EGEC views on the EU Critical Raw Materials Act   EGEC, the voice of the European geothermal industry, is a not-for-profit association representing the entire value-chain of the industry across 28 countries. It is included on the European Transparency Register number: 11458103335-07. Further information can be found at www.egec.org. We welcome the opportunity to respond to the consultation on the EU Critical Raw Materials Act consultation. Our observations and recommendations are:

The Clean Energy Transition Partnership (CETPartnership)  Joint Call 2022 was launched on the 14th September and will remain open to pre-proposals submissions until 23 November 2022, 14:00 CET. It is the first annual co-funded call under the CETPartnership and is co-funded by the European Commission under the Horizon Europe Partnership scheme. The CETPartnership aims to empower the clean energy transition and contribute to the EU’s goal of becoming the first climate-neutral continent by 2050, by pooling national and regional Research, Development, Technology and Innovation (RDTI) funding for a broad variety of technologies and system solutions required to make the transition.

The European Parliament has voted on 5 July 2022 to consider gas and nuclear energy to be sustainable investments in the Sustainable Finance Taxonomy, provide they comply with a set of criteria. This news brings about negative consequences for the geothermal industry beyond the simple dilution of the principle of “sustainable investments” by allowing a carbon intensive energy source to be eligible. It threatens geothermal project’s capacity to attract sustainable finance. The entire premise of the Sustainable Finance Framework is that there are not enough finance flowing towards geothermal and other renewable energy projects because these projects have a much lower profitability than those for “conventional” energy, especially on the short term. The Sustainable Finance Taxonomy was then designed to answer the need of investors that want to use their funds to support investments that contribute to the energy transition, identifying projects that are clearly consistent with decarbonisation by 2050, including very strict criteria for eligibility for renewable technologies such as geothermal energy. The purpose of an exclusive and science base taxonomy was to allow a sustainable finance industry to consolidate around a rapidly growing number of sustainable assets, whose improved market maturity is notably enabled by the sustainable finance framework that provides cheaper capital costs than conventional private finance. Such a virtuous circle could have been positive for the geothermal industry, which greatly benefits from reductions in cost of capital due to its CAPEX intensive nature. The inclusion of gas and nuclear throws the entire taxonomy out of balance. Gas in particular, which includes natural or “fossil” gas, benefits from a much more permissive eligibility threshold that geothermal for life cycle emissions. Indeed, as a fossil fuel gas would not be eligible if it had to justify a 100gCO2/kWh life cycle emission. This dismantles the internal consistency of the taxonomy which was crucial for its relevance in the eyes of investors, from the European Investment Bank to pension funds. Indeed, even in a framework where investors are required to justify a given share of “sustainable investments” on their balance sheets, they can now decide to include their gas investments, or to undertake new ones. More importantly, the higher profitability of gas projects means that private finance institutions will more easily finance them than geothermal ones when given the choice between the two. The taxonomy also impacts public investments: gas as a sustainable investment in the taxonomy allows public investment banks such as the EIB to provide guarantees to loans to build gas import pipelines or LNG terminals, to the detriment of investments into renewable heating and cooling infrastructure that would enable the deployment of geothermal energy projects throughout the EU. For the geothermal industry, this vote by the European Parliament represents a blow to the perspective of a rapid shift in our capacity to attract greater volumes of private finance. However, it does not change the underlying trends of the energy and financial sector that move towards decarbonisation and more renewable energy. A likely change may be the adoption of a rival taxonomy to the European one by investors and financial actors to evaluate the sustainability of their balance sheet, with the USA and China currently developing such documents. For more information: t.garabetian@egec.org