Episode 10 of our Energy Talks podcast focuses on the new European Commission and its expected priorities on transport policies and regulations for the next 5 years.

SGS INSPIRE Claire Couet interviewed guest speaker Julia Poliscanova, Senior Director for Vehicles & E-mobility supply chains at influential European NGO Transport & Environment (T&E). She expressed her views about what to expect from the designated European Commissioners during the second mandate of President Ursula von der Leyen.

T&E namely wants them to continue pushing for electrification of road transport, keeping the Fit for 55 targets and tackling the remaining barriers such as slow permitting, low investments in electricity grids and not sufficient leveraging of demand-side flexibility. She called for even more regulatory attention to the decarbonization of aviation and shipping.

We hope that you will enjoy hearing about the different voices from Brussels that SGS INSPIRE is bringing to you.

Hello everyone, this is episode number 10 of our Inspire-ing Energy Talks. Today, I have the great pleasure to receive Julia Poliscanova for this special podcast edition on what to expect from the European Commission, which is taking office in 2024 and will be over the next five years regulating from Brussels. Obviously, we will look at transport policy, but also energy and climate policies. Julia, you are a senior director focusing on vehicles, e-mobility, supply chains at Transport and Environment. I will let you say a few words about your organization in a second. You joined Transport & Environment (T&E) in June 2015 and you now lead the organization’s work regarding policies regulating vehicle emissions, sustainable batteries and critical materials. You also represent T&E on the board of the Global Battery Alliance. Previously, you also worked as an EU environment expert for the Mayor of London. Very interesting. And as an advisor to an MEP, a member of the European Parliament and you are a Latvian national. Julia, I'm so grateful to have you, that you accepted our invitation! Welcome to our podcast.

Yes. Hi, Claire, its really nice to be here and really nice to chat about these critical topics at such an exciting time in Brussels. So maybe I'll say a few words about us as T&E or Transport and Environment because maybe not everyone knows us. So, we are today Europe's largest green transport NGO. I like to think of ourselves more as a “think and do tank”, because what we ultimately do is shape policies by designing analysis and working collectively with coalitions and politicians in Brussels, as well as across Europe to implement those best recommendations in practice. So, we worked around electrification rules in Europe, for example, the famous 2035 car CO2 emissions standard. I'm sure we'll talk about it today. We also worked around clean fuel mandates for aviation and shipping and more recently we do a lot of work around competitiveness around critical minerals and sustainable batteries as well. We are headquartered in Brussels. That's where most people are, but we do also have offices in some of the key capitals, so we have smaller teams in Germany, France, Spain, Italy as well as the UK. So, we're quite well placed across Europe. We hope to be part of some of the main decision-making on clean transport in the years to come.

Thank you for that. May I ask you also about the vision for a zero-emission mobility system that I've read about? So, what is this vision of Transport and Environment?

So, our vision is a fully decarbonized zero emission transport system in all modes be it planes, ships, or cars, that also is affordable and has minimum health impacts on the planet and the people. We for example, work not only on electric cars, but also on bringing to the market much faster, smaller and affordable models. We also work on how mining is done in Indonesia because we realize that's also important. We do work, for example, on biofuels, because we rarely that's not a sustainable solution and we can't really rely on biofuels for aviation and shipping because the impacts on land, on people, on indirect emissions, are actually worse than what we are replacing.

If I had to summarize it really shortly, you know, what are the technologies we're looking at: we are working on, and our vision, is a fully electric road transport systems, so largely battery electric cars, trucks, vans and buses. While on innovation and shipping, we believe it is really about renewable, sustainable fuels, so things like E-kerosene or E-methanol for example, that's where we do a lot of work, but beyond that we also work on a generally more efficient mobility system. So, we do work on the size of vehicles for example, we do work on things such as taxes or how to avoid more road building.

Very clear. Thank you for painting that picture for us now, Julia, if we zoom on what has been happening, you know the consequences of the European elections that took place in June. Actually on this very week that we are recording this episode, the European Commission President, Ursula von der Leyen, has nominated her team of commissioners, so we know who is the Commissioner for Transport, among the others of course. I would like to ask you, what are your first reactions to the nominations? Do they meet your expectations? Are you disappointed? What do you expect from this Commission? Of course, Commissioners will have to be approved and there will be the hearings. But you know from the names and the mission statements that we've seen this week?

