European renewable energy policy framework

The European Renewable Energy Directive (RED) is the legal framework for the development of renewable energy in the EU. It establishes common rules for the promotion of clean energy and sets mandatory targets for renewables block-wide.

The directive has undergone several revisions. Legally binding since 2021, RED II raised the EU target share of renewables to 40% by 2030. A provisional agreement has pushed the goal to further to 45%. The upcoming RED III will introduce further changes to the legal framework.

RED II further establishes how entities can claim renewable energy use by using Guarantees of Origin.

The Directive confirms that Guarantees of Origin have the sole function of proving that the energy was produced from renewable sources. All member states are required to document the origin of electricity produced from renewable energy.

In 2018 the EU approved a new Renewable Energy Directive (REDII), which included text strengthening the system of Guarantees of Origin toward 2030. REDII clearly states that electricity suppliers and consumers of power shall use Guarantees of Origin to document and report renewable electricity claims in Europe.

The Electricity Markets Directive (2009/72/EC) requires European suppliers of electricity to disclose their fuel with regard to CO2-emissions and radioactive waste. The aim of electricity disclosure is to provide consumers with relevant information about power generation and to allow for informed consumer choice not based on electricity prices alone. Guarantees of Origin comprise a change-enabling instrument complying with consumers’ right to information about purchased products, thus supporting EU’s increased focus on the role of consumers in changing energy behaviour.

The European Union Energy Roadmap 2050 spells out how to create a low carbon economy by 2050, strongly supported by the International Energy Agency (IEA). The Roadmap explores routes towards decarbonising energy systems, including examining scenarios targeting an 80% reduction in greenhouse gases and an 85% decline in energy-related CO₂ emissions.

The EU Taxonomy is a classification system that defines whether business activities are sustainable. It simplifies comparing companies’ sustainability performance and reduces greenwashing. The aim is to enable investors and consumers to make more environmentally sound choices by increasing transparency. 

The EU Taxonomy interacts with legislation such as the Corporate Sustainability Reporting Directive (CSRD) to regulate environmental reporting practices. Starting in 2024, the CSRD will introduce new requirements for a wide range of companies relating to sustainability, climate change, human rights, diversity, and other issues. 

The CSRD is a piece of EU legislation that extends and strengthens the rules regarding the information companies should disclose on environmental and social impacts and risks. It builds on the Non-Financial Reporting Directive (NFRD) and works alongside the EU Taxonomy by introducing new requirements relating to sustainability, climate change, human rights, diversity, and other issues. 

The directive expands the scope of the entities that must comply, including all large European companies, listed SMEs, and companies with a significant business volume in the EU. 

As part of energy-related reporting, the directive requires companies to disclose both location-based and market-based emissions from purchased electricity, heating, and cooling, known as Scope 2. Simultaneously, it mandates the use of “contractual arrangements” such as Guarantees of Origin, green tariffs, and Power Purchase Agreements to report renewable energy consumption.