EUROPEAN COMMISSION Brussels, 26.10.2021 COM(2021) 950 final REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS



State of the Energy Union 2021 – Contributing to the European Green Deal and the Union’s recovery







(pursuant to Regulation (EU) 2018/1999 on the Governance of the Energy Union and Climate Action)







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1.Introduction and highlights The State of the Energy Union report marks, each year, the moment to take stock of change and of progress in the implementation of the European Union (EU) energy and climate policies, including the Energy Union across its five pillars, on the road to climate neutrality by 2050. The current year heralds a decade widely considered to be decisive for the fight against climate change, biodiversity loss and pollution, driven by natural resources depletion. It also marks an important passage from the Covid-19 crisis to economic recovery and from setting out the European Green Deal and its accompanying strategies to moving decisively to implementation. This year’s State of the Energy Union report thus takes stock of the Commission’s intense work with the other European institutions, Member States and its international partners on the EU response to the double challenge of achieving a fast, sustained recovery from the impacts of the COVID-19 crisis and of climate change. Investing in the transformation of the energy system is part of the solution on the path to climate neutrality and a response to the impacts of the COVID-19 crisis. This year’s report is also published against the background of a sharp spike in gas and electricity prices in the European Union as in many other areas of the world. Primarily due to global demand for gas soaring as economic recovery is picking up without higher demand being matched by higher supply, these increases are a high concern for citizens, businesses, the European institutions and governments all over the EU. To help and support addressing the negative impact on households and businesses, the Commission’s recent communication “Tackling rising energy prices: a toolbox for action and support” outlines a toolbox of short and longer term measures. These aim to allow a rapid co-ordinated approach to protect those most at risk without fragmenting the European single energy market or jeopardising investments in the energy sector and the green transition. In the medium term, the suggested policy response should focus on making the EU more efficient in the use of energy, less dependent on fossil fuels and more resilient to energy price spikes, while providing affordable and clean energy to end-users. The findings of this report help informing the discussion on how the Energy Union will best contribute to this. Finally, the report is also published on the eve of the 26th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP 26) in Glasgow. This comes during a year when many regions suffered from extreme weather events and the Intergovernmental Panel on Climate Change (IPCC) pointed to the increased risk of such events in the future and clearly attributed climate change to human activities. As shown by the International Energy Agency’s (IEA) World Energy Outlook 2021, combatting climate change requires urgent action during the current decade and will require a profound transformation of consumption and production patterns, notably the way energy is produced, transported and consumed. This Communication presents a state of play on this transformation helping identifying future areas for action and increased efforts. Inter-related accompanying reports allow a deeper analysis on the following: -The report on the functioning of the carbon market (emissions trading system) State of the Energy Union - key findings ·In 2020, EU greenhouse gas (GHG) emissions (including international aviation) were down 31 % compared to 1990 due to the impact of the pandemic on energy consumption but also due to continued decarbonisation trends; ·In 2020, for the first time, renewables overtook fossil fuels as the EU’s main power source (38 % of EU electricity, fossil fuels 37 % and nuclear 25 %). The share of renewable energy sources in the overall EU energy mix is expected to have reached at least 22 % although some Member States are at risk of failing to meet their national binding target; ·Latest available data indicate that EU primary energy consumption declined by 1.9 % and final energy consumption by 0.6 % in 2019 compared to 2018; ·EU net energy import dependency reached 60.6 % in 2019 compared to 58.2 % in 2018 and 56 % in 2000; the highest level in the past 30 years; ·While fossil fuel subsidies fell slightly in 2020, down to EUR 52 billion from EUR 56 billion in 2019, this was due to falling consumption amid the COVID-19-related restrictions. Without Member States action, fossil fuel subsidies are likely to rebound as economic activity picks up; ·To date, nine Member States have phased out coal, 13 have made national commitments to do so by a certain date, four are considering possible dates and only one has not yet started national discussions on a phase-out; ·Energy prices seesawed violently as the economy contracted due to the Covid-19 crisis and then begun to recover. Due to cheaper fuels, subdued demand and rapidly expanding renewable generation, wholesale energy prices fell sharply in 2019. Negative electricity prices became widespread in 2020. This downtrend was abruptly reversed: wholesale electricity prices have increased by 230 % on a yearly basis with a more moderate impact on retail prices until September 2021 (+11 % EU average). This was largely driven by rising gas prices which had an effect on the electricity price nine times bigger than the effect of the observed carbon price increase over the same period; ·More than 98.6% of EU electricity consumption is coupled. Traded volumes on natural gas hubs rose to an all-time high in 2019. This trend continued into 2020; ·Public clean energy R&I spending in Member States continues to be lower than in 2010, but national and EU recovery funding that targets clean energy R&I can partially compensate this; ·Energy poverty affects up to 31 million people in the EU as of 2019, with persisting differences across Member States and income levels. This underlines the importance of shielding the vulnerable from the current price spike and ensure a just transition towards climate neutrality. ·Most, albeit not all, trends are therefore positive but nevertheless still fall short of what is needed to drive the required transformation to achieve the objectives of the Energy Union. An acceleration is required not just to achieve a socially fair transition to climate neutrality by 2050 but also as an insurance against the sort of price shocks the EU is facing today. ·The adoption of the European Climate Law and of the “Delivering the European Green Deal” package proposed by the Commission in mid-2021 marked two major steps towards putting in place a credible framework to ensure the above. ·Member States’ Recovery and Resilience Plans are expected to provide a boost to climate-related investments by at least EUR 177 billion and to foster necessary reforms to support the climate and energy transition. 2. Delivering on climate change goals, recovery and resilience 2.1.Progress in implementing the European Green Deal with focus on energy and climate policy 2021 marked a shift from setting out a comprehensive vision for the transition to climate neutrality, and its supporting sectoral strategies, to proposing and implementing the resulting initiatives. Key moments in this regard were the adoption of the Climate Law in June and the presentation of the “Delivering the European Green Deal” (so-called ‘fit for 55’) package in July 2021. The adoption of the European Climate Law established a clear binding framework to achieve climate neutrality by 2050 which fully enshrines the 2030 target of at least 55% greenhouse gas reductions presented in the 2030 Climate Target Plan and relies on Member States’ National Energy and Climate Plans (NECPs). Supporting the path set out in the Climate Law, the pioneer “Delivering the European Green Deal” package presented a set of interconnected proposals across the economy increasing the 2030 ambition, among others, by setting new targets for GHG emissions reduction and for renewables and energy efficiency (chapters 3.1 and 3.2). In that context, the Commission proposed to raise the EU 2030 target for renewables from the current at least 32 % to at least 40 % of the Union’s gross final consumption of energy while setting up a complete framework for renewable energy deployment, addressing all sectors of the economy. The Commission also proposed raising energy efficiency targets at EU level and making them binding, so as to ensure overall reductions of 36% for final energy consumption and of 39% for primary energy consumption by 2030.