So overall, I would say that we are more positive than not. I think this is a very strong Commission and I do think that there's a lot of really great personalities and strong politicians that can bring a lot of value to the vision of Von der Leyen. Generally, maybe to take a very quick step back following the elections, we have seen a clear commitment to continue the European Green Deal, maybe with some tweaks that we can discuss later, but generally there is a commitment to the European Green Deal, which is great. The parties that supported it and voted it also have majority in the European Parliament, but now it's really time to focus on its implementation, really doing this scaling technologies, rolling out affordable solutions, actually seeing emissions drop. I think the team that that the President Ursula von der Leyen appointed, it can really bring that.

So maybe a few comments on some of the nominees. So, we are very pleased to see Miss Ribera as the Executive Vice President for the Clean, Just and Competitive transition in Europe. This is really great. It means that we have some continuity with a very strong climate and energy leader in Europe continuing this work at European level. We very much look forward to some of the work she will be doing. It's really great to see that she will also be in charge of competition policy and will be reforming, for example, European State aid, which is necessary to scale some of those clean tech technologies across Europe faster and more efficiently. So that's good news. We are also happy with the appointment of Stefan Séjourné, for example, for Executive Vice president on the industry side, also huge portfolio for the Commission, for example, for electric vehicles and batteries, it's really “make or break” moment in Europe, and what that green industrial policy will be, will really define whether we succeed or not. There is great already a great automotive plan in France. So, we do hope that that, that Mister Sejourné can build on that experience and bring something similar to Europe.

Where we are more concerned is around the nomination of the Transport Commissioner. So he, as a Greek politician, comes from a rather far right family of politicians and maybe even more importantly, he will also be reporting to an Italian Vice President who is in charge of regions and reforms, also coming from a more right family, which means that important Executive Vice Presidents, for example, such as Miss Ribera, who is responsible for clean transition, are not actually directly in charge, it seems, of the transport portfolio. So, there is a concern. We are happy to see that it has become “sustainable transport and tourism” portfolio rather than just “transport”. We also, for example, happy to see that within his mission letter, there is a priority to work on electrifying fleets, which is really important. However, we are concerned that, if he is appointed, he will be solely in charge of developing automotive strategy, for example. For us this really belongs in a more collaborative effort with Mr Séjourné and Miss Ribera. It's really important that they are involved because automotive strategy is as much about clean and green and industry as its about purely transport.

Thank you for these views. it’s true that the topic of industry is a bit spread around the different portfolios with Mr Sejourné in charge of proposing the clean industrial deal within the 1st 100 days, and then indeed also Mr Tzizikostas, who has the EU industrial plan for the automotive sector. So, it's not very clear how they are going to work altogether, as you were saying.

Maybe on that point, so it is true, and a lot of people have said in Brussels, you know, if you look at the word such as economy or competitiveness or industry, at least nine Commissioners have it in their mission letters. But on the other hand, one of the largest problems we did have in the past are silos. And people working on their own. So, I hope that what's behind this is not a lack of strategy, but instead a purposeful idea that they should be all collaborating, working together and really jointly and in that case, it can be a good thing, but it can also be a bit messy, time will show.

Absolutely. And if we zoom in on a very concrete file, which is the CO2 emission standards for cars and vans. You probably remember the statements that have been made by Ursula von der Leyen in July about, you know, e-fuels that should be allowed to meet the 2035 targets, that the planned review of the regulation, should be used to look at that. What is your view on this? And yes, in light also of the of the nomination this week, how do you see that file moving in the next 5 years?

Yes, I think it's quite clear that cars are a very sensitive topic across Europe. It's something that is top of the agenda and it's been one of the top things during the elections and the deal making of ahead of President von der Leyen’s nomination. The way I see it today is that we have gone through a vvery lengthy, and important legislative procedure, as part of which, we have agreed that pretty much all new vehicles will have to be zero emission by 2035. As part of that deal, back in March 2023, Germany already got an opening for climate neutral fuels, so that was already there, maybe it wasn't so clear, but the opportunity was there.

