the participants to the Arrangement (the ‘Participants’) should review this article with the objective of further strengthening its terms and conditions in order to contribute to the common goal of addressing climate change.

(3)The envisaged decision to review Article 6 of the Arrangement should be in line with the international commitments of the European Union pursuant to the Paris Agreement and the Union’s climate policy.

(4)The Council of the European Union in its Conclusions on export credit of 15 march 2022 already announced the intention by the Member States to determine by the end of 2023 in their national policies their own science-based deadlines for ending officially supported export credits to fossil fuel energy sector projects, unless in limited and clearly defined circumstances that are consistent with a 1.5°C warming limit and the goals of the Paris Agreement.

(5)It is appropriate to establish the position to be taken on the Union's behalf regarding the review of Article 6 of the Arrangement, as the envisaged decision of the Participants to the Arrangement will be binding on the Union and capable of decisively influencing the content of Union law, by virtue of Article 2 of Regulation (EU) No 1233/2011,

HAS ADOPTED THIS DECISION:

Article 1

The position to be adopted on the Union's behalf shall be to join the consensus of the Participants to the Arrangement regarding the review of the Article 6 of the Arrangement and other related articles in line with the annex to this Decision.

Article 2

This Decision is addressed to the Commission.

Done at Brussels,

   For the Council

   The President

(1)    As defined in Article 5 of the OECD Convention.
(2)    Regulation (EU) No 1233/2011 of the European Parliament and of the Council of 16 November 2011 on the application of certain guidelines in the field of officially supported export credits and repealing Council Decisions 2001/76/EC and 2001/77/EC (OJ L 326, 8.12.2011, p. 45).
(3)     https://www.iea.org/reports/net-zero-by-2050
(4)    Council Conclusions on export credits, approved by the Council (Economic and Financial Affairs) at its 3855th meeting on 15 March 2022 ( https://data.consilium.europa.eu/doc/document/ST-7101-2022-INIT/en/pdf. )
(5)    Judgment of the Court of Justice of 7 October 2014, Germany v Council, C-399/12, ECLI:EU:C:2014:2258, paragraphs 61 to 64.
(6)    Regulation (EU) No 1233/2011 of the European Parliament and of the Council of 16 November 2011 on the application of certain guidelines in the field of officially supported export credits and repealing Council Decisions 2001/76/EC and 2001/77/EC (OJ L 326, 8.12.2011, p. 45) (‘Regulation (EU) No 1233/2011’).
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Brussels, 9.7.2024

COM(2024) 282 final

ANNEX

to the

Proposal for a Council Decision

on the position to be taken on behalf of the European Union on the review of Article 6 of the Arrangement on Officially Supported Export Credits






ANNEX

The position of the European Union is to support a revision of Article 6 of the Arrangement and other related provisions in line with the last proposal submitted by the European Union to the other Participants to the Arrangement.

The last Union proposal suggested to replace the current text of Article 6 and to delete the lines on project classes B and C in the Appendix I (Eligibility Criteria for Climate Change Mitigation Projects) of Annex I (Sector Understanding on Export Credits for Climate Change [CCSU]) to the Arrangement, as set out hereunder:

6. PROHIBITIONS ON ARRANGEMENT SUPPORT

a)Participants shall not provide officially supported export credits or tied aid for fossil fuel energy sector except in limited and clearly defined circumstances that are consistent with a 1.5°C warming limit and the goals of the Paris Agreement. The consistency is to be assessed against the latest scientific evidence provided by the IPCC and the IEA.

b)For the provisions set out in paragraph a), all projects related to the following are covered: exploration, production, transportation, storage, refining, distribution of coal, crude oil, natural gas, or conversion into electricity or heat of coal, crude oil, natural gas and its derivatives.