The effort to increase building renovation rates as provided in the Renovation Wave Strategywas boosted by several developments. The “Next Generation EU” recovery instrument provided additional financial resources towards building renovation as a tool to underpin the economic recovery and increase energy and resources efficiency. The proposal to revise the Energy Efficiency Directive aims to make the public sector play a leading role by introducing an annual renovation obligation of 3 % for public buildings. The proposal also follows the ‘energy efficiency first principle’ and revises the primary energy factor. The forthcoming revision of the Energy Performance of Buildings Directive (EPBD) will also be instrumental in making the EU legal framework fit for the Renovation Wave objectives, including through a phased introduction of minimum energy performance standards. The results of the first co-design phase of the New European Bauhaus (NEB) initiative were also presented in a Communication on 15 September 2021, which also puts on the table the first elements of a support framework for its delivery in the subsequent phase. The NEB initiative aims to bring the European Green Deal to life in an attractive, innovative and human-centred way. Its core values are sustainability (including circularity), aesthetics and inclusiveness. To pursue the energy system integration, the proposal to amend the Renewables Directive provides a strong path towards renewables-based electrification and helps addressing hard-to-decarbonise sectors, including with renewable hydrogen. It introduces the target needed to deliver the 2030 greenhouse gas emissions reductions. With a new target of 40% of renewables in gross final consumption of energy by 2030, the European Union is delivering the tools to support the fundamental transformation of its energy system. The proposal also facilitates the integration of electric vehicles (EVs) and batteries in the energy system, and supports the further deployment and integration of district heating systems. The offshore renewable energy strategy adopted in 2020 sets the ambition to deploy at least 60 GW of offshore wind energy and 1 GW of ocean energy by 2030 with a view to reaching, by 2050, 300 GW of offshore wind and 40 GW of ocean energy capacity without negative impacts on the environment and to allowing the different sea uses through Maritime Spatial Planning. Anticipating the resulting increasing amount of electricity that will be generated in all European sea basins, the strategy sets out a new approach to grid infrastructure. The implementation of the offshore renewable energy strategy is progressing with the identification of bottlenecks. The work will now focus on scaling up, ensuring that renewable energy developers have the right market incentives to deploy wind farms, and on supporting breakthrough innovation in the sector with calls for research in innovative areas through Horizon Europe. In line with the hydrogen strategy’s objective to deliver 40 GW of renewable hydrogen electrolysers in 2030 laid down in the hydrogen strategy, the Commission proposed to include, in the Renewables Directive, binding targets for the use of renewable hydrogen in transport and industry. According to industry projections, the majority of these projects is expected to be implemented by renewable electricity resulting in an estimated volume of 6.7 Mt of renewable hydrogen and of 2.3 Mt of low-carbon hydrogen by 2030 within the EU. The Recovery and Resilience Plans will contribute to scaling up investments in renewable and low-carbon hydrogen by approximately EUR 9.3 billion based on the 22 plans approved to date. Supporting and boosting the production and greater use of hydrogen in transport, is a priority reflected in the new proposal for ReFuelEU Aviation and maritime. The proposed revision of the regulation on guidelines for the Trans-European Networks for Energy (TEN-E) aims at further improving the infrastructure planning and streamlining the permitting processes for interconnection projects, in particular in the offshore sector. The proposed revision of the Renewables Directive enhances cross-border cooperation and provides instruments to speed up permit procedures. Additional work will need to be carried out in the next months to support Member States’ planned projects. The Recovery and Resilience Plans submitted by Member States include reforms to facilitate investments in renewables and related grid infrastructure. In addition, in its Industrial Strategy update in 2021 the Commission reiterates the need to better understand the challenges and opportunities for the European industry in its move towards a climate-neutral economy, and how EU policies can support this process. The 2021-27 EU budget will provide significant support to implement the European Green Deal and the energy transition across the Union. In particular, the European Regional Development Fund (ERDF) and the Cohesion Fund will allocate at least 30% and 37% respectively of the available funding for the achievement of the Union’s climate objectives. The Just Transition Mechanism (JTM, section 4.3) will allocate 100% of its support to the achievement of the Union’s climate objectives and will alleviate the socio-economic situation in the regions most affected by the transition to climate neutrality. InvestEU focuses primarily on supporting the green transition with its EUR 9.9 billion Sustainable Infrastructure Window. The Commission has also supported Member States in the development and implementation of reforms in view of the achievement of EU energy and climate goals in 2021 through more than 65 technical support projects. 2.2.Recovery and resilience support accelerating the green transition As the centrepiece of NextGenerationEU, the RRF supports the twin green and digital transitions. In this context, the timely implementation of the national recovery and resilience plans (RRPs) can help Member States achieve the more ambitious targets for 2030 in line with the European Green Deal Package. The RRF requires Member States to dedicate at least 37% of their total allocation to measures contributing to climate transition, and at least 20% to the digital transition, while ensuring consistency of the national recovery and resilience plans with NECPs. All spending must comply with the principle of ‘do no significant harm’ (DNSH) to avoid any negative impact on climate and environment objectives. The analysis of the 22 RRPs approved by the Commission by 5 October 2021 shows that the Member States in question are planning to go beyond the requirement to dedicate at least 37% of their RRF allocation to the climate transition and have significantly built on the ‘flagship initiatives’ put forward by the Commission in relation to the green transition, in particular the ‘Power up’, ‘Renovate’ and ‘Recharge and refuel’ flagship initiatives. The planned combined climate-related investment is around EUR 177 billion, representing 40% out of a total of EUR 445 billion of RRF funds allocated to these Member States. Almost EUR 76 billion is allocated to investments and reforms in energy efficiency and clean energy (Figure 1). Nearly all Member States are using the RRF funds for investments in building renovation and clean transport, and many are using it to invest in renewable energy. The RRPs approved to date also include relevant reforms to support the green transition, which will contribute to creating an enabling environment for the climate and energy transition. For instance, Member States have put forward in their RRPs reforms to foster increased energy efficiency through the phasing out of outdated heating systems or the development of one-stop shops for the energy renovation of buildings; reforms of energy markets to facilitate the deployment of renewable energy; and reforms to encourage sustainable mobility through the promotion of intermodality or tax incentives for clean vehicles. Figure 1: Distribution of climate-related investments in MS’ RRPs.

