EUROPEAN COMMISSION Brussels, 23.2.2017 COM(2016) 767 final/2 2016/0382(COD) CORRIGENDUM

This document corrects document COM (2016) 767 final of 30.11.2016

Concerns only EN version.

The text shall read as follows: Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on the promotion of the use of energy from renewable sources (recast) (Text with EEA relevance) {SWD(2016) 416 final}

{SWD(2016) 417 final}

{SWD(2016) 418 final}

{SWD(2016) 419 final}



EXPLANATORY MEMORANDUM 1.CONTEXT OF THE PROPOSAL •1.1Reasons for and objectives of the proposal Renewable Energy Sources (RES) contribute to climate change mitigation through the reduction of greenhouse gas emissions, achieve sustainable development, protect the environment and improve citizens' health. Moreover, renewable energy is also emerging as a driver of inclusive economic growth, creating jobs and reinforcing energy security across Europe. These aspects are enshrined in Article 194 of the Treaty on the Functioning of the European Union, which has conferred Union competences to promote renewable energy. The European Union (EU) has long been worldwide leader in the promotion and development of renewable energy, steering the effort to combat climate change, encourage the shift to a low-carbon economy and stimulate high-potential economic growth. President Juncker has already defined the ambition of the EU becoming the world's number one on renewables as one of the Commission's main political priorities. This ambition should cover not only the objective to increase deployment of renewable energy, but also the supply by European companies of key components inside and outside the EU. The current 2020 framework sets a EU 20% target for energy consumption which relies on legally binding national targets until 2020. National Renewable Energy Action Plans and the biennial monitoring provided for by the Directive 2009/28/EC on the promotion of the use of energy from renewable sources have been effective in promoting transparency for investors and other economic operators and thereby favoured the rapid deployment increase in the share of renewables from 10.4% in 2007 to 17% in 2015. In October 2014, the European Council agreed the 2030 framework for climate and energy reaffirming the Union's long-term commitment to the ambitious EU strategy in renewable energies. The new framework sets out the European Union target of at least 27% for the share of renewable energy consumed in the EU in 2030. This target is binding at EU level and will be fulfilled through individual Member States' contributions guided by the need to deliver collectively for the EU. In addition, the new framework also enables the collective delivery to be done without preventing Member States from setting their own, including more ambitious, national targets. Member States can support renewable energy, subject to State aid rules. On several occasions, the European Council has encouraged the Commission to review and develop legislation related i.a. to renewables to underpin the agreed 2030 target. The European Parliament has also called upon the Commission to present the renewable energy legislation and to increase even further the ambition level to at least 30%. EU energy system projections indicate that current Member States and EU policies, if no new policies are put in place, would only lead to, approximately, 24.3% of renewable energy consumption in 2030. This level would be well below the at least 27% EU level binding renewable energy target as agreed by the European Council, and would prevent the Union from collectively delivering on the commitments made in the 2015 Paris Agreement. The continuation of unchanged policies would also seriously risk undermining the realisation of the Union's political ambition for world leadership in renewable energy. In addition, it would forego the benefits of security offered by increasing energy supply from indigenous sources, and reduce consumers' participation in the energy system. The analysis that underpins this proposal for a recast of the Renewable Energy Directive (the Proposal) therefore indicates that reaching the EU level target of at least 27% calls for a change in policies in the form of a Union level framework leading to EU, national and regional level measures. This is even more the case once it is considered that the exact size of the target shortfall is subject to unavoidable uncertainty given the assumptions required for the estimation, that an EU renewables' share above 27%, is the minimum level that must be reached, and that the significant investment effort required to fill the gap in the EU (e.g. 254 billion Euro for renewable energy only in electricity generation) calls for early, clear and stable policy signals. At the same time, and in the absence of an updated regulatory framework, there is a risk that greater differences within the EU will arise, whereby only the best performing Member States will continue the increasing trajectory in renewables' consumption, while those who are lagging behind will not find any incentive to increase their production and consumption of renewable energy. Moreover, this concentration of the efforts in a few Member States would be more expensive and further distort the internal energy market. Furthermore, Union-level action is a particularly appropriate tool given the fundamental difference between the 2020 framework and the 2030 framework. While delivery under the first could heavily rely on the strength of national binding targets, and thus allow Member States a large discretion on the choice of national measures, the 2030 framework is solely based on a EU-level binding target, which is not translated into national targets. The Union's 2030 target can thus be best achieved through a partnership with Member States combining their national actions supported by a framework of measures as outlined in this Proposal. In the electricity sector, Member States will be able to promote renewable electricity by implementing cost-effective national support schemes subject to State aid rules and the framework conditions defined at EU level, including rules for cross-border participation. In the heating and cooling sector, a greater penetration of renewable energy will exploit untapped potential. This is to be achieved flexibly through Member State endeavours. In transport, given cross-border trade of biofuels, a harmonised approach is required. In this context, an important coordinating element of the overall 2030 energy and climate framework is the proposal on the Energy Union Governance, which includes (i) planning, whereby Member States formulate national plans on energy and climate; (ii) reporting and monitoring, whereby Member States report progress on implementing their national plans; and (iii) gap filling/corrective measure, whereby the Commission in 2025 will undertake a more thorough review of the renewable energy progress. For the EU, the investment needs are estimated to be around or above €1 trillion from 2015 to 2030 in renewable electricity generation alone. In this context, strengthening investors' certainty is crucial and therefore it is one of the specific objectives of the Proposal. This needs to be put into context by noting that at $48.8 billion in 2015, EU investment in renewables has fallen some 60% compared to 2011, a drop which is not just caused by the reduction in technology costs. As a consequence, while the Union still keep the leading position in terms of renewable energy investments per capita, its share in total renewables investment has been declining at a rapid pace, from almost one half in 2010 to less than one fifth in 2015. An updated framework also needs to take into consideration the new elements already in place in the field of investments. The 2030 framework is an opportunity for the European Union in terms of investments, creation of growth and jobs. The EU has to make sure that the right conditions for investments are in place. In this spirit the European Fund for Strategic Investments (EFSI), as part of the Investment Plan for Europe and the European Structural and Investment Funds (ESIF), have been shown to be a major contributor to investments in the renewable energy sector. Out of the EFSI transactions approved by the European Investment Bank (EIB), 23% are in the energy sector. Almost half of the projects in this sector are related to renewable energy investments. This shows that there is a real interest by private investors to engage in concrete projects across the EU as this is seen as a key sector for the energy transition of the European Union and as a strategic sector in which to invest. The ESIF have a strong focus on low-carbon investments, including renewable energy, in the 2014-2020 period. Furthermore, the proposal to double the duration of the EFSI as well as its financial strength must also be seen as an opportunity for more investments in renewables. The proposal for the continuation of EFSI until 2020 contains the objective to mobilize up to 40% of the investments in the infrastructure and an innovation window to COP21 related projects. For this to happen, renewable energy projects, together with energy efficiency, need to continue to be a major part of the investments in the energy sector. Therefore, it is essential that the right signals are maintained so that the private and public sectors in the EU have a clear indication on the future of EU policies. In this context, this Proposal establishes the right regulatory framework. Investments in renewables and energy efficiency and in the modernization and integration of European energy markets, are essential for the decarbonisation of EU economy. But most importantly for the creation of growth and jobs all over Europe, and for the Union's global competitiveness, as the technological advantage these investments sustain will be essential for the European industry. Last but not least, the revision of the current renewable energy framework is also necessary to reflect the global change that has taken place since 2009, with competitors becoming stronger on a world stage due to their increasing investments in renewable energy. If the EU wants to retain its leadership role, a strong renewable energy framework is required to support the deployment of renewable energy in all sectors. This will also entail significant benefits in terms of competitive advantages for European industry.