Part of the current procedure and nomination of Ursula von der Leyen, ultimately the deal was made that we keep everything else as it is - that's my reading - however, we do bring a targeted review in 2026 to properly add those e-fuels. This is something that unfortunately, politically is what we had to do, in our view as T&E, unfortunately. So that's my reading. My reading is everything else stays as it is, but we bring, you know, a clearer opening for e-fuels, how big it will be, what exactly are the e-fuels that will qualify, all of this remains to be defined. But let me maybe take a step back and share with you and the listeners why we worry about that. We don't have any problem with the particular technology, by the way, of e-fuels, we work “day and night” on scaling those e-fuels for aviation and shipping where they're really necessary. So that's no problem with the technology, but in the road transport sector where you do have a more efficient and cheaper way to decarbonize, which are batteries, it's simply a waste of resources. We are talking about a climate neutral fuel that is at least €6 a liter in 2035 for European drivers. If you drive a Porsche, why not? But that's not your mass market electrification or decarbonization solution. At the same time, we see how difficult it will be and expensive, to scale those e-fuels. At the moment, so many projects around e-fuels are delayed: around aviation and shipping for example, or green hydrogen projects are delayed because ultimately green hydrogen is what we need for those e-fuels. So, it's going to be already so hard to scale at least a little bit of those e-fuels for where they're needed, in aviation and shipping. So why waste them where they're not needed, creating unnecessary competition?

The final major point I'd add here is really about the signal we're sending to European industry. So, we today, when it comes to creating clean tech, for example, scaling batteries in Europe, we don't really have subsidies like the USA is now giving or like China has given. We don't have, you know that kind of very strong tariffs, that the USA has. The only thing we have in Europe to create the signal for investors is the market, and that signal is created by the 2035 Regulation. Europe saying “the entire European cars market will go electric after 2035” is the best signal for the battery manufacturers to scale production here. That's why we saw so many investments until now. However, today, if we misguidedly reassess and question that commitment, the risk is that we will lose those battery investments. I have spoken in the last few weeks with a number of battery executives, and they all tell me, you know, if there is no 2035 decision and there is no clear electrification path in Europe, given all the other problems we have investing in Europe, because it's not easy investing, in Europe, why would we bother? I think that's probably the most important. Yes, we need to scale, yes, we need them for aviation and shipping, but we don't need them for road. What we do need for road is to massively scale the local production of batteries and if there is no clear 2035 zero emissions target, it simply won't happen on time. That's our main concern.

I hear you. I hear you. Yes. But you're so worried about the consequences of watering down certain things and sort of destroying the incentives for these sectors like the battery sector. One question related to this, what did you read in the Mario Draghi report, that, you know, is positive with regards to the battery value chain and building more batteries in Europe etc? Do you have findings from this report, that was also published in September 2024, that you think are connected to the transport and e-mobility discussion?

Oh, absolutely. Absolutely. Maybe I can mention a few things, 2-3 things.

Number 1: So, it's just generally great to see that he's not mincing his words and he says the way things are. The way I read what he is saying is that he's not questioning any decarbonization targets. He has not questioned specifically the 2035 zero emissions target that he mentions, but what he says is, well, when we set this target, we did not set an aligned comprehensive industrial strategy to scale the technologies we need to meet this target. For me this is the core finding about this. He's not saying: “Oh my God, let's jump to e-fuels”. He's saying, OK, if you want to have all battery electric vehicles, how are you going to produce them here? What is our industrial strategy? So, I think that this is really great. And it's correct, maybe it's not great because we don't yet have that industrial strategy, but it is really the right conclusion in my view.

The second thing that I think is really good in what he says is that he clearly says that “we as Europeans should decide which clean tech is worth fighting for or not.” So, he does say that some sectors, and he does mention automotive and electrification as part of that.Some sectors are just so strategic to our GDP that we can't afford not have any expertise, that means that we do need to put all in, you know, go all in, and put all the measures in place to ensure that we have local manufacturing and expertise in those sectors. So, for me, batteries fall under that. He even says, which is something we even said as T&E, which is “Look, the Green Deal came on the promise of green jobs and growth, so this transition cannot be imported”.