Source: Preliminary assessment of 22 RRPs approved by the Commission (by 5 October 2021). 3. Energy union – essential for decarbonisation Accelerating decarbonisation and renewables In 2020, GHG emissions reached their lowest level in 30 years, down by 31 % from 1990 and 10 % from 2019 levels. When emissions and removals from land-use, land-use change and forestry (LULUCF) are accounted for, this results in a net reduction of GHG emissions of 34 %. Main drivers were reduced energy consumption due to the pandemic but also continued decarbonisation trends such as the switch from fossil fuels to renewable energy.

Even before the COVID-19 crisis, the EU had surpassed its UNFCCC target of reducing GHG emissions by 20% by 2020. Projections submitted by Member States in 2021 point to a 34 % reduction in GHG net emissions by 2030 with existing measures and to 41 % with additional measures for the EU, compared to the reduction of at least 55 % GHG reduction laid down in the European Climate Law. The Carbon Market Report 2021 shows that the EU Emissions Trading System (EU ETS) has contributed significantly for the EU to meet its 2020 emissions reductions target. Since the introduction of the EU ETS in 2005, emissions in the power and heat generation as well as energy-intensive industrial sectors have dropped by around 43%. The total auction revenues generated by the EU ETS between 2013 and 2020 exceeded EUR 68 billion, with a large part (75%) being used for climate action. To maintain the environmental integrity of and certainty in the EU ETS, the Commission presented a proposal for its revision in line with the increased 2030 emissions reductions target of at least 55% below 1990. Stable and reliable long-term strategies are essential to help coordinated and cost-effective movement towards the long-term goal set by the Paris Agreement. By October 2021, 20 Member States have submitted their long-term strategies to the Commission. 13 out of these clearly stated that they aim to achieve climate or carbon neutrality by 2050 or before. The remaining Member States aim to be largely climate neutral or project emission reductions ranging from 80% to 95% compared to 1990 by 2050. However, as national strategies received do not yet allow the collective achievement of the objectives and targets of the Energy Union, Member States are encouraged to consider updating them, where possible, increasing their ambition. Moreover, quick action to address methane emissions stemming mainly from agriculture, energy and the waste sector is well highlighted in the Commission Strategy on methane and confirmed by the IPCC in its latest report on climate change. To tackle methane emissions in the energy sector the Commission will put forward, still in 2021, a proposal on reducing methane emissions. Increasing ambition and delivering on decarbonisation is also about achieving the existing 2020 target for renewables. Member States are to submit by 30 April 2022 data on whether the 2020 renewable energy targets were achieved. The latest available data (2019, see Figure 2) and existing external analyses indicate that the EU as a whole, and the majority of Member States individually, were on track to achieve the targets, thanks partly to the lowering prices for key technologies such as wind and solar over the years. However, some Member States, notably France and Poland, appear at risk of failing to achieve their national binding target without making use, for instance, of statistical transfers with Member States with a surplus of renewable energy compared to their national target. The Commission has helped and will continue to help Member States concluding such agreements. Figure 2: Overall share of energy from renewable sources (% of gross final energy consumption, 2019). Source: Eurostat Work is also progressing on the EU Renewable Energy Financing Mechanism as a further option to support renewable energy projects and thereby encourage a greater uptake of renewable energy sources across the EU. Member States’ NECP pledges correspond to a collective EU capacity that exceeds the current 2030 renewables target (33.1-33.7 % above the current target of at least 32 % renewable energy in gross final energy consumption by 2030). The updates of NECPs under the Governance Regulation, due by 30 June 2023 (draft updates) and by 30 June 2024 (final updates), should reflect the higher target and ambition for 2030, in line with the proposed revision of the Renewables Directive. The Commission will issue guidance on those updates in line with the legislative proposals made. Overall investment in renewables grew substantially in the EU to EUR 48.8 billion in 2020, from EUR 32.9 billion in 2019. However, the picture varied across the different technologies: annual additional capacity declined from 8.4 to 7.1 GW for onshore wind, but increased from 1.5 GW to 2.5 GW for offshore wind and from 16.3 GW to 18.6 GW for solar photovoltaic (PV) energy. To further support innovation and deployment in renewables, the Commission will work in 2022 on an EU Solar Energy Strategy. The work will focus on the existing barriers that are hampering the deployment of solar energy capacity required by 2030 and by 2050 and the conditions that will enable such deployment. The Commission supports the uptake and deployment of renewable hydrogen and facilitates the European Clean Hydrogen Alliance and supports the deployment of renewable and low carbon hydrogen through the Innovation Fund, the establishment of the Clean Hydrogen Joint Undertaking, and the Member States leading the process on Important Projects of Common European Interest (IPCEIs). The main renewable energy source remains bioenergy, representing around 60% of all renewable sources. The current Renewable Energy Directive includes sustainability criteria for the use of bioenergy. The Commission has worked intensively with Member States to finalise the implementing acts setting out operational guidance for Member States on the forest sustainability criteria. In addition, in the context of the forecast increase of renewables, the Commission adopted a series of measures aiming at closing existing loopholes, strengthening sustainable harvesting and ensuring the highest economic and environmental added-value of woody biomass. As with the share of renewable energy sources, the Commission will assess next year whether the 2020 energy efficiency targets were achieved. In 2019, primary energy consumption decreased for the second consecutive year. It was 1.8 % lower than in 2018 although still 1.8 % above the linear trajectory to reach the 2020 energy efficiency target. Final energy consumption declined in 2019 for the first time in six years, but given the accumulated gap, the yearly decline of 0.6 % in 2019 was not sufficient to reach the target: actual consumption was 2.3 % above the linear trajectory towards the 2020 target. The EU reduced its primary energy intensity by over 3 % compared to the previous year. With winter of 2019 being warmer than in 2018, weather was a factor driving the reduction in energy consumption, but so was the shift to renewables. The year-on-year improvement in final energy intensity was 2 %. In 2020, the impacts of the COVID-19 crisis led to a substantial drop in energy consumption and early EEA estimates indicate that it had dropped low enough to meet the targets for both primary and final energy consumption. As regards progress towards the current 2030 targets, EU primary and final energy consumption in 2019 were 19.7% and 16.3 % respectively above 2030 target levels. The pace of decline in 2019 towards the 2030 targets was satisfactory for primary energy consumption only. Far more efforts are needed to reduce the existing final energy consumption target and the higher ambition set out in the proposed revision of the Energy Efficiency Directive. This will require the updating and proper implementation of the NECPs with new measures being planned to bridge the collective ambition gap of the current NECPs. The Commission may issue guidance on those updates. Buildings represent one area where such measures are more needed and offer greater potential. They are responsible for about 40 % of the EU’s total energy consumption and for 36 % of energy-related GHG emissions. Currently, about 75 % of the building stock is considered energy inefficient, so effective action is needed, including the revision of the relevant regulatory framework, notably the revision of the Energy Efficiency Directive and the revision of the EU Emission Trading System proposed in July and the forthcoming proposal to revise the Energy Performance of Buildings Directive. The priority of energy efficient renovation of public and private buildings is also positively reflected in the investments planned under the 22 RRPs approved by the Commission. The Commission analysed that this amounts to a 23% share of the total expenditure contributing to climate objectives in these plans. Besides, all Member States must establish Long-Term Renovation Strategies (LTRS) to support the renovation of their national building stock into a highly energy efficient and decarbonised building stock by 2050. The Commission will assess all LTRS by the end of 2021. The EU energy labels have been a driver for helping consumers choose products which are more energy efficient and encouraging manufacturers to drive innovation by using more energy efficient technologies. Since March 2021, the energy label rating system uses A to G rankings only, instead of the previous A+++ to D ratings. Four product groups were required to introduce the rescaled labels from 1 March 2021, with new labels for light bulbs and lamps applicable from 1 September 2021.