The Proposal lays down the principles according to which Member States can collectively and continuously ensure that the share of renewable energy in the EU final energy consumption reaches at least 27% by 2030 in a cost-effective manner across the three sectors of electricity (RES-E), heating and cooling (RES-H&C) and transport (RES-T), taking into account the following specific objectives: address investment uncertainty, along a path that takes account of medium and long term decarbonisation objectives; ensure cost-effective deployment and market integration of renewable electricity; ensure collective attainment of the EU-wide target for renewable energy in 2030, establishing a policy framework in coordination with the Energy Union Governance that avoids any potential gap; developing the decarbonisation potential of advanced biofuels and clarify role of food-based biofuels post 2020; develop renewable energy potential in the heating and cooling sector. Therefore, the measures included in the Proposal aim to tackle, in a proportionate way, the existing issues hampering renewable energy deployment, such as investor uncertainty, administrative hurdles, the need to improve cost-effectiveness of renewables deployment, the need to update the policy framework and the risk of loss of citizen buy-in during the transition towards 2030. 1.2.•Consistency with existing policy provisions in the policy area The Proposal is consistent with the Market Design and Energy Union Governance proposals as well as the revision of the Energy Efficiency and Energy Performance of Buildings Directives, the EU ETS proposal of July 2015 and the proposed Effort Sharing Regulation, the Land Use, Land Use Change and Forestry Regulation (LULUCF) of July 2016. The Proposal needs to be viewed together with the above mentioned initiatives, which are not by themselves sufficient to allow the EU to reach, collectively, a share of at least 27% renewables in the final energy consumption by 2030 in a cost-effective way. The Proposal builds on the development of an electricity market fit for renewable energy under the Market Design initiative, where short term markets are fully developed and integrated, flexibility plays a key role in enhancing the market value of renewables, and renewable energy generators can earn a higher fraction of their revenues from the energy markets reducing the need for public support. Moreover, the Proposal complements the Market Design initiative by introducing different measures aimed at attracting the necessary investments cost-efficiently and in a timely manner and by further reducing administrative burden for renewables producers, including consumers producing their own renewable heat and electricity. The Proposal complements the Energy Union Governance by creating the conditions across the three sectors (electricity, heating and cooling and transport) to facilitate the EU target achievement in a collective manner. At the same time, the Governance initiative streamlines and integrates the existing planning, reporting and monitoring obligations of the energy acquis including those for renewable energy post 2020 which will help track progress towards EU-wide target achievement, allow for a revision of the ambition in national plans and activate elements in response to a gap in the collective ambition or a delivery gap. The Energy Efficiency Directive (EED) and Energy Performance for Buildings Directive (EPBD) aim, respectively, at facilitating the achievement of the energy efficiency target and at enhancing the energy performance of buildings. The provisions on heating and cooling in the proposed EED and EPBD will complement Member States endeavours to facilitate the penetration of renewable energy in the heating and cooling sector under the twin action of the provisions contained in this Proposal and the Governance Regulation. This will preserve as much flexibility as possible to reflect national differences of such systems in place while ensuring the necessary contribution for the achievement of the overall 2030 target. In the context of the reformed EU Emission Trading Scheme (EU ETS) for the period after 2020, a strengthened EU ETS will play an increasing role in providing a stronger investment signal for lower carbon technologies, including renewables, and will ensure that synergies between renewable energy and climate policies are better exploited. However, the ETS prices under the reformed EU ETS will not be sufficient to reach the EU-binding target in renewables of at least 27%. The provisions on support for renewable energy in the power sector will ensure that such mechanisms will be fully complementary with the ETS and minimise any potentially negative impact on the carbon price. Furthermore, the proposed Effort Sharing Regulation makes proposals for setting national binding emission reduction targets for greenhouse gases for the sectors outside the EU ETS and on LULUCF, without indicating how these could be met in the most cost-efficient way. EU energy system projections show that renewable policies across the power, heating and cooling, and transport sectors are necessary to reach the non-ETS target and to do so cost-effectively. The proposed LULUCF Regulation aims at including carbon emissions and removals from agriculture and forestry into the EU 2030 climate and energy framework. The reinforced EU sustainability criteria on bioenergy aim to continue guaranteeing the sustainability of forest biomass used in the energy sector, including through a LULUCF requirement ensuring proper carbon accounting of carbon impacts of forest biomass used for energy. 2.LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY •2.1.Legal basis The Proposal is based on Article 194(2) of the Treaty on the Functioning of the European Union, which is the legal basis for measures on energy. As the Treaty contains a specific energy legal basis, it is appropriate to use it. •2.2.Subsidiarity principle

The subsidiarity principle is addressed in this Proposal as the Union does not have exclusive competences on renewable energy policy. The Proposal builds on the growing importance of energy as a political and economic challenge and its close interrelation to the policy areas of security of energy supply, climate change, internal market and economic and social development. The need for EU action EU level action is needed to ensure that Member States contribute to the at least 27% EU level binding renewable energy target and that this is collectively and cost-effectively met. Member States are requested to define their own ambition levels including trajectories that correspond to their national circumstances and preferences. A linear EU-wide trajectory will help track progress towards the achievement of the EU-wide target without being binding on Member States individually. The progressive opening of support of renewable electricity is needed to address fragmentation of the internal market and ensure cross-border tradability, especially for common rules on transport fuels. As regards the electricity sector, the EU has set up a single integrated power market where main principles, rules for common problems and rules regarding cross-border aspects are being established at EU-level. It follows that also for renewables such cross-border aspects need to be addressed at EU level through specific rules. Some of the sustainability risks linked to the development of bioenergy have a cross border dimension and hence can be more efficiently addressed at EU level. This is in particular the case for environmental impacts such as climate change and biodiversity loss. In addition, there is a need for a harmonised EU sustainability framework for biomass in heat and power in order to facilitate biomass trade and promote the internal market in biomass fuels. Analysis shows that action only at Member States' level would likely lead to distortions in, and fragmentation of the internal energy market, resulting in an overall higher costs and lower deployment of renewable energy across the Union. EU added value As regards the heating and cooling sector, it consumes close to 50% of EU's energy and 75% of the EU's consumption in this sector is still fossil-based. The lack of an EU-wide strategy has compounded investors' uncertainty and allowed the fragmentation of local markets, where consumers have difficulties in making choices based on their preferences and lack of regulatory policies creating incentives for decentralised energy. EU guidance in this sector could help create an integrated EU market for renewables in heating and cooling. Therefore,, Member States are provided with options on how to address the untapped potential in the heating and cooling sector. Given the local dimension of heating and cooling, the Proposal sets up an overall framework for incentivising renewables in this sector, while leaving to the Member States the possibility to adapt to local circumstances in the most cost-efficient way. Transport consumes approximately a third of EU's total energy demand and this demand is almost entirely met by oil. While the transition to low-emission alternative energy in transport has already begun, spurred also by the current Renewable Energy Directive, the sector is significantly lagging behind the other sectors for a number of reasons, including the lack of strong incentives to innovate in energies and technologies needed for the long-term decarbonisation and energy diversification of transport as well as infrastructure issues related to electrification (which is being addressed via the implementation of the Alternative Fuel Directive and the proposed measures under the review of the Energy Performance of Building Directive). A common EU action will ensure that that the objectives of the policy (e.g. developing the decarbonisation potential of advanced biofuels) are achieved collectively at least cost. An EU-wide energy and climate framework for renewable energy in 2030 will also help to monitor and support Member States energy policies to achieve a sustainable, secure and affordable energy system for European citizens. With a predictable EU regulatory framework leading the renewables' sector towards 2030 supporting Europeanisation of renewables policy, in particular strengthening the market-based approach to renewables and promoting the opening of cross-border support, Member States can better design national policies towards the 2020 target, which ensure that renewable energy policies are coherent with other energy and climate objectives, namely the ETS, the Effort-Sharing Regulation and the EU energy efficiency target for 2030. An EU-level framework setting out high-level principles for support schemes would also provide investor certainty, which may have been undermined in the past by the stop and go policy – and sometimes retroactive measures – taken by certain Member States. By acting at EU-level, several barriers to public and private investments (e.g. related to authorisation procedures) could be tackled, addressing the lack of coordination between various authorising bodies at national level and stimulating the administrative capacity to implement cross-border projects and support schemes. EU action will deliver investors certainty in an EU-wide regulatory framework, a consistent and cost-efficient deployment of renewable energy across the EU and an efficient operation of the internal energy market whilst respecting the potential of Member States to produce different forms of renewable energy according to the energy mix of choice. In this regard, Member States retain wide discretion and flexibility to favour the development of renewable energy in any sector of their economies in the way that suits their national potential and circumstances best, including the option of achieving the EU-level target by supporting the deployment of renewable energy in other Member States, compatible with market design proposals. The Proposal therefore complies with the subsidiarity principle. 2.3.Proportionality principle and choice of instruments The Proposal complies with the proportionality principle, as it sets out EU actions that will ensure the Union to meet the at least 27% target but provides flexibility for Member States to implement the envisaged actions and develop the renewable energy sector that corresponds best to their national situation, preferences and potential, provided they collectively reach the at least 27% target. The EU level target entails a fundamental shift in the policy framework for 2030, from legally binding national targets, allowing Member States large discretion on their national measures, to a legally binding target placed at the level of the European Union. Within this context, having solely national measures would lead to a non-cost efficient and unevenly spread efforts across the EU, leading to an insufficient deployment of renewables in the EU internal energy market, potentially falling short of the agreed target. Within this context, having solely national measures coordinated under the proposed governance mechanisms would not offer sufficient guarantees in terms of meeting the target, achieving it in the most cost-efficient manner, avoiding any free riding among Member States and reducing market fragmentation. EU level action can therefore create a robust and stable framework that enables the collective and cost-efficient achievement of the Union's binding objective of at least 27% renewable energy in 2030, with a fair distribution of efforts by Member States, without going beyond the necessary measures needed to ensure cost-optimality of the common effort. Concerning specific sectoral provisions, the heating and cooling consumes close to 50% of EU's energy and 75% of the EU's fuel needs for heating and cooling still come from fossil fuels. As such, decarbonising the heating and cooling sector is crucial if the EU is to stay on the path of our long term decarbonisation objectives and improve security of supply. By 2030, close to half of the contribution to the EU renewable energy target should come from heating and cooling. This magnitude shows the need for action in this specific sector. The proposed heating and cooling options guide Member States in the choice of approach to facilitate the penetration of renewables in the sector contributing to reach this cost-efficient share, while leaving them full flexibility in the design of their integrated climate and energy plans. Should all Member States adopt the suggested measure, this would roughly cover one fourth of the gap between the no policy change and the EU level target of at least 27%.