And the third thing specifically about batteries, which I think is really relevant and refreshing, is that he finally brings a much more strategic view for Europe on trade policy. For a long time, if you are anywhere, and if you want to mention the word tariffs ever, you are just labelled as a bad protectionist and you go and you stand in the corner, and you don't open your mouth and I think we really need to wake up. Trade is strategic. What we need to build in Europe is where we need to also be able and be willing to use trade defense measures. And he does say that it's important to align trade, competitiveness and industrial policy, so the way I read it is, that he does give a mandate to the next Commission and the next Trade Commissioner, Mr Šefčovič, who is, of course, a great expert and believer in batteries, to actually use trade defense mechanisms to also protect and scale battery manufacturing in Europe.

Yes, and talking about trade and measures, I would like to have your take on another discussion which has been these tariffs to be imposed on electric vehicles imported from China and the impact is obviously on Chinese manufacturers, but also on cars made by other types of manufacturers. What do you see in terms of impact for the EV uptake in Europe? Do you think that's a good measure, a bad measure? What is your advice also?

Right. we've been quite vocal as T&E in our support for EV tariffs. But I would like to explain why. We're not doing this because we want to protect the laggard European car makers who have not invested in electric vehicles quickly. I think for us it's an important question to answer for Europe: “Do we want local manufacturing or not?” And if the answer is yes, for us the answer is “Yes we want local EV and battery manufacturing”. If we do, then we do need to support tariffs. Because right now, the technology is just so excellent and cheap on the other side of the world, notably in China, that it's just hard to see why you would be scaling and doing anything in Europe if you can just import it easily. However, and this is a very important “however”, we don't just support tariffs you know, just as a policy, no matter what. It's part of many other policies that need to be in place, otherwise they don't make sense. For example, tariffs and levies only make sense if we keep the 2025 to 2035 car CO2 targets, because what we have is thanks to the CO2 target, our carmakers are planning to bring more affordable electric car models on the market, and because they're planning that, it makes sense to give them some support, raise the tariffs and give them a bit of breathing space to scale. However, if we remove or weaken car CO2 targets, as some like Renault, for example, are currently asking then we shouldn't do EV tariffs, because if we don't have CO2 standards, manufacturers in Europe will delay affordable EV models, they won't do them. So at least we should get them from China because otherwise our consumers are not getting them at all. So as part of measures where you have strong car CO2 standards, you have our car makers ramping up affordable EVs so that people can benefit from them, tariffs make sense. Just tariffs on their own and European laggard attitude to electrification absolutely does not. And that's a very important nuance in our position.

And just a quick follow up on that, Julia, do you see really a laggard attitude from some players in Europe on developing EV's and proposing EV models, affordable EV models, to European consumers?

Absolutely. Maybe not absolutely everybody. But I think generally what happened is you know, you do have to commend China. Of course, there's subsidies, you know, and various questions we can ask about the way things are run, but they had a long-term vision 20 years ago to develop the entire supply chain from electric vehicles to batteries to critical minerals and now, they are just excellent at that. Excellent in every technology you can look at be it, expensive or cheap batteries you know, be it a software, it's not about cheap Chinese stuff, it's about really high-quality Chinese stuff these days. At the same time, we in Europe, for years pretended by we, I mean “most European car makers” pretended, diesel was the solution, then that some fake plug-in hybrids were a solution. We've always just kind of maximised profits on petrol and diesel costs for as much as possible, and then complied last minute with vehicles emissions standards in Europe by bringing EVs. This is what we have in Europe. We have this five-year cycle where manufacturers prioritize - this is where we are in 2024 by the way - they prioritize SUVs and high profit margins, then when standards enter into force, we prepare EV models for that, and EV sales go up. We saw it in 2020. We will see the gain in 2025, I really bet the EV market, if governments keep the 2025 standard, the EV sales will pick up next year. We see it in all car maker plans. They're all planning affordable or new, better EV models starting with late 2024, specifically designed to coincide with the 2025 target. So, we have been laggards and we have not had the same vision as China long term. We've just kind of reacted to the standards as they come, and this is why we are behind.