3.3.Enhancing energy security and safety As witnessed in the last few months, a continued high reliance on imports of fossil fuels exposes the Union’s economy to global price fluctuations. Improving resilience requires enhancing energy security and safety while phasing out fossil fuels and integrating more decentralised renewable energy. The recent Communication “Tackling rising energy prices: a toolbox for action and support” outlines key mid- and long-term steps to ensure this. In 2021, two large-scale technical incidents were resolved within one hour, proving the resilience of the EU’s energy system despite COVID-19. They also demonstrated that effective preparedness for possible shocks is an ongoing need at Member State and EU level. This is particularly important also in the context of increased net energy import dependency, which reached 60.6 % in 2019, the highest level for the last 30 years. This level is explained by the combination of a slight increase in energy demand and reduced domestic production of fossil fuels and domestic renewable capacity that remains still insufficient. The sectorial European coordination groups (for electricity, gas and oil) played a particularly important role in 2020 and 2021, in monitoring security of supply, e.g. by addressing the impact of delays in the maintenance of power plants due to COVID-19 related measures and discussing possible reactions to extreme weather events. In the electricity sector, the implementation of the risk preparedness regulation is in the run-up to the first set of national risk-preparedness plans. These plans will set out Member States’ measures to prevent, prepare for, and mitigate potential electricity crises in mutual cooperation, taking account of increasing electrification. In the context of the latest security of supply rules for gas , all but two Member States have put in place national plans to prevent or mitigate the impact of gas supply disruptions. Member States made progress to conclude bilateral solidarity arrangements aimed at securing cross-border supply to vulnerable customers in the event of severe crisis . The Commission plans a revision of the gas security of supply regulation in December 2021, which could facilitate access to storage capacity across borders, including for renewable and low carbon gases. In addition, gas storage levels and the proper functioning of the gas market will continue to be monitored ahead of the winter season. Continued improvements in electricity and gas interconnectivity have also enhanced regional cooperation and reinforced the security of supply at EU, Member States and regional level. The EU is prepared for potential temporary disruptions in oil supply. In order to ensure the safe operations of the existing EU offshore oil and gas installations, the Commission and the Member States have cooperated closely to update external emergency plans. Recent incidents, such as the May 2021 cyberattack on the US Colonial pipeline, have shown how cybersecurity threats and vulnerabilities can affect the energy system. The Commission has started work on a network code to ensure the cybersecurity of cross-border electricity flows. It plans to adopt the code by end of 2022. In December 2020, as part of the EU Security Union strategy, the Commission proposed two new directives on the resilience of critical entities and on the security of network and information systems, to improve the resilience of the energy sector. It also re-launched the Thematic Network on Critical Energy Infrastructure Protection, a forum for regular discussions among operators and owners of critical energy infrastructures. In an update of the Industrial Strategy in May 2021, the Commission emphasised the need to accelerate the green and digital transitions while strengthening the EU’s resilience and strategic capacities. Industrial alliances are a key tool to facilitate stronger cooperation and joint action between all interested partners in sectors of strategic importance. In October 2021, the Commission published a study identifying potential bottlenecks in the raw materials supply chains for energy technologies that are critical for energy security and the clean energy transition. As regards the nuclear sector, the Commission is working closely with Member States’ nuclear safety regulators to monitor potential impacts of the pandemic on the safety of nuclear installations. The sector has shown good robustness in the face of such conditions through its established practice of risk assessment and mitigation. No adverse impacts on safety or reliability have been reported. Nevertheless, the Commission is funding a study to review how the sector managed the pandemic, and ensures its resilience in such conditions. More generally, in terms of addressing potential risks relating to extreme natural hazards, such as those from flooding or severe weather, the robustness of EU nuclear power plants against external events was reviewed and strengthened as part of the post-Fukushima stress tests conducted in cooperation with the Commission. The Nuclear Safety Directive requires licence holders to conduct periodic safety reviews with a view to identifying further safety improvements, taking account of operating experience. 3.4. Strengthening the internal energy market 3.4.1. Progress in the electricity and gas markets While electricity prices were expected to increase given the record lows reached by wholesale prices during the pandemic and as economic activity picked up, a combination of factors pushed prices to all-time high levels over the last months. This had impacts on businesses and consumers, notably the vulnerable ones, at a time when many have been fragilised by loss of income from the pandemic. Beyond higher global gas demand due to the global economic recovery, key drivers were seasonal conditions and, to a much lesser extent, carbon prices. The effect of the gas price increase on the electricity price is nine times bigger than the effect of the carbon price increase . Most Member States are affected by high gas and electricity prices, but to different degrees and at different times. The extent to which wholesale prices are passed through to retail prices also varies in each Member State, depending on the energy mix, regulation and the structure of retail prices. About two thirds of the retail price are, on average, typically determined by transmission and distribution costs, taxes and levies; one third by the wholesale price element. The speed at which the increases in wholesale gas prices translate into retail prices also depends on the contract terms (i.e. contract length, fixed or variable prices, etc.). In the recent communication “Tackling rising energy prices: a toolbox for action and support”, the Commission outlines help and support to address undesirable negative impacts of higher energy prices on households and businesses, on the recovery, its fairness and inclusiveness, and on confidence in the energy transition. Figure 3: Household price components in 2020 (in %). Source: Eurostat.