Important national prerogatives, such as the Member State's right to determine the conditions for exploiting their energy resources, their choice between different energy technologies and the general structure of their energy supply, remain fully untouched. Furthermore, the EU bioenergy sustainability framework includes minimum criteria to demonstrate the sustainable production and efficient use of biomass in transport, heat and power. The new sustainability provisions follow a risk-based approach and do apply only to large-scale heat and power generators. Finally, proportionality is ensured by striking a balance between objectives of competitiveness, security of supply and sustainability, and by considering the long term benefits beyond 2030 of the proposed course of action - and not only be based on short to medium term impacts. The level of constraint imposed is thus proportionate to the objective. 2.4.Choice of the instrument The instrument chosen is a Directive that has to be implemented by the Member States. A Directive is the appropriate instrument for the promotion of renewables as it clearly defines the EU objectives to be reached, while leaving Member States sufficient flexibility to implement it in the way that suits their particular national circumstances best. Therefore, only limited provisions imposing mandatory action are included, and exclusively in order to increase the necessary cost-optimal deployment across the Union (e.g. Article 5 of the Proposal on partial mandatory opening of support schemes). The Proposal entails a substantive amendment to the Renewable Energy Directive, and the recasting technique allows the adoption of a single legislative text which simultaneously makes the desired amendment, codifies that amendment with the unchanged provisions of the earlier act, and repeals that act. Therefore, a recast Directive is the appropriate instrument and is in line with the Commission’s commitment under the interinstitutional agreement on better law-making. 3.RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS 3.1.REFIT evaluation A regulatory fitness programme (REFIT) evaluation of the Renewable Energy Directive was carried out between 2014 and 2016. The results of this evaluation are submitted in a separate REFIT evaluation Staff Working Document presented together with the Impact Assessment accompanying the Proposal. The REFIT evaluation concluded that the objective of sustainably increasing the share of renewable energy in the EU final energy consumption has been successful. The binding national targets, the National Renewable Energy Action Plans and the biennial monitoring provided for by the Renewable Energy Directive have been particularly effective for promoting transparency for investors and other economic operators, and have ensured high quality information on renewable energy markets and policies in the Member States. This is illustrated by the rapid deployment increase after the date of adoption of the Directive, passing from 10.4% share of renewables in 2007 to 17% in 2015. These legal provisions, together with additional national policies and other non-regulatory measures, have contributed to the overall achievement of EU’s energy and climate policy goals, resulting in greenhouse gas emission saving, increased security of energy supply, innovation leadership, employment creation, public acceptance and regional development. They have proved their relevance, coherence, efficiency, effectiveness and added value for the overall EU energy and climate change objectives. Renewable energy is, currently, the only decarbonisation option in the power sector deployed at a rate that is close to what is required under long-term International Energy Agency (IEA) scenarios to limit global temperature rise to 2◦C above pre-industrial levels. However, even if the EU as a whole and all but one Member States are currently on track towards its overall renewable energy targets for 2020, target achievement by 2020 will only be secured if Member States continue to promote the deployment of renewables with the view to meet their increasingly steep trajectories. Furthermore, additional efforts are necessary to increase the current progress rate of renewables deployment in transport to ensure the sectorial 10% target is met. In particular, the regulatory uncertainty caused by the long lead political discussion on how to address the risk of Indirect Land Use Change (ILUC) associated to food based biofuels has had a negative impact in the deployment of renewables in the transport sector. 3.2.Stakeholder consultations 3.2.1. Consultation methods, main sectors targeted and general profile of respondents A wide range of stakeholders including Member States and National Regulatory Authorities have been involved throughout the preparation of the proposal. This has included a 12-week public consultation, a stakeholder workshop held on 5 February 2016, a dedicated discussion at the Electricity Regulatory Forum in Florence and numerous bilateral discussions. A public consultation was launched on 18 November 2015 and remained open until 10 February 2016. The Commission received in total 614 replies. 340 replies were sent by national and EU-wide associations, accounting for 58% of the replies. Out of these, 110 came from industry associations (18% of total replies) and 90 were submitted by the renewable energy industry (15%). Moreover, there were 186 replies directly from undertakings (30%). A total of 19 national governments and 22 regional or local authorities also participated in this consultation. It is important to note the significant participation by individual citizens, energy cooperatives and Non-Governmental Organisations. The Commission also carried out an online public consultation on bioenergy sustainability, running from 10 February until 10 May 2016, which received over 950 replies. This was complemented by a thematic stakeholder conference which took place on 12 May 2016. 3.2.2 Summary of stakeholder views The detailed assessment of the replies to the public consultation confirms broad consensus amongst respondents on a number of the elements put forward in the public consultation, including inter alia the need for a stable and predictable EU legal framework for renewables, the importance of defining complementary measures in the recast Directive to ensure the achievement of the at least 27% binding target at EU-level and the relevance of developing a market fit for renewables. However, stakeholders are divided on other issues, such as on the geographical scope of support schemes and the exposure of renewables to market conditions (e.g. priority dispatch and balancing responsibilities). With regard to the role of private and public entities in the electricity market, there is a strong support for additional EU action for empowering energy consumers and local authorities. The vast majority of replies support stronger EU rules guaranteeing that consumers have the possibility to produce and store their own renewable heat and electricity and participate in all relevant energy markets in a non-discriminatory and simple way, including through aggregators. Many respondents support increasing short-term market exposure for self-consumption systems, by valuing surplus electricity injected into the grid at the wholesale market price. However, a number of renewables' generators highlight that market-based support schemes are still needed for small-scale self-consumption systems during the transition towards a reformed market design. Several respondents support facilitated access to finance for local initiatives on renewable energy.

Stakeholders stress that retroactive changes to support schemes should be prevented. Other elements are identified as important to improve the stability of investments; these include the removal of administrative barriers, further market integration and a reinforced investment protection regime going beyond the Energy Charter Treaty. Several respondents also insist on the necessity to ensure a quick implementation of the recast Directive, well ahead of 2021, in order to give timely policy signals and an outlook to investors. Several Member States have in particular underlined that the right for Member States to choose their own energy mix and to develop the renewable technologies that they have chosen, e.g. for diversification reasons, needs to be guaranteed, especially in the design of support schemes. They also stressed that market integration of renewables has to be organised in a coordinated way and cannot be left only to fragmented procedures depending on individual notification schedules of Member States. Last but not least, having a robust legal framework enshrined in the Renewables Directive is considered key to achieving the at least 27% EU renewable energy target by 2030. The majority of respondents favour preventive measures to avoid a gap in target achievement, but also see a need for implementing corrective actions if this happens to be the case. Some stakeholders, such as energy regulators, highlight the need to ensure consistency of any complementary measures with national support schemes. The public consultation highlighted that the main barriers to increasing renewable energy in transport include inter alia the lack of a stable policy framework for the period after 2020, the long debate on biofuels sustainability, and the high price of electric vehicles. The vast majority of respondents also indicated that an EU wide fuel incorporation obligation would be an effective or very effective measure to promote the consumption of sustainable renewable fuels in the EU transport sector and increasing the uptake of electric vehicles. In addition, the Electricity Regulatory Forum held in Florence on 13-14 June 2016 with the participation of Member States, National Regulatory Authorities and key stakeholders concluded that the Renewables framework for the post 2020 period should be based on an enhanced market design, fit for the full integration of renewables, a strong carbon price signal through a strengthened ETS, and that specific support for renewables, that when and if needed, should be market based and minimise market distortions. To this end, the Forum encouraged the Commission to develop common rules on support schemes as a part of the revision of the Renewable Energy Directive that facilitate a market based and more regionalised approach to renewables. The public consultation on bioenergy sustainability has shown a divided perception on the benefits and risks of bioenergy and on the need for a new EU policy. Nevertheless, an overwhelming majority of respondents underlined climate mitigation as the main objective of a bioenergy sustainability policy. A number of public authorities and public enterprises as well as biofuel and bioliquids producers and forestry companies and several Member States indicated that they prefer the baseline scenario, i.e. no additional EU sustainability requirements. One of the main reasons invoked is the existence of other legislation that covers the potential risks linked to biomass for energy, as well as the risk of excessive administrative burden. On the other hand, many EU bioenergy producers and users, as well as by a number of Member States support additional EU action in order to extend the EU sustainability criteria to biomass used in heating/cooling and electricity. A recent opinion of the EU Standing Forestry Committee, the advisory group on EU forest action, supported the option of introducing a risk-based sustainability criterion for forest biomass. Requirements on the efficiency of conversion of biomass to energy are supported by a range of stakeholders including in particular the wood using industry, including pulp and paper producers, and environmental NGOs. NGOs also support a cap on the overall use of bioenergy, as well as restrictions on certain feedstocks or sources, and environmental and social requirements for biomass production. In general, stakeholders have asked for consistency of treatment when imposing measures that concern specific feedstocks, regardless of their final use: this means for example that the rules should be the same for agricultural biomass that is used for producing biofuels or for biogas for heat and power. 3.3.Collection and use of expertise The following main studies were commissioned from external contractors: Study on the impact assessment for a new Directive mainstreaming deployment of renewable energy and ensuring that the EU meets its 2030 renewable energy target - ECN, Oeko Institute, Eclareon, REBEL, SUER, BBH. Study on Technical Assistance in Realisation of the 2016 Report on Renewable Energy, in preparation of the Renewable Energy Package for the Period 2020-2030 in the European Union - Öko-Institut, E3-Modelling, Observ’ER, COWI. Supporting investments into renewable electricity in context of deep market integration of RES-e after 2020: Study on EU-, regional- and national-level options - Cambridge Economic Policy Associates (CEPA). Study on the sustainable and optimal use of biomass for energy in the EU beyond 2020 – PricewaterhouseCoopers, Vito, TU Wien, Utrecht University, INFRO, Rutter Soceco. Carbon impacts of biomass consumed in the EU - Forest Research UK, VTT, North Energy, Alterra. Study on impacts on resource efficiency on future EU demand for bioenergy, IISA, Idufor, EFI, Oeko Institute, IEEP. 3.4.Impact assessment The Impact Assessment (IA) accompanying the Proposal did not present a set of preferred options but carried out a detailed analysis of each policy option with a gradual approach from a business as usual scenario (Op. 0), consisting in the continuation of national measures but excluding additional action at EU level, to alternative scenarios including more EU-comprehensive measures across the five areas below.