I hear you.

And maybe I give you one more stat which I think is really interesting. So in the last few years the actual price of an EV in China has dropped dramatically. They're really cheap there today. The batteries and raw materials this year are really cheap. There's no excuse in Europe in the last few years the actual price has gone up by 30%, this does not make sense. This cannot be explained by anything else than the strategy of car makers to sell a bigger car with a higher profit margin because they're not aiming at the real mass market. They're just aiming at a more short-term profit driven strategy. Now, I'm not naive, I understand that's how business works, but that's not how you remain competitive long term when the other competitor is bringing massive amounts of affordable solutions on the market.

And Julia, you mentioned the vision that China had to develop its EV value chain. They also are sitting on a very nice reserve of lithium. So how do you see the raw materials dependency topic, you know, what are the solutions that you see at hand on that one?

Yes, absolutely. I think that's such a critical and exciting topic. I do think Europe has done quite a bit on that in the last two years. So, first of all, just to react to your comment about lithium, everyone sits on a lot of lithium. Lithium is ubiquitous. That's the great part about it. Actually, we have seen and have done analysis ourselves to show that even in Europe, if we were to implement all the different plans, you know industrial plants for lithium mines, Europe can be almost self-sufficient in processed lithium for its batteries by 2030. Lithium is ubiquitous. It's everywhere. There are also new cleaner ways to extracted from geothermal grinds, there's a few good projects on that in Europe. So really lithium is not the problem actually. But on the broader question on critical raw materials, so there's a number of things that we need to do, and some of them we are already doing, I'll just really try and organize my thoughts in three buckets.

First of all, Europe has already done a lot, and it's the right answer, with its Critical Raw Materials Act that was passed last year. The idea is to really see where we have some potential in Europe when it comes to extraction of critical minerals, their processing as well as recycling, select these so-called “strategic projects” and once we select them, we really speed them up and we make sure we support them, and it happens. So, this is the right framework, select the best potential and get it done. And now we're implementing this and this is really most important and actually, when other nations like Canada are saying “we love the European Strategic Projects Framework, we might copy it.”

The second thing here is quite important when we look domestically at Europe. So, I did say that we have lots of lithium, and I stand by this, but I do believe that Europe domestically will never be a mining superpower. Simply said, it depends on geology and your best, most valuable resources economically are elsewhere. So, when it comes to domestic policy, we should go all in and focus on processing. That's where there's a lot of value, and this is the choke point. This is what is done in China. Th raw material extraction is very diverse and spread across the world, but it all goes to China for processing, so this is what's really important to address and diversify. It's really important, we develop processing capacities. We can do it. We have companies like BASF, or for example Umicore, they really can-do battery grade chemicals. And recycling, recycling is actually in terms of its process when it really comes to recovering minerals is very similar to the processing stage, so it's really “no regrets” and it's developing the same know-how, but processing and recycling is where the focus should be in terms of our industrial policy.

And the final and 3rd bucket here is the global dimension. So ultimately, we will in our view rely - unless we have a more circular system which we should strive to do of course – but we will rely on global imports of raw materials, so global diplomacy is really important, and this is the part of this puzzle where I believe today Europe is the weakest and where we've done least progress. We have talked about it a lot. We have some strategic partnerships with some countries, but they're not materializing in actual projects on the ground. In the meantime, Chinese are all over the world, in Africa, and other countries buying resources, Americans, quite interestingly, they started later than us, but they're already far ahead. There is this great partnership we are in with the US, the Minerals Security Partnership (MSP). Honestly, my view is that we should just double down on that, join forces with the Americans. They can do it quickly. We bring the higher standards, and we just do it together.

You mentioned extraction of raw materials in Europe and the potential. Could you point out at a few countries that that have potential with that respect?