At this stage, there is no clear evidence that an alternative market framework than the marginal pricing method and the pay-as-clear market would provide cheaper prices and better incentives. In the light of the recent volatility, the Commission tasked the Agency for the Co-operation of Energy Regulators (ACER) to assess benefits and drawbacks of the current wholesale electricity market design, including its capacity to address situations of extreme price volatility in gas markets. Steps taken over the last year have also further improved the functioning of the internal energy market. The transposition of the Electricity Directive into national law by 31 December 2020, has created new opportunities for companies and consumers to participate in electricity markets, for example by adjusting their demand to help relieve congestion in the grid or to balance demand and supply. Such demand side flexibility is developing in the European electricity market, although to a varying degree. Demand side flexibility increases the flexibility of the electricity system and contributes to ensuring cost-effectiveness of electricity markets. At the same time, significant progress has been made in harmonising national rules on energy trading and system operation. The most tangible example is EU market coupling, which connects all Member States and creates a common EU trading platform for electricity. Market coupling forms part of an affordable model for the energy transition, ensuring that least-cost electricity can be dispatched around the EU for the benefit of consumers. The borders between Poland, Czechia, Slovakia, Romania and Hungary were successfully included in the EU-wide coupling on 17 June 2021. It is planned that, in a next step, the last two borders will be included in the Single Day-Ahead market coupling (Romania – Bulgaria by the end of October 2021 and Croatian – Hungarian in March 2022). The overall welfare gains from extending the SDAC to all EU internal borders are estimated over EUR 115 million a year. Significant progress has been made on the single intraday coupling, with 22 Member States coupled from 2019. Coupling of Italy, Greece and Slovakia are planned. The additional welfare benefits from a more efficient use of intraday electricity trade capacity across Europe are estimated at over EUR 50 million annually. Completion of the single intraday coupling is a priority for further integration of renewables as it helps to reduce electricity price divergences across regions. Accomplishing market coupling in all timeframes across internal borders, including close to real-time balancing, would generate additional welfare benefits of more than EUR 1.5 billion per year and reduce the need for backup fossil fuel power plants, thus saving significant GHG emissions. Volumes traded on natural gas hubs rose to an all-time high in 2019. This trend continued into 2020, with the COVID-19 crisis further driving the trading activity and demand for gas. In spite of falling liquefied natural gas (LNG) imports, storage withdrawals intensified in 2020. While current gas storage levels are tight but adequate if there is a winter similar to the previous one, storage is not available in all EU Member States and a more integrated European approach could help cushion volatility in energy prices. Delayed or incomplete implementation of existing acquis, including network codes, appears to be a barrier to wholesale market improvements. Price correlation is high between hubs in North Western Europe and the Dutch Title Transfer Facility (TTF), which is becoming into a benchmark for internationally traded LNG, pooling around three quarters of all European gas trade. However, the level of market development, liquidity and competition still differ across the Union. There are price differences of EUR 1 to 3 per megawatt hour (MWh) or above during the year between TTF and North Eastern markets (Poland, Baltics and Finland) or the South West (Spain, Italy). 3.4.2. Energy infrastructure for greater decarbonisation Infrastructure is key for the energy market to function properly and efficiently and integrate more renewables. Most of Member States have already achieved the 2030 interconnectivity level of 15 % required under the Governance Regulation and replacing the previous target of 10 % by 2020. Projects of Common Interest (PCIs), key cross border infrastructure projects that link the energy systems of EU countries, have a significant role in meeting this target. Since the last State of the Energy Union report, several PCIs have been commissioned or completely constructed. Between 2014 and 2020, more than EUR 4.7 billion of EU funding under the Connecting Europe Facility (CEF) was allocated to works and support studies related to PCIs, triggering a total investment of EUR 9.5 billion. Two thirds of that budget was allocated to electricity and smart grid projects to support the integration of renewable energy sources in the power system. The 5th list of PCIs is planned to be adopted in November 2021 under the existing regulation on TEN-E guidelines. In December 2020, the Commission proposed a revision of the TEN-E Regulation, currently being negotiated, to reflect the key role of energy infrastructure in the green transition. A new approach to infrastructure planning will support the role of electrification in the future energy mix, help to decarbonise the gas sector through renewable and low-carbon gases, including hydrogen, and develop a more integrated energy system. The proposal excludes fossil fuel infrastructure (including natural gas) and introduces mandatory sustainability criteria for all PCIs. The revised framework will need to enter into force in time for the selection process of the 6th Union list of PCIs. The revised Connecting Europe Facility Regulation provides for a new window for cross-border projects in the field of renewable energy, including new offshore floating windfarm projects to explore further this vector of renewable sources. The first call for proposals for pre-feasibility studies has been published on 22 September 2021 for a total amount of EUR 1 million. The first call for technical studies and works for cross-border projects that were selected in the dedicated EU list will be published in third trimester of 2022 for a total amount of EUR 100 million. 3.4.3. Phasing out fossil fuel subsidies Total energy subsidies in the EU amounted to EUR 176 billion in 2019. As further detailed in the annex on energy subsidies, recent data show that despite EU’s commitments to phase out fossil fuel subsidies, they are not declining sufficiently. Fossil fuel subsidies have already increased in 11 Member States since 2015. Fossil fuel subsidies, which represent around 30% of total energy subsidies, dropped slightly in 2020 to EUR 52 billion (from EUR 56 billion in 2019), due to lower energy consumption in the wake of the COVID-19 pandemic. Considering that GDP and energy consumption dropped in 2020 at similar pace, there is no clear trend for a decrease in the level of fossil fuel subsidies in spite of the EU’s international commitment. Accordingly, as the economy picks up and fossil fuel consumption rebounds, the EU needs to step up efforts to avoid returning to pre-pandemic subsidy levels. Phasing out of coal from electricity generation has been incentivised by plant closure subsidies in many Member States. Renewable energy received a total of EUR 78 billion in subsidies, up by 8% since 2015 . Energy efficiency subsidies continued to grow, to EUR 16 billion in 2019 and EUR 17 billion in 2020, up by almost 50% since 2015. At the same time, financial support to vulnerable households can be appropriate in certain instances. Particularly in a context of post-COVID economic recovery, specific social payments to those most at risk can be an appropriate means to help them afford their energy bills in the short term or to support energy efficiency improvements, while ensuring effective market functioning. Funding subsidies for renewable generation by public revenues other than electricity bills can have, in certain Member States, the benefit of relieving vulnerable consumers from a significant part of their energy bill. In parallel, the EU Taxonomy will help guide private investors and public funds by identifying environmentally sustainable economic activities and channelling more funding into them, thus reducing investment in fossil fuels capacity and associated subsidies.