On 16 September 2016, the Regulatory Scrutiny Board delivered its first opinion on the Impact Assessment and asked for its resubmission. This was subsequently revised and resubmitted to the Regulatory Scrutiny Board on 17 October 2016 which issued a second negative opinion on 4 November 2016 but did not ask for the impact assessment to be further revised and resubmitted. Against this background, the Commission has considered it opportune to go ahead with a recasting proposal for the Renewable Energy Directive while taking into due account the reservation expressed by the Regulatory Scrutiny Board in its second opinion. In particular, it has opted for more proportionate and less burdensome provisions for the heating and cooling sector combined with strengthened provisions in the governance framework to safeguard the achievement of the 2030 targets. It has also ensured that the provisions contained in the Proposal are fully compatible with and complementary to State aid rules and do not impinge on Commission's competencies in the field of State aid. The proposed provisions are general principles requiring the use (where needed) of market-based and cost-effective schemes. This is fully consistent with the new market design and helps to minimise costs for tax payers and electricity consumers. The provisions further support the investor certainty over the 2021-2030 period. The Commission has taken into consideration all the objectives of the Energy Union. Finally, it notes the unavoidable uncertainties in the estimate of the gap to be filled, the minimum nature of the EU-level 27 binding target and the need to provide stable and timely incentives for investment with high lead times. Given all of the above, the Commission considers the overall package of measures to be a proportionate answer to the problems faced. More detailed information on this is presented in this chapter. (i) Options to increase renewable energy in the electricity sector (RES-E) a) A common European framework for support schemes: (1) sole use of market mechanisms; (2) European framework for market-based and cost-effective support; (3) mandatory move towards investments aid. The Renewable Energy Directive allows the possibility for support schemes, but leaves the choice of support schemes to Member States. This has led to the sub-optimal situation where Member States have introduced support schemes which were subsequently, in many cases, changed or revoked retroactively. This has in turn negatively impacted investor confidence. Clearer rules are therefore needed in the recast Renewable Energy Directive to increase investor confidence. Against this background, Option 2 entails the introduction of principles for support schemes that Member States can put in place and are currently still needed for attracting sufficient investments to reach the Union 2030 target. This option includes design principles for Member States to use for support schemes and the protection for investors against retroactive changes. Such principles are without prejudice to State aid rules. In relation to this sector, the Regulatory Scrutiny Board considered that the existing state aid guidelines already address most of the issues included in the Impact Assessment and already acknowledge the 2030 climate and energy targets. It is a political choice to anchor these principles in the legislation. In this way, these provisions will support the Europeanisation of renewable energy policy, making renewables fit for the market, while ensuring certainty for investors until 2030. More details can be found in Annex 1 of the Impact Assessment. In this context, the proposed framework sets out design principles that (i) ensure sufficient investor certainty over the 2021-2030 period and (ii) require the use (where needed) of market-based and cost-effective schemes based on emerging best practice design. The principles in this Proposal are fully in line with the orientations already taken by the Commission in the Environment and Energy State Aid Guidelines (EEAG) and develop them further in a number of areas such as notably on cross-border participation. Moreover, the framework is effective in ensuring sufficient investor certainty by defining general design principles in accordance with market-based principles and based on best practice that will be valid over the 2021-2030 period. At the same time, the framework is proportionate and not overly prescriptive, since rules are of general nature, and also respects subsidiarity as it fully takes into account Member States' right to determine their energy mix. For this purpose it is necessary to define in the present regulatory framework the relation between, on the one hand, the right for Member States to choose their own energy mix and to develop the renewable technologies that they have chosen, e.g. for diversification reasons, and the objective to ensure a level of competition between technologies on the other. Submitting these basic principles of the energy framework for Europe to agreement in the Council and the European Parliament, will build legitimacy and public acceptance for the market integration agenda. Furthermore, various stakeholders including regulators as well as a number of Member States have called for such a framework to be introduced in the Proposal, in complementarity to applicable State aid rules. b) A more coordinated regional approach: (1) mandatory regional support; (2) mandatory partial opening of support schemes to cross-border participation. This proposal reflects the second option (Option 1 in the Impact Assessment Report), in order to make a partial opening of RES-E support schemes to cross-border participation mandatory. This option allows achieving lower overall system costs and support costs by ensuring that investments are increasingly located where potential and other conditions are most favourable. The results of the Impact Assessment show that this measure would result in reduced energy system costs of €1.0 billion annually for the period 2021-2030, while renewable energy support costs paid by the consumer are reduced by 3%. This option is proportionate as it only proposes a progressive, partial opening, reflecting the level of physical interconnections. It respects subsidiarity as it does not limit Member State's ability to design their support scheme and thus does not interfere with their right to determine their energy mix. c) A renewable-focused financial instrument: (1) an EU-level financial instrument with wide eligibility criteria; (2) an EU-level financial instrument in support of higher-risk RES projects. The goal under this area is to enhance the use of funds under existing or new financial instruments to support the high ambition of Member States in deploying renewables. The details of such enabling framework should be set out in the context of the preparation of the Multiannual Financial Framework for 2021-2027. d) Administrative simplification: (1) reinforced provisions with "one-stop-shop", time ranges and facilitated procedures for repowering; (2) permitting procedures time limited, through automatic approval and simple notification for small projects. A combination of Options 1 and 2 is preferred for this Proposal, in order to establish a permit granting process for renewable energy projects with one designated authority ("one-stop-shop"), a maximum time limit for the permit granting process, a simple notification to Distribution System Operators for small scale projects and a specific provision on accelerating permit granting process for repowering existing renewable plants. This option allows achieving clearer, more transparent, predictable and less time-consuming permitting processes for applicants. This option is proportionate as it is to a large extent the implementation of best-practice procedures that already exist in some Member States. It does not entail high costs. It respects subsidiarity as it leaves Member States the choice of how to organise the one-stop-shops. It also does not interfere with the content of the permitting procedures. (ii) Options to increase renewable energy in the heating and cooling sector (RES-H&C):

