More

    European Commission Presents ‘Fit for 55’ Emissions Package

    Stockholm (NordSIP) – On Wednesday, July 14th, following the agreement by the Council of the EU and the European Parliament to adopt a 2050 Climate-Neutral Target and climate law, the European Commission adopted a policy package able to reduce net CO2 emissions by at least 55% by 2030, compared to 1990 levels. The proposals are the latest step in the EU’s efforts to deliver on the European Green Deal, presented by the Commission on 11 December 2019, which set the goal of making Europe the first climate-neutral continent by 2050.

    “The fossil fuel economy has reached its limits. We want to leave the next generation a healthy planet as well as good jobs and growth that does not hurt our nature. The European Green Deal is our growth strategy that is moving towards a decarbonised economy. Europe was the first continent to declare to be climate neutral in 2050, and now we are the very first ones to put a concrete roadmap on the table. Europe walks the talk on climate policies through innovation, investment and social compensation,” President of the European Commission, Ursula von der Leyen (Pictured, Centre), said.

    The Commission’s ‘Fit for 55’ package leverages the EU’s emission trading scheme, increases the use of renewable energy, promotes greater energy efficiency and a faster roll-out of low emission transport modes and the infrastructure and fuels to support them. The package also aligns taxation policies with the European Green Deal objectives, provides measures to prevent carbon leakage, as well as tools to preserve and grow natural carbon sinks.

    Emissions Trading

    The Commission’s proposals tighten the EU Emissions Trading System (ETS), which has brought down emissions from power generation and energy-intensive industries by 42.8% in the past 16 years, by lower the overall emission cap even further.

    News sectors will also be covered by the emissions trading system, including aviation and shipping, while also setting up a new emissions trading system for road transport and buildings. The Commission also proposes to increase the size of the Innovation and Modernisation Funds

    To complement the necessary but substantial spending increase on climate in the EU budget, Member States should spend the entirety of their emissions trading revenues on climate and energy-related projects. A dedicated part of the revenues from the new system for road transport and buildings should address the possible social impact on vulnerable households, micro-enterprises and transport users.

    Emission Reductions

    The Effort Sharing Regulation, part of the ‘Fit for 55’ package, assigns differentiated emissions reduction targets to each Member State for buildings, road and domestic maritime transport, agriculture, waste and small industries. Recognising the different starting points and capacities of each Member State, these targets are based on their GDP per capita, with adjustments made to take cost-efficiency into account. So for example, while Sweden, Denmark and Finland all aim for a 50% reduction in CO2 emissions Romania, Croatia, Bulgaria, Latvia, Hungary and Poland all aim for reductions of less than 20%.

    The Regulation on Land Use, Forestry and Agriculture sets an overall EU target for carbon removals by natural sinks, equivalent to 310 million tons of CO2 emissions by 2030. National targets will require Member States to care for and expand their carbon sinks to meet this target. The EU Forest Strategy includes a plan to plant three billion trees across Europe by 2030.

    Energy Production, Use and Infrastructure

    Given that energy production and use accounts for 75% of EU emissions,the Renewable Energy Directive will set an increased target to produce 40% of the bloc’s energy from renewable sources by 2030. The Energy Efficiency Directive will also set a more ambitious binding annual target for reducing energy use at EU level. The the public sector will be required to renovate 3% of its buildings each year to drive the renovation wave, create jobs and bring down energy use and costs to the taxpayer.

    Stronger CO2 emissions standards for cars and vans will require the average emissions of new cars to come down by 55% from 2030 and 100% from 2035 compared to 2021 levels, so that  all new cars registered as of 2035 will be zero-emission. The revised Alternative Fuels Infrastructure Regulation will also require Member States to expand charging capacity in line with zero-emission car sales, and to install charging and fuelling points at regular intervals on major highways: every 60 kilometres for electric charging and every 150 kilometres for hydrogen refuelling.

    Taxation, Import Tariffs & Transition Adjustment

    The revised Energy Taxation Directive proposes to align the taxation of energy products with EU energy and climate policies, promoting clean technologies and removing outdated exemptions and reduced rates that currently encourage the use of fossil fuels.

    Moreover, a new Carbon Border Adjustment Mechanism will put a carbon price on imports of a targeted selection of products to ensure that ambitious climate action in Europe does not lead to ‘carbon leakage’.

    To ensure a fair transition to the carbon neutral economy,  the Commission also proposed the creation of a new Social Climate Fund to provide dedicated funding to Member States to help citizens finance investments in energy efficiency, new heating and cooling systems, and cleaner mobility. The Social Climate Fund would be financed by the EU budget, using an amount equivalent to 25% of the expected revenues of emissions trading for building and road transport fuels and provide €72.2 billion to Member States, between 2025 and 2032.

    Image courtesy of EC

    Filipe Albuquerque
    Filipe is an economist with 8 years of experience in macroeconomic and financial analysis for the Economist Intelligence Unit, the UN World Institute for Development Economic Research, the Stockholm School of Economics and the School of Oriental and African Studies. Filipe holds a MSc in European Political Economy from the LSE and a MSc in Economics from the University of London, where he currently is a PhD candidate.

    Latest Posts

    partner insights

    Cutting meat consumption is by far and away the most important dietary change we can all make to help combat climate change. It will also have a positive knock-on effect for biodiversity.