The Climate Law amend the Governance Regulation so as to ensure more uniform reporting across Member States on the phasing out of energy subsidies, in particular for fossil fuels, the reporting arrangements are to be set out by means of implementing act in 2022, currently in preparation. 3.5.Research & innovation and competitiveness While most of the reductions in CO2 emissions through 2030 will come from technologies already on the market today, the International Energy Agency (IEA) projects that almost half of the reductions needed by 2050 will come from technologies that are currently at demonstration or prototype phase. The EU is well-placed in terms of global market shares in certain value chain segments of clean energy technologies, but increased investments in R&I and further efforts in technology transfer would ensure the EU seizes the opportunity of the energy transition to reinforce its competitiveness in the clean energy sector. The second competitiveness progress report shows that the EU remains at the forefront of clean energy research. At global level, it has a greater share of ‘green’ inventions in climate change mitigation technologies than other major economies. Nevertheless, the EU’s rate of public investment in clean energy technologies needed for decarbonisation is the lowest of the major economies (0.027 % of GDP in 2019). Public clean energy R&I spending in Member States is still below 2010 levels, but national and EU recovery funding that targets clean energy R&I can partially compensate this. Moreover, spending has been increasing since 2016, a sign of a partial recovery from the previous economic crisis. The long-term impact of COVID-19 on the innovation ecosystem remains to be seen. The EU private sector experienced a 7 % reduction in overall energy R&I spending. Global public spending on energy R&I showed there was continued, albeit slower growth in 2020. Spending in renewable energy R&I specifically was more resilient and continued to grow. The EU is the global leader in the wind sector, but competition remains fierce. In 2020, the European offshore wind market represented 71 % (24.8 GW) of the global market in terms of cumulative installed capacity. The Member States’ global market share accounts for about 42 % (14.6 GW). The size of the home market is key in this respect. In solar PV, the EU’s trade deficit grew to more than EUR 5.7 billion in 2019 and the EU has a comparably small market share in cell and module manufacturing. However, it maintains a cutting edge position in other parts of the value chain, including research and development notably on product performance, sustainability and circularity. The EU is at a crossroads for several technologies expecting market expansion. Its heat pump, renewable fuels, smart grids and renewable hydrogen industries are well placed to benefit from the growing future demand stemming from the policy driven expansion of relevant markets. At the same time, the EU batteries industry is catching up through a combination of investment in battery production, increased demand in EVs, the shift of the EU car industry, and a focus on circularity to address the raw materials issue, also guided by the Batteries Directive. 4. Wider benefits in a European Green Deal perspective 4.1. Sustainability, economic growth and employment 4.1.1. Air quality and other environmental impacts The move towards further decarbonisation of the EU economy has positive implications for aspects of the environment beyond climate alone. In particular, air pollution is reduced as a result of increased energy efficiency, the replacement of fossil fuels and the development of non-combustible renewable energy sources (such as wind and solar) or the move towards cleaner transport modes that lead to less air pollution. This will help us to reach the Zero Pollution Action Plan target of reducing the health impacts of air pollution (expressed as premature deaths) by more than 55% in the EU in 2030 compared to 2005. In 2019 , air pollution was still responsible for about 400 000 premature deaths in the EU, with regional variations often reflecting energy consumption patterns such as the use of coal or biomass for domestic heating. The health effect of air pollution follows the same regional pattern as for exposure to air pollution by fine particulate matter, where, in 2018, the highest population exposures were across a number of EU Member States, principally Bulgaria, Croatia, Czechia, Greece, Italy, Poland and Romania. Potential trade-offs between the transition to a decarbonised energy system and the reduction of air pollution need to be addressed. For instance, increasing bioenergy use in devices without adequate emissions abatement technologies needs to be avoided. Monitoring related developments is important after the World Health Organisation has adopted updated Air Quality Guidelines in September 2021, which will inform the forthcoming revision of the Ambient Air Quality Directive . In parallel, the deployment of renewable energy is also guided by European environmental legislation, including where this is developed further in the context of the European Green Deal. 4.1.2. Jobs and growth The gross value added of the clean energy sector has seen average annual growth of 5% since 2010 and reached EUR 133 billion in 2018. Energy efficiency activities have displayed a particularly strong average annual growth of 9 % in the same period, while that of renewable energy production averaged 2 %. Both have increased more than the rest of the economy. The latest data available date back to before the Covid-19 crisis and indicate that reduced energy intensity showed signs of economic growth decoupling from energy consumption. However, the latter has not been decreasing in absolute terms. The latest available data from before the COVID-19 crisis show that direct employment in the clean energy sector represented 1.7 million full-time jobs in 2018 with average annual growth of 2 %, twice the rate in the overall economy (1 %) in 2010-2018. The rapid emergence of clean energy innovations requires re-skilling and up-skilling across all skills levels to further develop and deploy technologies and solutions across the EU. Demand for a wide range of occupational categories relevant to the clean energy transition is expected to increase in the period to 2030 . The EU’s Pact for Skills supports this process building partnerships with industrial ecosystems such as construction and energy intensive industries. Renewables and energy efficiency are expected to drive future job creation in the EU in relation to the energy transition. Wind energy and solar PV (installation and production of panels) are key jobs drivers. It is expected that the wind sector will create over 420,000 new full-time jobs by 2050 and solar PV up to 140,000 full-time jobs , .