a) Mainstream renewables in the heating and cooling supply: (0) continuation of the current national measures with no EU action; (1) introducing RES H&C obligation for fossil fuel suppliers; (2) same obligation but for all fuel suppliers. The preferred option was Option 2, where suppliers designated by the Member States and covering at least 50% of the energy supply would have been required to gradually mainstream renewable energy in their total annual sales volume until 2030 (by 1 percentage point annually). In relation to this sector, the Regulatory Scrutiny Board has questioned the proportionality of establishing an obligation on heating and cooling energy suppliers. In order to address these concerns, the current proposal replaces the obligation by several options open to Member States, therefore providing flexibility of implementation at national level. Taken into account that heating and cooling represents nearly half of the EU final energy use and that, while the share of renewable energy in electricity has increased by more than 8 percentage points between 2009 and 2015, the share of renewables in the heating and cooling sector has only expanded by less than 3 percentage points in the same period, there is a need for an ambitious, but flexible, measure in this sector. This option is proportionate, as it does not go beyond what is necessary to increase deployment of renewables in the RES-H&C sector at EU level and does not place a heavy burden on SMEs. This option is consistent and complementary to EED and EPBD. The energy efficiency in the heating and cooling sector is promoted through energy savings and renovation, especially in the building sector. In parallel, the heating and cooling options would accelerate the fuel-switching from fossil fuels to renewable energy in the heating and cooling sector, also tackling the existing building stock. Dedicated renewable-energy measures in the heating and cooling supply and energy use at building level will reduce the risk of technology lock-in, i.e. where the approach focused on energy efficiency only triggers fossil fuel technologies being replaced by more efficient but still fossil fuel solutions. b) Facilitate the uptake of renewable energy and waste heat in District Heating and Cooling (DHC) systems: (1) best practice sharing; (2) energy performance certificates and opening access to local H&C; (3) measures under 1 and 2 together with an additional reinforced consumer rights framework. Option 3 is preferred for this Proposal. This option empowers consumers to produce renewable heat locally, and use a renewable district heating and cooling system to create local synergies with other users, therefore having a positive social impact. The disconnection possibility would allow for additional renewable heat production between 2020 and 2030 further contributing to climate change mitigation. Even though allowing disconnection could have negative consequences for the revenue streams of local district heating and cooling companies, these impacts would be off-set by the positive social and environmental impacts. This option is also proportionate since administrative burden will be directly correlated to the level of penetration of district heating systems at national level. In particular, Member States with low share of district heating will face limited certification burden and likely moderate disconnection demand. District heating and cooling represents around 10% of energy supply in the EU. District heating and cooling systems are an enabler for higher shares of renewable energy in the EU energy system. For example, there is a vast untapped potential for using industrial scale heat pumps in district heating and it is estimated that over 25% of the EU population live in areas suitable for geothermal district heating applications. Furthermore, district heating systems represent an important infrastructural technology to facilitate increased total conversion efficiencies of waste-to-energy plants. The older district heating and cooling systems must evolve to accommodate the increase of renewable energy supply. However, the current investment in district heating and cooling does not allow a transition to efficient and renewable energy supply. Energy performance measures require relative simple administrative support, but could potentially substantially increase renewable energy deployment, therefore the efficiency of the measure. In addition, this option is also proportionate (as it creates a level playing field between local district heating and cooling operators and the contributors and users of heat through a transparent, yet comparable system) and respects subsidiarity (as it provides the principles but respects the role of national and local authorities in establishing district heating and cooling systems). (iii) Options to increase low-carbon and renewable energy in the transport sector (RES-T): (1) EU incorporation obligation for advanced renewable fuels; (2) EU incorporation obligation for advanced renewable transport fuels (including advanced biofuels), alongside a reduction of food-based biofuels with a range of variants covering the speed and extent of reduction; (3) building on option 2, a dedicated EU incorporation obligation for aviation and maritime renewable fuels; (4) GHG emission reduction obligation (continuation of the Fuel Quality Directive). The Regulatory Scrutiny Board considered that the sustainability of biofuels and their potential contribution to the Union-level target should be clearly specified and assessed in the same way as for other forms of bioenergy. It also asked for the consideration of an additional option applying improved sustainability criteria to all biofuels. The Impact Assessment has analysed these four policy options for EU action to promote the decarbonisation and energy diversification of transport fuels, while addressing Indirect Land Use Change (ILUC) associated to food-based biofuels. In this context, it builds on the analysis developed in the impact assessment to the ILUC Directive, the Impact Assessment assesses a number of options for strenghtening the existing sustainability framework for biofuels, including by extending and further reducing the existing cap on food-based biofuels to the period after 2020 in order to minimise ILUC emissions. In addition, the Impact Assessment on bioenergy assessed options for strengthening the overall sustainability criteria for bioenergy, including a new sustainabilty criteron for forest biomass (used also for biofuel production) and an extension of the sustainability criteria to biomass used for heat and power. Option 2 is preferred for this Proposal since it builds on the practice of 25 Member States, which have introduced biofuel blending mandates, and provides industry with greater certainty about future market demand/volumes for advanced biofuels, which is needed to ensure large-scale investment and innovation into the sector. This option will also allow for a gradual reduction of food-based biofuels, as indicated in the July 2016 Strategy on Low Emission Mobility. The proposed reduction trajectory takes into account the important past investments realised so far, and is in line with a realistic speed in the rollout of advanced biofuels in the market. The option is easier and straightforward to implement, as it builds on the extensive policy and administrative experience gained at national level. The preferred option addresses ILUC emissions and promotes high GHG performance of advanced biofuels. ILUC can be significantly reduced through a gradual reduction of conventional biofuels by 2030, focusing primarily on oil-crop based that are associated with higher ILUC impacts. In addition, the minimum GHG saving requirement would promote optimal carbon performance of new biofuel installations.

In its Strategy on Low Emission Mobility the Commission indicated that food-based biofuels have a limited role in decarbonising the transport sector due to the concern about their real contribution to the decarbonisation of the transport sector. In the proposal for the ILUC directive, a precautionary approach was proposed and accepted by the co-legislators limiting the contribution of food-based biofuels to no more 7% by 2020. The regulatory uncertainty surrounding the preparation and negotiation of the ILUC Directive discouraged new investments in this sector beyond what was already in place. A progressive reduction of food based biofuels and their replacement by more advanced biofuels will realise the potential for decarbonising the transport sector. However, in determining the progression of the reduction of conventional biofuels, it is important not to retrospectively undermine the business models incentivised by the existing directive. Therefore the proposed trajectory progressively reducing the share of conventional biofuels aims at avoiding stranded assets and unintended job losses, whilst taking into account the important past investments realised so far, and is also in line with a realistic rollout of advanced biofuels in the market. The exact path of the gradual reduction trajectory set out in this Proposal reflects an informed political assessment of what would constitute a balanced approach to stability of investments and the reduction of greenhouse gas emissions in transport. (iv) Options to empower and inform consumers of renewable energy: a) Empowering consumers to generate self-consume and store renewable electricity: (1) EU guidance on self-consumption; (2) empowering citizens to self-consume and store renewable electricity; (3) a distance self-consumption for municipalities. Option 2 is preferred for this proposal as it maximises consumer's empowerment and their potential participation, mitigates grid deployment costs and grid costs distributional issues and enhances the contribution of rooftop solar PV to the renewable energy target. This option is also proportionate (as it does not open a universal right to self-consume) and respects subsidiarity (as it does not pre-empt on the freedom of Member State to support a specific technology, but only creates the right enabling framework for the roll-out of decentralised renewables production). b) Disclose information for renewable electricity: (1) consolidating the Guarantees of Origin (GO) system; (2) Building on option 1 making GOs mandatory for disclosure; (3) Building on option 2 extending GOs to all sources of electricity generation. A combination of Option 1 and Option 2 is preferred for this Proposal, to consolidate the system and make the use of GOs mandatory for disclosure of renewable electricity. This strikes a good balance and allows to increase transparency and trust in the system while avoiding the additional administrative costs that would result from extending the system to all sources of generation. This option is also proportionate as it does not entail an excessive administrative burden for the management of the system (especially for small scale producers). It also and respects subsidiarity as it allows Member States to choose their preferred method of managing the system. c) Tracing renewable fuels used in heating and cooling and transport: (1) extended GOs to renewable gaseous fuels; (2) extended GOs to renewable liquid and gaseous fuels; (3) the development of alternative tracking system for renewable liquid and gaseous fuels. Option 1 for gaseous fuels and Options 3 for liquid fuels are preferred for this Proposal. This allows to bring benefits in terms of a more robust tracking of renewable fuels to the benefit of consumers and reduce risks of fraud especially in relation to liquid biofuels. In addition, cross border trade in renewable fuels should also be facilitated with such systems. Lastly, Option 3 looks preferable to Option 2 for the liquid fuels since it fits better with the current administrative systems already in place for tracking the sustainability of these fuels. This option is also proportionate (as it builds upon existing systems in place for biofuels, and supports the simplest method to facilitate cross-border trade for renewable gaseous fuels) and respects subsidiarity (as it is complementary with existing registration schemes for renewable liquid and gaseous fuels at a national level). (v) Options to ensure the achievement of at least 27% renewable energy in 2030: a) 2020 national targets: 2020 national targets as basis vs. baseline. Option 1, i.e. to ensure that 2020 targets act as a baseline post-2020 was preferred for this Proposal. The option of keeping the 2020 target provides a backstop and should require no additional effort assuming Member States achieve that target in the first place. This option is also proportionate (as it should require no additional effort assuming Member States achieve that target in the first place) and respects subsidiarity (as it is only a prolongation in time of targets already agreed by Member States). It is important to note that all other options related to the achievement of the at least 27% renewable energy in 2030 are addressed in the Energy Union Governance Regulation while the obligation to meet the at least 27% target on the EU remains enshrined in the Proposal. b) Trajectory: Linear Vs. Non-linear. Option 1, which involves setting a linear trajectory from the 2020 target to 2030, was preferred for this Proposal. It provides more certainty and should help reduce the costs and avoid risks associated with achieving the 2030 target. This option is also proportionate (as it has limited impact on cost of deployment now that technology learnings have been largely reaped for the most mature technologies) and respects subsidiarity (this is simply a modality for measuring progress against the EU-level target decided by Member States).

