The EU has agreed that one third of energy use should be from renewable sources and encourages the use of renewable electricity or biofuels sourced from waste rather than crops.

After 18 months of negotiations, the EU has increased its renewable energy target from 27% to 32% for the years 2020 to 2030. The European Parliament and Council will formally approve the agreement in the near future, so it can be set into EU law in the form of the EU Renewable Energy Directive (RED II).

The EU has agreed that by 2030, just under one third of energy use in the EU should be from renewable sources. The trade body for European energy utilities has described the deal as a “well-balanced compromise”. Miguel Arias Cañete, the climate and energy commissioner, noted that “the binding nature of the target will also provide additional certainty to the investors”.

However, some environmental groups — such as Friends of the Earth Europe — have criticised the target for not being ambitious enough to reach commitments under the Paris Agreement. Moreover, some MEPs — including those from Spain and Italy — had hoped for a target of 35%. In order to assuage those who pushed for a higher target, the EU included the 2023 review clause as a key feature of the agreement. Under this clause, according to José Blanco, social democrat lawmaker and lead negotiator for the European Parliament, the target can be revised “in case of substantial cost reductions … or if necessary to meet new international climate change obligations”.

The EU has established an interim target of 20% for 2020. Studies have shown that this target should be achievable, as around 17% of the EU’s energy use was from renewable sources in 2016. However significant discrepancy exists across Member States. For example, in 2016, the UK’s renewable energy consumption was only 9%. Fern, an EU-based non-governmental organisation, noted that “woody biomass is the EU’s biggest source of renewable energy”, as Member States are permitted to count burning wood towards their 2030 target.

Biofuels sourced from soybean and palm oil will be phased out from 2023 and capped at the consumption levels of 2019. This is to encourage the use of renewable electricity or biofuels sourced from waste rather than crops.

Parallel negotiations on changes to the Energy Efficiency Directive concluded with no deal after Member States rejected the European Parliament’s compromise offer of a 32.5% target.

Latham will continue to monitor the progress of the legislation.

This post was prepared with the assistance of Olivia Featherstone in the London office of Latham & Watkins.