On the demand side, green jobs are created mainly in the construction sector, especially with regards to building renovation, where 13 to 28 jobs per million euros invested are estimated to be created in the EU . Certain measures in the national RRPs such as prioritising renovation to improve buildings’ energy and resources performance are a good example of correlations between economic stimulus and the clean energy transition. Renovation works are labour-intensive, create jobs and investments, often rooted in local supply chains, generate demand for highly energy and resource-efficient equipment, and add long-term value to properties. In turn, job losses are expected to occur primarily in coal industries, machinery manufacturing and conventional transport equipment sectors. Looking ahead, the increased climate and energy targets will lead to new investment needs. Over the next ten years, on average, additional investments of EUR 390 billion per year will be needed compared to the average annual amounts invested over the last ten years. More specifically, achievement of increased 2030 climate and energy targets represents an increase of some EUR 100 billion per year compared to investment needs projected for the implementation of the NECPs. 4.2.Priority for consumer choice Proactive consumers and engaged prosumers will play a key role in the shift to a renewables-based and more integrated energy system. Such prosumers are better shielded from price fluctuations. At the same time, support for vulnerable consumers and enterprises will remain important in a context of high energy prices and potential vulnerabilities in the context of the post-Covid pandemic. The hydrogen and gas market decarbonisation package planned for December 2021 will address consumer provisions, also for gas markets. In order to allow consumers to actively engage on the market, the Commission also will focus on implementing existing legislation that promotes consumer choice and active participation. For instance, the Renewables Directive and the Electricity Directive reflect the growing importance of renewable energy self-consumers (prosumers) and active consumers. This legal framework opens the possibility for the cooperation between distribution system operators and renewable energy communities as well as citizen energy communities. To further strengthen the role of consumers, the Commission is analysing options for establishing a Union-wide green label with a view to promoting the use of renewable energy from new installations. Currently, at least 2 million people in the EU are involved in more than 7700 energy communities . Energy communities have contributed to up to 7 % of nationally installed capacities, with estimated total renewable capacities of at least 6.3 GW. On a conservative estimate, they have invested a total of at least 2.6 billion EUR. In autumn 2021, the Commission will launch an Energy Community Repository and Advisory Hub for Rural Energy Communities to further facilitate the development of citizen and renewable energy communities. Smart energy grid solutions, in particular fit-for-purpose smart metering and seamless data flows with appropriate data protection, are key to empowering consumers. The Commission is developing transparent and non-discriminatory rules on access to data and a Digitalisation of Energy Action Plan. 4.3.Protecting the most vulnerable Energy poverty continues to undermine social inclusion and people’s ability to participate actively in and benefit from the green energy transition. This is recognised also by the European Pillar of Social Rights that places energy services among the essential services everyone shall have access to; calling for support measures for those in need. In 2019, energy poverty affected up to 31 million people in the European Union, including a significant share of low-income households but also middle-income ones, with significant differences across Member States. To fight this situation, the “Delivering the European Green Deal” package is designed to mitigate potential distributional effects and adverse social impacts of the energy system transformation. In addition, the support measures put forward with the recent communication “Tackling rising energy prices: a toolbox for action and support” reflect the fact that the energy poor and the low and lower-middle-income households are most impacted by the current price hikes because they spend significantly higher shares of their incomes on energy. In the context of higher energy prices, the Commission will continue to monitor how EU legislation relating to energy poverty will be applied in Member States and how energy poverty develops. Building on last year’s recommendations on energy poverty, the Commission will call for closer cooperation with the relevant competent authorities through the establishment of an energy poverty and vulnerable consumers coordination group. This will enable Member States to exchange best practices and engage in coordinated efforts, so that any analysis based on indicators at EU or national level could be complemented with related EU policies such as energy efficiency and the renovation wave. The Affordable Housing Initiative, a key component of the Renovation Wave strategy, aims at revitalising 100 neighbourhoods as lighthouse projects across the EU in the coming years. The start of those renovation projects is planned for the fourth quarter of 2021. The Commission also established an Energy Poverty Advisory Hub with the objective to become the centre of energy poverty experience and expertise in Europe. It will start with assisting 80 individual municipalities with direct support to scale up and broadly disseminate specific solutions to eradicate energy poverty at the local level. At the same time, the Electricity Directive recognises the importance of national social security systems, which are well placed to channel support to those most affected by energy poverty and rising prices. Member States can target specific payments to those most at risk to help them cover their bills in the short term. Such measure can also be complemented by measures to avoid disconnections. However, it is important that such emergency measures are not seen as an alternative to addressing issues like housing with poor insulation or inefficient appliances. The European Green Deal puts emphasis on supporting regions, sectors and individuals directly affected by the clean energy transition to ensure a just transition. The transition also has a significant impact on regions that are heavily dependent on carbon-intensive industries, such as steel, cement or chemicals, which will undergo major transformations. For this, the Just Transition Mechanism was set up. It includes the Just Transition Fund, which will invest EUR 19.2 billion in the territories that are facing the most negative socio-economic impacts of the transition. Member States are now preparing their territorial just transition plans, which will give access to the three pillars of the Just Transition Mechanism. In addition, the Commission put in place the Just Transition Platform to assist all stakeholders in accessing and using the resources of the Just Transition Mechanism. This Platform builds and expands the support of the EU initiative for coal regions in transition, which helps coal regions across 12 Member States to formulate low-carbon transition strategies and address potential negative socio-economic impacts, . Up to 315,000 jobs can be expected to be created by 2030 by deploying clean energy production technologies, which can reach 460,000 jobs by 2050; creating job opportunities in several coal regions along the transition path. 4.4.Tackling administrative and investment barriers If we are to achieve the EU’s climate objectives, we will need a suitable framework to facilitate the massive investments involved. Overly complex and lengthy administrative permitting procedures constitute a major barrier for the transition to a decarbonised energy system, in particular to the deployment and integration of renewable energy. The obstacles include complex structures, a lack of legal consistency and insufficient policy and regulatory frameworks and guidelines. The 2018 Renewables Directive introduced provisions on the organisation and maximum duration of the permit-granting process, covering all relevant permits to build, repower and operate renewable energy plants and for their grid connection. It also requires Member States to establish a single contact point to guide applicants through the entire administrative process. The Commission is closely monitoring the transposition of relevant provisions of the Directive and is assessing whether further measures are needed. For this purpose, a review clause for articles dealing with administrative procedures was included in the Commission proposal to amend the Renewables Directive presented in July 2021. Member States are also asked to establish an enabling framework that tackles the remaining non-financial barriers to renewable energy projects, such as insufficient digital and human resources of authorities to process a growing number of permitting applications. To help Member States tackle administrative and investment barriers, the Commission will issue guidance in 2022 on streamlining permitting and administrative procedures for renewable energy deployment, drawing on the analysis of existing obstacles as well as best practices in Member States. 5. The external dimension, climate and energy diplomacy The EU continues to lead by example on achieving climate neutrality by 2050. While raising its own level of ambition and taking specific measures in line with the Paris Agreement, it also plays an active role in international forums. The EU and its Member States make a substantial contribution to the developed countries’ collective goal of providing USD 100 billion per year to support climate action in developing countries. The new financing instrument Global Europe (EUR 79.5 billion for the years 2021-2027) will ensure that at least 30% of funding supports climate action.