c) Mechanisms to avoid an ambition gap to the EU renewable energy target: (1) to revise ambition of national plans; (2) include review clause to propose additional EU level delivery mechanisms at a later stage if needed; (3) to increase the ambition of EU wide measures; (4) to introduce binding national targets. A combination of Options 1 and 2, relying on the governance process to deliver the at least 27% target and then a review clause to consider proposing additional EU-wide measures, was preferred for the Proposal on the Energy Union Governance. The other options are not considered politically feasible and may not be possible to agree on without prejudging the next mid-term budgetary framework. This approach is also proportionate (as it does not automatically trigger any additional measures that require funding at the EU-level) and respects subsidiarity (as it leaves the choice to Member States for delivering additional efforts). d) Mechanisms to avoid and fill a delivery gap: (1) to revise national plans; (2) include review clause to propose additional EU level delivery mechanisms at a later stage if needed; (3) increasing the ambition of EU wide measures; (4) to introduce binding national targets. A variant of Option 3 was preferred for the proposal on the Energy Union governance, as it is considered most feasible means of correcting any gap in delivery. This would be supported by Option 1 (revise the delivery of national plans) which should also come into effect with the Energy Union governance process. This option is also proportionate (as it does not trigger any additional measures that require funding at the EU-level) and respects subsidiarity (as it leaves the choice to Member States for delivering additional efforts). (vi) Options to strengthen the EU sustainability framework for bioenergy: In addition, an impact assessment on the sustainability of bioenergy examined options for the sustainability of biomass used for heat and power: (1) Baseline scenario: relying on other elements of the 2030 climate and energy framework as well as on national policies to ensure the sustainability of biomass used for heat and power; (2) Extend existing sustainability and greenhouse gas saving criteria for biofuels in transport to encompass solid and gaseous biomass in heat and electricity; (3) Building on option 2, further develop sustainability requirements for forest biomass alongside a requirement to include LULUCF emissions in national commitments under the Paris agreement; (4) Building on either option 2 or 3, include an energy efficiency requirement for heat and power installations; (5) Building on either option 2 or 3 include a cap on the use of certain feedstocks (e.g. roundwood) for energy production. Option 3 was preferred for this Proposal as it is considered the most cost-effective approach to continue ensuring that bioenergy use in the EU post-2020 delivers optimal GHG savings while minimizing the risks of adverse environmental impacts associated to increased forest biomass harvesting. This option respects subsidiarity because, building on risk-based approach, it relies firstly on the national laws and standards for demonstrating sustainable production of forest biomass for energy use. It is also proportionate because it applies only on large-scale generators of biomass heat and power. 3.5.Models used The Proposal builds on policy options assessed vis-á-vis the outcomes of energy-system modelling scenarios. More specifically, the starting point used in the impact assessment accompanying the Proposal is the EU Reference Scenario 2016 (REF2016), which provides 2030 energy-system projections, based on current trends and policies. 3.5.1. The baseline scenarios Building on the REF2016 and the EUCO27 (see below in 3.5.2.), specific baseline scenarios have then been used, which highlight the expected implications of the continuation of current policies and practices on the developments in the specific sectors subject to policy interventions, assuming that all other sectors and policies are in line with the central policy scenario. 3.5.2. The policy scenarios A central policy scenario built for the impact assessments accompanying the proposal for a revision of the Energy Efficiency Directive and the proposal on the Effort Sharing Regulation, was also used. This scenario (called "EUCO27") projects the expected developments across sectors to reach the 2030 targets and help identify the scale of the economic, social and environmental challenges to cost-effectively reach an at least 27% renewable energy share. This approach, building on a common policy scenario and then focusing on 'one issue at a time', was deemed the only operational way to assess the impacts of specific policy options in the general context of various far-reaching initiatives put forward by the Commission as part of the 2016 Energy Union initiatives. 3.5.3. Model used The model suite used for assessing the policy options underpinning the Proposal is the same model suite as used for the 2020 climate and energy package as well as for the 2030 climate and energy policy framework. The model suite includes models (PRIMES, PRIMES- TAPEM & PRIMES-TREMOVE, PRIMES Biomass Supply, GAINS, GLOBIOM-G4M, Prometheus and CAPRI) linked with each other in formally-defined ways to ensure consistency in the building of scenarios. These inter-linkages are necessary to provide the core of the analysis, which are energy, transport and GHG emissions trends, covering the following: The entire energy system (energy demand, supply, prices and investments to the future) and all GHG emissions and removals:

Time horizon: 1990 to 2050 (5-year time steps) Geography: individually all EU Member States, EU candidate countries and, where relevant Norway, Switzerland and Bosnia and Herzegovina Impacts: on energy, transport and industry (PRIMES), agriculture, forestry and land use (GLOBIOM-G4M), atmospheric dispersion, health and ecosystems (acidification, eutrophication) (GAINS); macro-economy with multiple sectors, employment and social welfare. The Impact Assessment on bioenergy sustainability uses EUCO27 as a baseline scenario, and assesses the policy options with the two following modelling tools: GLOBIOM (global economic land use model) and G4M (forestry sector model), which gives projections on commodity prices, land impacts, and greenhouse gas emissions from the land use, land use change and forestry sector. Green-X (EU renewable energy model), combined with ArcGIS Network (geospatial model for biomass transport chains) and MULTIREG (input-output model), which models the breakdown of renewable energy sources and bioenergy feedstocks as well as greenhouse gas emissions from the energy sector, and economic and social impacts such as gross value added, investment, and jobs. 4.BUDGETARY IMPLICATIONS The Proposal recasts the Renewable Energy Directive and the new measures set forth in Articles 23 and 25 are expected to bring limited additional budgetary and administrative consequences for the public authorities of Member States in terms of administrative structures to be put in place. In most of the cases the costs associated with the measures are passed on to final consumers, whom in turn will profit from the benefits of decarbonisation. The Proposal has no implication for the Union budget. 5.Detailed explanation of the specific provisions of the Proposal The main provisions which substantially change Directive 2009/28/EC or add new elements are the following: Article 1 indicates the scope of this Proposal mentioning new elements for the period after 2020 such as the overall EU binding target, renewable self-consumption, improved biofuels, bioliquids and biomass fuels sustainability and greenhouse gas emissions saving criteria. Article 2 introduces new specific definitions, in the light of the amendments carried out to the Renewable Energy Directive. Article 3 sets out the 2030 EU target. It establishes the 2020 national targets as baseline (i.e. Member States cannot go below the 2020 national targets from 2021 onwards). It also includes a reference to the mechanism to ensure that this baseline is maintained and to avoid the emergence of a gap in target achievement, both as set out under the Governance Regulation. Furthermore, it deletes the 10% RES-T target after 2020. Article 4 lays down the general principles that Member States may apply when designing cost-effective support schemes to facilitate a market-oriented and Europeanised approach, subject to State aid rules. Article 5 establishes a gradual and partial opening of support schemes to cross-border participation in the electricity sector. Article 6 ensures that the level of, and the conditions attached to, the support granted to renewable energy projects, when Member States opt to do so, are not revised in a way that negatively impact supported projects. Article 7, which regulates how to calculate the share of energy from renewable sources, includes a decreasing maximum share of biofuels and bioliquids produced from food or feed crops starting from 2021, with the aim to address ILUC emissions. Member States may set a lower limit and may distinguish between different types of biofuels and bioliquids produced from food and feed crops, for instance by setting a lower limit for the contribution from biofuels produced from oil crops, taking into account indirect land use change. Article 15 includes a new calculation methodology (anchored on the Energy Performance of Buildings Directive) of minimum levels of energy from renewable sources in new and existing buildings that are subject to renovation. Article 16 establishes a permit granting process for renewable energy projects with one designated authority ("one-stop-shop") and a maximum time limit for the permit granting process. Article 17 introduces a simple notification to Distribution System Operators for small scale projects and a specific provision on accelerating permit granting process for repowering existing renewable plants;

Article 19 includes some modifications to the guarantees of origin system (i) to extend the guarantees of origin (GOs) system to renewable gas; (ii) to make the issuance of GOs for heating and cooling mandatory upon a producer's request; (iii) to make the use of GOs mandatory for RES-E and renewable gas disclosure; (iv) to enable the issuance of GOs to supported RES-E allocated through auctioning, with revenues raised to be used to offset the costs of renewable support; and (v) to improve the administrative procedures through the application of the CEN standard. Article 21 empowers consumers by enabling them to self-consume without undue restrictions, being remunerated for the electricity they feed into the grid. Article 22 sets forth new provisions on energy communities to empower them to participate in the market. Article 23 aims to exploit the renewables potential in the heating and cooling sector, ensuring a cost-efficient contribution of the sector to target achievement, and to create a larger market for RES-H&C across the EU. Accordingly, Member States will endeavour to achieve an annual increase of 1% in the share of renewable energy in the heating and cooling supply. Member States will decide how to implement it. Article 24 empowers energy consumers by providing them information of district heating energy performance, and enabling them to stop buying heat/cold from a district heating/cooling system at building level if the consumers, or a party on their behalf, can achieve a significantly better energy performance by measures taken at building level. It also opens local heating and cooling systems for producers of renewables heating and cooling and waste heat or cold and third parties acting on their behalf. Article 25 establishes a EU-level obligation for fuel suppliers to provide a certain share (6.8% in 2030) of low-emission and renewable fuels (including renewable electricity and advanced biofuels), in order to stimulate decarbonisation and energy diversification and to ensure a cost-efficient contribution of the sector to the overall target achievement. ILUC issues are addressed through Article 7 which introduces a decreasing maximum share of biofuels and bioliquids produced from food or feed crops starting from 2021. The switch to advanced biofuels is promoted by a specific sub-mandate, increasing yearly their contribution to reach at least 3.6% by 2030. Finally, the article includes a provision providing for the introduction of national databases that ensures traceability of the fuels and mitigate the risk of fraud. Article 26 reinforces the existing EU sustainability criteria for bioenergy, including by extending their scope to cover biomass and biogas for heating and cooling and electricity generation. The sustainability criterion applying to agricultural biomass is streamlined in order to reduce the administrative burden. The new text also makes the criterion for peatland protection stricter, but easier to verify. A new risk-based sustainability criterion for forest biomass is introduced, as well as LULUCF requirement for ensuring proper carbon accounting of carbon impacts of forest biomass used in energy generation. In addition, the GHG saving performance requirement applying to biofuels is increased to 70% for new plants and an 80% saving requirement is applied to biomass-based heating/cooling and electricity. To avoid excessive administrative burden, the EU sustainability and greenhouse gas saving criteria do not apply to small biomass-based heating/cooling and electricity installations, with a fuel capacity below 20 MW. Annex V includes updated default values for biofuels and bioliquids, and a new Annex VI is added to include a common greenhouse gas accounting methodology for biomass fuels for heat and power, including default values. Article 27 brings a clarification on the mass balance system and adapt it to cover biogas co-digestion and injection of biomethane in the natural gas grid. The amended article includes the obligatory recognition of evidence from national schemes of other Member States that have been verified by the Commission. To streamline the EU sustainability criteria, it deletes a number of non-operational provisions, including the possibility to establish bilateral agreements with third countries, and the possibility for the Commission to recognise areas for the protection of rare, threatened or endangered ecosystems or species recognised by international agreements or included in lists drawn up by intergovernmental organisations or the International Union for the Conservation of Nature. Furthermore it clarifies the legal basis allowing the Commission to specify the auditing approaches to be applied by the voluntary schemes, with stronger focus on limiting administrative burden. Finally, it enhances the involvement of Member States in the governance of voluntary schemes by allowing checks of certification bodies. Article 28 includes a legal basis allowing the Commission to update the GHG calculation methodology. It also clarifies the future use of Member States reports on average cultivation emissions. Articles 3, 4, 16 (1-8), 22 and 23, 24 and 26 of the Directive 2009/28/EC will be repealed by this proposal. Articles 6, 7, 8, 9, 10, 11, 12, 14, 25, 25a, 27, 28, 29 of Directive 2009/28/EC (Articles 8, 9, 10, 11, 12, 13, 14, 18, 31, 32, 33, 35 and 36 of this proposal) are slightly revised (e.g. technicalities or adaptions to new amendments and provisions) or just renumbered. 6.Additional information Simplification and regulatory fitness The EU-level 2030 target setting offers an opportunity to implement a holistic approach to deployment of renewable energy. This entails a single overarching renewable energy target of at least 27% for the Union by 2030, without the need to keep a specific sub-target for RES-T. Moreover, the Proposal includes measures across the three sectors of renewable energies, strengthening visibility for investments in renewable energy, enhancing the general regulatory framework and exploiting the potential of all sectors in contributing to the collective effort to reach the 2030 target. The calculation of the final consumption of energy from renewable sources in transport is moved to Article 7 to make it consistent with the calculation of the final consumption of energy from renewable sources in electricity and heating and cooling. Measures streamlining the current framework for support to renewable electricity (e.g. Article 4 of the Proposal) and addressing cross cutting issues (e.g. administrative barriers in Articles 15, 16 and 17 of the Proposal) are included. Repeal of existing legislation The adoption of the Proposal will lead to the repeal of the existing Renewable Energy Directive as of 1 January 2021. Review/revision/sunset clause The Proposal includes a general review clause in Article 30. Recasting