c)The prohibitions set out in paragraphs a) and b) above do not apply to projects that meet the standards as set out in the CCSU, Appendix I

d)The OECD Secretariat shall annually prepare a public report on officially supported export credits or tied aid provided for fossil fuel energy sector and clean energy projects defined as transactions that fall under Project Class A (Environmentally sustainable energy production) and Project Class E (Transmission, distribution, and storage of energy) of the CCSU. The report shall include number of transactions and aggregate credit values by country of origination and destination, type of fossil fuels, and a breakdown on up-stream (exploration and production), mid-stream (transportation and storage), down-stream (refining and distribution) and power-generation activities for the fossil fuel energy sector and for the clean energy projects a breakdown on Project Class A and E projects. 

e)The provisions set out in this Article shall be reviewed no later than 31 December 2026, in order to contribute to the common goal of addressing climate change, taking into account the most recent reports on climate science and the most recent recommendations from international organisations on concrete means to hold the increase in the global average temperature to 1.5 degrees Celsius above pre-industrial levels.

[…]

APPENDIX I: ELIGIBILITY CRITERIA FOR CLIMATE CHANGE MITIGATION PROJECTS

[…]

PROJECT CLASS

DEFINITION

RATIONALE

STANDARDS USED OR SUNSET TIMELINE

MAXIMUM REPAYMENT TERM

PROJECT CLASS B: Remediation projects in fossil fuel plants, fossil fuel substitution

TYPE 1: Fossil Fuel Power Plants with Operational Carbon Capture and Storage (CCS)*

A process consisting of the separation of CO2 stream from the emissions produced by fossil fuel generation sources, transport to a storage site, for the purposes of environmentally safe and permanent geological storage of CO2 or use as an input or feedstock to create products or services.

To achieve low carbon emission levels for fossil fuel power sources.

Carbon intensity shall achieve a level equal to or less than 350 metric ton CO2 per GWh vented to atmosphere 1 ;

or

In the case of all projects, a capture and storage rate that would reduce the plant’s carbon emissions by 65% or greater;

or

The capture rate has to be at least 85% of CO2 emitted by the equipment included in the

application for officially supported export credits. The 85% is to apply at normal operating conditions.

18 years.

TYPE 2: Waste to Energy*

Unit dedicated to generating energy by thermal treatment (including gasification) of mixed stream solid waste.

To offset GHG emissions from the use of conventional power and by reducing future GHG such as methane that would normally emanate from the waste.

In the case of a steam cycle, a boiler (or steam generator) energy conversion efficiency of at least 75% based on low heating value (LHV). 2  In the case of gasification, a gasifier efficiency of at least 65% LHV. 3

15 years

TYPE 3: Hybrid Power Plants*

A power plant that generates electric power from both a renewable energy source and a fossil fuel source.

To meet the requirement of plant availability, a fossil fuel generating source is required for those periods when power from the renewable energy source is not available or sufficient. The fossil fuel source enables the usage of renewable energy in the hybrid plant, thereby achieving a significant carbon reduction compared with standard fossil fuel plant

Model 1:

Two separate generation sources: one Renewable Energy and one fossil fuel. Project shall be designed such that at least 50% of its projected total annual energy output originates from the plant’s renewable energy source.

Model 2:

Single generation source using the combination of renewable and fossil fuel. The project shall be designed such that at least 75% of the useful energy produced is derived from the renewable source.

15 years

PROJECT CLASS C: Energy efficiency

TYPE 1: Combined Heat & Power projects*

Simultaneous generation of multiple forms of energy (electrical, mechanical and thermal) in a single integrated system. Output of the CHP plant shall include electric or mechanical energy and heat for commercial industrial and/or residential use.

Up to two thirds of the primary energy used to generate electricity in conventional thermal power plants is lost in the form of heat. Combined heat and power (CHP) generation can therefore be an effective GHG mitigation option. CHP is possible with all heat machines and fuels (including biomass and solar thermal) from a few kW-rated to 1000MW steam-condensing power plants. 4

Overall efficiency of at least 75% based on low heating value (LHV). 5

15 years

TYPE 2: District heating and/or cooling*

Network which carries/ distributes thermal energy from energy producing unit to end use.