Absolutely. So all lithium are more traditional “hard rock lithium”, that's where we have resources in Portugal and Spain, for example among other countries. Actually, the best, largest resource in Europe which is in Serbia. And I do believe that Rio Tinto is really trying to do this better this time and engage with everyone and I hope there is a solution where we can extract it, but at higher standards, and with everyone on board. In terms of newer, so geothermal lithium, there's really great projects in Germany for example, also in in France and so there's a few there. But we have other resources as well, so if we look at nickel, cobalt, we have a bit of that in the Nordics, so kind of in that belt around northern Sweden and Finland, for example. So, we do have a bit of things. We also have some manganese, and it's quite an interesting project that's in the Czech Republic, and it is actually an old Soviet mine and we are recovering these manganese from waste, so it's a really great circular project which is called “RE-mining” and actually it can meet up to 1/4 of our manganese needs in Europe, and that’s also happening now, it's called Euro-manganese. So, there's a lot of things happening but I do just want to stress that I really do think that it will take a while. It will also require people to be on board, right? That's why it's more difficult in Europe. So ultimately for me, no regrets are to go for the processing and recycling stages here in Europe.

I hear you and the battery regulation is also helping right, for further circularity, for recycling.

Absolutely. I think ultimately the longer-term vision for mining in, in our view as T&E is to move from an extractive to a circular system already by 2030, we can have quite 10/12% for example of cobalt and nickel coming from recycling. But it's also a sector that needs scaling, right? It's not a green add-on, it's also an industry. And on top of that, I didn't mention that because you, you keep asking and it's my favorite topic, I think we should also look at the demand-side. So we focus a lot on the supply side and it's correct, but there's a lot we can do on the demand-side. For example, we've done an analysis where we show that if a lot more electric vehicle were smaller models, which are also affordable, so it's good rather than electric SUVs Europe would need 1/4 of lithium less by 2050. That’s a huge amount, that's so many mines we don't need to build, just because the attacks policy and city policies will put people in that rightly sized vehicle, so that's really another angle from which we can address the critical problem.

Changing habits has a bigger impact than we think, massive impact. I have a last question for you in this podcast series. We've been talking a lot about, you know, aviation, shipping, road transport decarbonization. So if you look at the whole picture and you have to pick three urgent action areas for the EU transport policy, let's say today, which is in connection, of course with climate policy and industrial policy, everything that we've mentioned today, if you have to pick three urgent actions, what would they be?

#1. Keep and don't reopen the 2035 zero emissions standard for cars and instead focus on a comprehensive industrial policy to localize battery supply chain manufacturing. That's number one, including tariffs on batteries.

#2, we do really need to put a lot more focus on the carbon as innovation and shipping. So here the most important task is to implement the clean fuel mandates for aviation and shipping sectors that were set in law by a very strong industrial strategy to scale renewable fuels such as e-kerosene or e-ammonia for aviation and shipping, that's really at the moment happening too slowly. So again, industrial strategy on those fuels.

#3 is maybe a broader point. So, for a while we have talked about transport infrastructure as something which is about roads or airports, so a very old fashioned way of talking about infrastructure. In our view today, it's all about energy infrastructure, either for your hydrogen green fuels or for batteries, you need electricity. Electricity is critical for the transport sector. And when we talk about the energy infrastructure, the main gap I see right now where the next Commission must act are grids. Both in terms of at transmission and distribution level, building out and modernizing them a lot faster, but also in terms of smarter ways to provide flexibility and enabling electric vehicles to help the grids as well as to simplifying permitting processes. You know, I've heard this fantastic phrase someone said in one of the meetings were I was, they said: “You know, building batteries, improving competitiveness, these are all hard tasks but improving permitting for charging points, for example, it's really literally something that it's the problem that we've inflicted on ourselves by bureaucracy and we can solve it” so at least quickly solving that bureaucracy and making sure charges are not waiting for two years to be connected is really something the next Commission must do.

Very clear, very clear. Julia, I thank you so much for this. We will be back with more podcast episodes very soon. It was a pleasure, Julia. All the best for the new Commission and the battles ahead. Thank you so much for joining us.

Thank you. Thanks so much for talking to me, Claire, it was really great to chat.