This explanatory memorandum accompanies a Proposal for recasting the Renewable Energy Directive. This specific approach has been adopted because recasting involves new substantive changes, while some provisions of the earlier act remain unchanged. Correlation table The Member States are required to communicate to the Commission the text of national provisions transposing the Directive as well as a correlation table between those provisions and the Directive. Given the large scope of this Proposal and the number of legal obligations it establishes, this correlation table is necessary so that the Commission can appropriately carry out its tasks of overseeing the transposition of the Directive European Economic Area (EEA) The proposed act concerns an EEA matter and should therefore extend to the European Economic Area. ê 2009/28/EC (adapted) ð new 2016/0382 (COD) Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on the promotion of the use of energy from renewable sources (recast) (Text with EEA relevance) THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty establishing the European Community Ö on the Functioning of the European Union Õ, and in particular Article 175(1) ð 194(2) ï thereof, and Article 95 thereof in relation to Articles 17, 18 and 19 of this Directive, Having regard to the proposal from the European Commission, After transmission of the draft legislative act to the national parliaments, Having regard to the opinion of the European Economic and Social Committee , Having regard to the opinion of the Committee of the Regions ,

Acting in accordance with the Ö ordinary legislative Õ procedure laid down in Article 251 of the Treaty , Whereas: ò new (1)Directive 2009/28/EC of the European Parliament and of the Council has been substantially amended several times. Since further amendments are to be made, that Directive should be recast in the interests of clarity. ê 2009/28/EC Recital 1 (adapted) ð new (2)ð Promoting renewable forms of energy is one of the goals of the Union energy policy. ï The control of European energy consumption and the The increased use of energy from renewable sources, together with energy savings and increased energy efficiency, constitute Ö constitutes an Õ important parts of the package of measures needed to reduce greenhouse gas emissions and comply with the Kyoto Protocol to the United Nations Framework Convention Ö the 2015 Paris Agreement Õ on Climate Change, and with further Community and international greenhouse gas emission reduction commitments beyond 2012 Ö the Union 2030 energy and climate framework, including the binding target to cut emissions in the Union by at least 40% below 1990 levels by 2030 Õ . Those factors also have Ö It also has Õ an important part to play in promoting the security of energy supply, promoting technological development and innovation and providing opportunities for employment and regional development, especially in rural and isolated areas ð or regions with low population density ï . ê 2009/28/EC Recital 2 (adapted) ð new (3)In particular, increasing technological improvements, incentives for the use and expansion of public transport, the use of energy efficiency technologies and Ö the promotion of Õ the use of energy from renewable sources ð in the electricity, heating and cooling sectors as well as ï in Ö the Õ transport Ö sector Õ are some of the most Ö very Õ effective tools ð , together with energy efficiency measures ï, Ö for reducing Õ by which the Community can reduce its ð greenhouse gas emissions in the Union and ï its Ö the Union's Õ dependence on imported ð gas and ï oil in the transport sector, in which the security of energy supply problem is most acute, and influence the fuel market for transport. ò new (4)Directive 2009/28/EC established a regulatory framework for the promotion of the use of energy from renewable sources which set binding national targets on the share of renewable energy sources in energy consumption and transport to be met by 2020. Commission Communication of 22 January 2014 established a framework for future Union energy and climate policies and promoted a common understanding of how to develop those policies after 2020. The Commission proposed that the Union 2030 target for the share of renewable energy consumed in the Union should be at least 27%. (5)The European Council of October 2014 endorsed that target, indicating that Member States may set their own more ambitious national targets. (6)The European Parliament, in its Resolutions on "A policy framework for climate and energy in the period from 2020 to 2030" and on "the Renewable energy progress report", has favoured a binding Union 2030 target of at least 30% of total final energy consumption from renewable energy sources, stressing that that target should be implemented by means of individual national targets taking into account the individual situation and potential of each Member State.

(7)It is thus appropriate to establish a Union binding target of at least 27% share of renewable energy. Member States should define their contribution to the achievement of this target as part of their Integrated National Energy and Climate Plans through the governance process set out in Regulation [Governance]. (8)The establishment of a Union binding renewable energy target for 2030 would continue to encourage the development of technologies which generate renewable energy and provide certainty for investors. A target defined at the Union level would leave greater flexibility for Member States to meet their greenhouse gas reduction targets in the most cost-effective manner in accordance with their specific circumstances, energy mixes and capacities to produce renewable energy. (9)The national targets set for 2020 should constitute Member States' minimum contribution to the new 2030 framework. Under no circumstances the national share of renewables should fall below such contribution and, in case this happens, the relevant Member States should take the appropriate measures to ensure that this baseline is maintained as well as contribute to the financial instrument referred to in Regulation [Governance]. (10)Member States should take additional measures in the event that the share of renewables at the Union level does not meet the Union trajectory towards the at least 27% renewable energy target. As set out in Regulation [Governance], if an ambition gap is identified by the Commission during the assessment of the Integrated National Energy and Climate Plans, the Commission may take measures at Union level in order to ensure the achievement of the target. If a delivery gap is identified by the Commission during the assessment of the Integrated National Energy and Climate Progress Reports, Member States should apply the measures set out in Regulation [Governance], which are giving them enough flexibility to choose. (11)In order to support Member States' ambitious contributions to the Union target, a financial framework aiming to facilitate investments in renewable energy projects in those Member States should be established, also through the use of financial instruments. (12)The Commission should focus the allocation of funds on the reduction of the cost of capital of renewables projects, which has a material impact on the cost of renewable energy projects and on their competitiveness. (13)The Commission should facilitate the exchange of best practices between the competent national or regional authorities or bodies, for instance through regular meetings to find a common approach to promote a higher uptake of cost-efficient renewable energy projects, encourage investments in new, flexible and clean technologies, and set out an adequate strategy to manage the retirement of technologies which do not contribute to the reduction of emissions or deliver sufficient flexibility, based on transparent criteria and reliable market price signals. ê 2009/28/EC Recital 7 (adapted) ð new (14)Directive 2001/77/EC of the European Parliament and of the Council of 27 September 2001 on the promotion of electricity produced from renewable energy sources in the internal electricity market and, Directive 2003/30/EC of the European Parliament and of the Council of 8 May 2003 on the promotion of the use of biofuels or other renewable fuels for transport ð and Regulation (EC) 1099/2008 of the European Parliament and of the Council ï established definitions for different types of energy from renewable sources. Directive 2003/54/EC XXXX/XX/EU of the European Parliament and of the Council of 26 June 2003XX concerning common rules for the internal market in electricity Ö Õ established definitions for the electricity sector in general. In the interests of legal certainty and clarity it is appropriate to use Ö those Õ the same or similar definitions in this Directive. ò new (15)Support schemes for electricity generated from renewable sources have proved to be an effective way of fostering deployment of renewable electricity. If and when Member States decide to implement support schemes, such support should be provided in a form that is as non-distortive as possible for the functioning of electricity markets. To this end, an increasing number of Member States allocate support in a form where support is granted in addition to market revenues. (16)Electricity generation from renewable sources should be deployed at the lowest possible cost for consumers and taxpayers. When designing support schemes and when allocating support, Member States should seek to minimise the overall system cost of deployment, taking full account of grid and system development needs, the resulting energy mix, and the long term potential of technologies. (17)The opening of support schemes to cross-border participation limits negative impacts on the internal energy market and can, under certain conditions, help Member States achieve the Union target more cost-efficiently. Cross-border participation is also the natural corollary to the development of the Union renewables policy, with a Union-level binding target replacing national binding targets. It is therefore appropriate to require Member States to progressively and partially open support to projects located in other Member States, and define several ways in which such progressive opening may be implemented, ensuring compliance with the provisions of the Treaty on the Functioning of the European Union, including Articles 30, 34 and 110. (18)Without prejudice to adaptations of support schemes to bring them in line with State aid rules, renewables support policies should be stable and avoid frequent changes. Such changes have a direct impact on capital financing costs, the costs of project development and therefore on the overall cost of deploying renewables in the Union. Member States should prevent the revision of any support granted to renewable energy projects from having a negative impact on their economic viability. In this context, Member States should promote cost-effective support policies and ensure their financial sustainability. (19)Member States' obligations to draft renewable energy action plans and progress reports and the Commission's obligation to report on Member States' progress are essential in order to increase transparency, provide clarity to investors and consumers and allow for effective monitoring. Regulation [Governance] integrates those obligations in the Energy Union governance system, where planning, reporting and monitoring obligations in the energy and climate fields are streamlined. The transparency platform on renewable energy is also integrated in the broader e-platform established in Regulation [Governance]. ê 2009/28/EC Recital 11 (adapted)