To improve the efficiency of heating of districts by building piping networks for steam and/or hot water with substantial thermal efficiency, both by minimising losses of piping and converters, and by increasing the amount of utilisation of waste heat. District cooling is an integrative technology that can make significant contributions to reducing emissions of carbon dioxide and air pollution and to increasing energy security e.g. via substitution of individual air conditioners.

The district piping thermal conductivity shall be less than 80% of the relevant thermal conductivity required by the European standard EN253:2009 (to be reviewed when this standard is updated).

15 years

TYPE 3: Smart Grids*

Integrated, technologically advanced electricity networks with improved dynamic capabilities to monitor and control the input and output of all their constituent technical components (such as power generation, Network Management Solutions, High Voltage Direct Current (HVDC) converters and systems, Flexible Alternating Current Transmission Systems (FACTS), Special Power Systems (SPS), transmission, distribution, storage, Smart Grid Power Electronics Solutions, consumption reduction, metering, distributed energy resources). ICT according to internationally agreed industry standards such as NIST-SGIP and ETSI-CEN-CENELEC.

To enable network operators, transmission and distribution system operators, grid users, storage owners, metering operators, applications and service providers or power exchange platform operators to create economical, environmentally-friendly, balanced and sustainable power systems with reduced transmission losses and optimized levels of supply quality, safety, grid stability, reliability, renewable power collection and cost-efficiency by supporting supply contracts involving predominantly export of state-of-the-art, innovative technologies and services.

Standards 1, 2 (a or b) and 3 shall be met.

1. The total cost of the project includes at least 20% for eligible information and communication technology (ICT) upgrades.

2a. An estimated minimum 10% reduction in the amount of CO2 emissions from fossil fuel will result from the project or application, or

2b. Demonstrated significant CO2 emission reductions will be enabled through either:

reductions in energy losses within the electricity grid served by the Smart Grid application or project by at least 5%; or

reductions in aggregate electricity consumption by loads served by the Smart Grid application or project by at least 5%; or

intermittent feed-in of renewable energies, including from subordinate voltage levels, representing at least an additional 10% of the total energy fed into the grid where the smart grid technologies are applied.

3. Prior to authorization, an independent, qualified third party will review the project and prepare a report that describes the characteristics of the proposed Smart Grid application or project and verifies whether the project or application will meet standards 1 and 2 (a or b). For projects using the 2b standard, estimated C02 emissions reductions enabled by the project will be included in the report. Such report will be shared with Participants prior to any authorization of financial support and authorization will be conditional on the report positively verifying that standards 1 and 2 (a or b) will be met by the proposed Smart Grid project or application.

Standards will be measured by comparing the estimated emissions or energy use from an Area Served by the Grid if the proposed Smart Grid technologies are applied to emissions or energy use of that same area if the proposed Smart Grid technologies were not applied

15 years

Note: * In an effort to respond to the climate imperative, Participants have focused their effort on expanding the scope of the CCSU to include new project classes. Participants commit to reviewing these project classes, which have not been examined since 2012, as soon as possible but no later than March 2024. 

Minor technical changes to the position expressed with the last Union proposal may be agreed to by the representatives of the Union within the Participants to the Arrangement without further decision of the Council.

(1)    In the case of a plant fuelled by natural gas, significantly lower carbon intensity is expected to be achieved.
(2)    Boiler (or steam generator) energy conversion efficiency = (Net heat exported by the steam / heat or calorific value [LHV] provided by the fuel) (x 100%).
(3)    Gasifier efficiency = (Calorific value of gas per kg of fuel used / average net calorific value (LHV) of one kg of fuel) (x 100%).
(4)    IPCC Fourth Assessment Report: Climate Change 2007, http://www.ipcc.ch/publications_and_data/ ar4/wg3/en/ch4s4-3-5.html.
(5)    The total system efficiency () of a CHP system is the sum of the net useful power output (WE) and net useful thermal outputs (ΣQTH) divided by the total fuel input (QFUEL), as shown below:
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