Throughout 2021, the EU has been leading the discussion on the energy transition also in multilateral fora such as the UN High Level dialogue. The EU cooperates closely with the G7 and G20 towards achieving net zero GHG emissions by 2050 and phasing out international finance for unabated coal energy production and subsidies. Moreover, the EU has been actively working towards a significant outcome also at COP 26. More and more partners are reaching out with more ambitious plans regarding energy efficiency and renewable energy uptake and targets towards low-carbon or net zero-carbon economies. The EU, the United States and other participating countries agreed in September 2021 to set a collective goal to reduce methane emissions by at least 30 % below 2020 levels by 2030. The goal stretches across the economy to include methane emissions from fossil fuels energy production, namely released during oil and gas extraction and transmission, and from agriculture and waste. The Global Methane Pledge will be launched during the November climate conference in Glasgow. Moreover, the Commission is supporting the United Nations Environmental Programme (UNEP) in establishing an independent International Methane Emissions Observatory (IMEO) to address the global data gap and transparency in this area, including through a financial contribution. EU bilateral and regional energy cooperation with international partners continues to focus on systematic support for the transition to low-emission and climate-resilient economies and to ensure energy security and competitiveness. The revival of EU-US energy cooperation and the EU-Japan Green Alliance of May 2021 are examples of its approach. Similarly, it is prioritising clean energy cooperation with India, (the EU-India Clean Energy and Climate Partnership) and China (the EU-China Energy Cooperation Platform). The EU has set out its objectives for regional cooperation for the 2021-2027 multiannual financial framework with the neighbouring regions in the East, the South and the Western Balkans, calling for new joint actions to reinforce sustainable energy security, collectively speed up a green energy transition and promote clean energy investment. The Commission works intensively towards establishing the 2030 energy and climate framework including the relevant 2030 targets for the nine non-EU Contracting Parties of the Energy Community and the adoption of a Decarbonisation Roadmap that will support these Contracting Parties in their path towards mid-century climate neutrality. Moreover, efforts to modernise the Energy Charter Treaty are ongoing. EU Member States approved a new agenda for the Mediterranean based on a renewed partnership with the Southern Neighbourhood. In June 2021, all 42 member countries of the Union for the Mediterranean approved a declaration underlining their commitment to a clean energy transition pathway, and to step up regional cooperation on energy. With developing countries, and in particular in sub-Sahara Africa, cooperation is prioritising access to affordable, reliable and sustainable energy and leveraging private sector investments. The EU supports the African Union initiative to create an African Single Electricity Market (AfSEM) enabling productive transformation and fuel economic development, create jobs, fight poverty and advance prosperity. Ensuring nuclear safety beyond its borders has also been a key area of attention for the Commission. In late summer, technical experts from the European Nuclear Regulators Group (ENSREG) and the Commission completed a peer review of the implementation of Belarus’ nuclear safety stress test action plan. ENSREG and the Commission’s technical experts have also started preparations for a peer review of Turkey’s stress test, planned for mid-2022. In addition, the EU has demonstrated its continuing commitment to the implementation of Annex III of the Joint Comprehensive Plan of Action (JCPOA) on civil nuclear cooperation with Iran. To pursue a global energy transition, ensuring security of supply and clean technologies, the Commission started a reflection on a European strategy on external energy engagement to be adopted in 2022. With the aim to align the EU energy and climate diplomacy to the European Green Deal, the EU Foreign Affairs Ministers adopted Council Conclusions on the topic. The Commission’s work focuses on new opportunities in deploying a clean energy system, and promoting energy efficiency and safe and sustainable technologies while gradually moving away from fossil fuel use towards green energy solutions and promoting a just transition. Trade policy and energy diplomacy will need to work hand in hand to ensure undistorted trade and investment in: I.the raw materials that are needed for the energy transition in the EU, II.the energy goods required for the energy transition, and III.the technologies that both the EU and our trading partners depend on for the transition to climate neutral economies. 6. Conclusion This 2021 stocktaking of the State of the Energy Union 2021 shows that the implementation of EU energy and climate policies is contributing to the delivery of the European Green Deal and to the recovery from the impacts of the COVID-19 crisis. Based on this analysis and on the Communication “Tackling rising energy prices: a toolbox for action and support”, the Commission would highlight the following six areas for further action. The Commission will continue monitoring energy price developments to ensure its response to the current energy price surge remains proportionate and focussed on those most affected. The Commission will continue to put in place a legislative framework fit for our enhanced climate and energy targets. This will include the revision of the Energy Performance in Buildings Directive and initiatives on hydrogen, gas market decarbonisation and methane, to be adopted later this year. The Commission calls on the European Parliament, the Council and the consultative committees to make progress on the adoption of these proposal alongside the July package, and stresses the importance of maintaining its ambition, integrity and consistency. Further public and private investments in energy efficiency and renewable energy, in particular in wind and solar, storage and decentralised electricity production, are crucial for the transition, increasing resilience and mitigating renewed electricity price increases. In 2022, the Commission intends to adopt an EU Solar Energy Strategy, covering the existing barriers that are hampering and conditions that will enable the deployment of solar energy capacity required by 2030 and by 2050. It is necessary to address barriers to investment in the transition if businesses are to take a leading role and the EU and its Member States are to attract investment. In particular, streamlined permit procedures create the necessary predictability for investors in the energy sector and beyond. Phasing out grid bottlenecks and swiftly removing barriers to renewable energy integration while nurturing social acceptance of renewables can speed up the transition further. In 2022, the Commission plans to issue guidance to Member States on streamlined permit and administrative procedures for renewables deployment. Fossil fuel subsidies should come to an end. With lower expenditures for fossil fuel subsidies and pollution related disease, national budgets will have a greater margin for investments in innovative technologies, in green skills, and in mitigating potential distributional effects of the transition. In 2022, the Commission intends to adopt an implementing act on NECP progress reporting; this should help to ensure more uniform reporting on the phasing out of energy subsidies, in particular for fossil fuels.