(20)It is necessary to set transparent and unambiguous rules for calculating the share of energy from renewable sources and for defining those sources. In this context, the energy present in oceans and other water bodies in the form of waves, marine currents, tides, ocean thermal energy gradients or salinity gradients should be included. ê 2009/28/EC Recital 5 In order to reduce greenhouse gas emissions within the Community and reduce its dependence on energy imports, the development of energy from renewable sources should be closely linked to increased energy efficiency. ê 2009/28/EC Recital 8 The Commission communication of 10 January 2007 entitled ‘Renewable Energy Roadmap — Renewable energies in the 21st century: building a more sustainable future’ demonstrated that a 20 % target for the overall share of energy from renewable sources and a 10 % target for energy from renewable sources in transport would be appropriate and achievable objectives, and that a framework that includes mandatory targets should provide the business community with the long-term stability it needs to make rational, sustainable investments in the renewable energy sector which are capable of reducing dependence on imported fossil fuels and boosting the use of new energy technologies. Those targets exist in the context of the 20 % improvement in energy efficiency by 2020 set out in the Commission communication of 19 October 2006 entitled ‘Action Plan for Energy Efficiency: Realising the Potential’, which was endorsed by the European Council of March 2007, and by the European Parliament in its resolution of 31 January 2008 on that Action Plan. ê 2009/28/EC Recital 9 The European Council of March 2007 reaffirmed the Community’s commitment to the Community-wide development of energy from renewable sources beyond 2010. It endorsed a mandatory target of a 20 % share of energy from renewable sources in overall Community energy consumption by 2020 and a mandatory 10 % minimum target to be achieved by all Member States for the share of biofuels in transport petrol and diesel consumption by 2020, to be introduced in a cost-effective way. It stated that the binding character of the biofuel target is appropriate, subject to production being sustainable, second-generation biofuels becoming commercially available and Directive 98/70/EC of the European Parliament and of the Council of 13 October 1998 relating to the quality of petrol and diesel fuels being amended to allow for adequate levels of blending. The European Council of March 2008 repeated that it is essential to develop and fulfil effective sustainability criteria for biofuels and ensure the commercial availability of second-generation biofuels. The European Council of June 2008 referred again to the sustainability criteria and the development of second-generation biofuels, and underlined the need to assess the possible impacts of biofuel production on agricultural food products and to take action, if necessary, to address shortcomings. It also stated that further assessment should be made of the environmental and social consequences of the production and consumption of biofuels. ê 2009/28/EC Recital 10 In its resolution of 25 September 2007 on the Road Map for Renewable Energy in Europe , the European Parliament called on the Commission to present, by the end of 2007, a proposal for a legislative framework for energy from renewable sources, referring to the importance of setting targets for the shares of energy from renewable sources at Community and Member State level. ê 2009/28/EC Recital 12 The use of agricultural material such as manure, slurry and other animal and organic waste for biogas production has, in view of the high greenhouse gas emission saving potential, significant environmental advantages in terms of heat and power production and its use as biofuel. Biogas installations can, as a result of their decentralised nature and the regional investment structure, contribute significantly to sustainable development in rural areas and offer farmers new income opportunities. ê 2009/28/EC Recital 13 In the light of the positions taken by the European Parliament, the Council and the Commission, it is appropriate to establish mandatory national targets consistent with a 20 % share of energy from renewable sources and a 10 % share of energy from renewable sources in transport in Community energy consumption by 2020.

ê 2009/28/EC Recital 14 The main purpose of mandatory national targets is to provide certainty for investors and to encourage continuous development of technologies which generate energy from all types of renewable sources. Deferring a decision about whether a target is mandatory until a future event takes place is thus not appropriate. ê 2009/28/EC Recital 15 The starting point, the renewable energy potential and the energy mix of each Member State vary. It is therefore necessary to translate the Community 20 % target into individual targets for each Member State, with due regard to a fair and adequate allocation taking account of Member States’ different starting points and potentials, including the existing level of energy from renewable sources and the energy mix. It is appropriate to do this by sharing the required total increase in the use of energy from renewable sources between Member States on the basis of an equal increase in each Member State’s share weighted by their GDP, modulated to reflect their starting points, and by accounting in terms of gross final consumption of energy, with account being taken of Member States’ past efforts with regard to the use of energy from renewable sources. ê 2009/28/EC Recital 16 By contrast, it is appropriate for the 10 % target for energy from renewable sources in transport to be set at the same level for each Member State in order to ensure consistency in transport fuel specifications and availability. Because transport fuels are traded easily, Member States with low endowments of the relevant resources will easily be able to obtain biofuels from elsewhere. While it would technically be possible for the Community to meet its target for the use of energy from renewable sources in transport solely from domestic production, it is both likely and desirable that the target will in fact be met through a combination of domestic production and imports. To this end, the Commission should monitor the supply of the Community market for biofuels, and should, as appropriate, propose relevant measures to achieve a balanced approach between domestic production and imports, taking into account, inter alia, the development of multilateral and bilateral trade negotiations, environmental, social and economic considerations, and the security of energy supply. ê 2009/28/EC Recital 17 The improvement of energy efficiency is a key objective of the Community, and the aim is to achieve a 20 % improvement in energy efficiency by 2020. That aim, together with existing and future legislation including Directive 2002/91/EC of the European Parliament and of the Council of 16 December 2002 on the energy performance of buildings , Directive 2005/32/EC of the European Parliament and of the Council of 6 July 2005 establishing a framework for the setting of ecodesign requirements for energy-using products , and Directive 2006/32/EC of the European Parliament and of the Council of 5 April 2006 on energy end-use efficiency and energy services , has a critical role to play in ensuring that the climate and energy objectives are being achieved at least cost, and can also provide new opportunities for the European Union’s economy. Energy efficiency and energy saving policies are some of the most effective methods by which Member States can increase the percentage share of energy from renewable sources, and Member States will thus more easily achieve the overall national and transport targets for energy from renewable sources laid down by this Directive. ê 2009/28/EC Recital 18 It will be incumbent upon Member States to make significant improvements in energy efficiency in all sectors in order more easily to achieve their targets for energy from renewable sources, which are expressed as a percentage of gross final consumption of energy. The need for energy efficiency in the transport sector is imperative because a mandatory percentage target for energy from renewable sources is likely to become increasingly difficult to achieve sustainably if overall demand for energy for transport continues to rise. The mandatory 10 % target for transport to be achieved by all Member States should therefore be defined as that share of final energy consumed in transport which is to be achieved from renewable sources as a whole, and not from biofuels alone. ê 2009/28/EC Recital 19 To ensure that the mandatory national overall targets are achieved, Member States should work towards an indicative trajectory tracing a path towards the achievement of their final mandatory targets. They should establish a national renewable energy action plan including information on sectoral targets, while having in mind that there are different uses of biomass and therefore it is essential to mobilise new biomass resources. In addition, Member States should set out measures to achieve those targets. Each Member State should assess, when evaluating its expected gross final consumption of energy in its national renewable energy action plan, the contribution which energy efficiency and energy saving measures can make to achieving its national targets. Member States should take into account the optimal combination of energy efficiency technologies with energy from renewable sources. ê 2009/28/EC Recital 20 To permit the benefits of technological progress and economies of scale to be reaped, the indicative trajectory should take into account the possibility of a more rapid growth in the use of energy from renewable sources in the future. Thus special attention can be given to sectors that