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6th Aug 2021

Analysis

'Fit for 55': what is it, and why now?

  • The package is expected to trigger difficult months of negotiations between the 27 EU countries and the European Parliament (Photo: Jeanne Menjoulet)

The European Commission will unveil its so-called 'Fit for 55' package of revised climate and energy laws on Wednesday (14 July) - aiming to align key EU policies with the new 55-percent net-emissions reduction by 2030.

Green groups have already slammed the mammoth package of 12 legislative proposals for delaying action, after the commission faced intense lobbying over recent months.

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"This package of measures from the Commission is a fireworks display over a rubbish dump. It may look impressive, but move in close and it begins to smell," said Greenpeace EU director Jorgo Riss.

"To really make a difference, the EU and European governments need to stop the greenwashing and end support for fossil fuels, polluting transport, industrial farming and deforestation," he added.

Moreover, the package is expected to trigger difficult months of negotiations between the 27 EU countries and the European Parliament.

Green mobility push

Although urgent action is needed across all sectors of the EU economy to reduce emissions, this is particularly important in the transport sector - one of the few economic activities that has seen emissions increase in recent years.

Transport accounts for about a quarter of total emissions in the EU - with road transport as the highest contributor.

Under the revision of the alternative fuels infrastructure directive, the EU aims to make electric vehicle charging and hydrogen refuelling for heavy vehicles as easy as filling a conventional tank.

Under the Green Deal, the EU set a target to have one million charging-points for electric vehicles by 2025, and three million by 2030.

However, EU auditors identified different payment systems, and the lack of adequate information for users, as significant obstacles to electric vehicles uptake. Updated rules are expected to address these issues.

Meanwhile, stricter CO2 limits for cars and vans in the EU could completely ban new petrol and diesel vehicles from 2035.

The Netherlands and Denmark will do so by 2030, followed by France and the UK in 2040.

To reduce emissions from carbon-intensive aviation, new legislation is expected to require all aircraft leaving from EU airports to use fuel containing a minimum target of sustainable fuels.

For shipping, a new legislative proposal is expected to introduce "greenhouse gas intensity targets", which would increase gradually.

However, according to NGOs, this could mean that liquified natural gas (LNG) would be part of the EU shipping fuel mix until around 2040, boosting their advantage competitive price over green fuels, such as green hydrogen and ammonia, and undermining the transition of the shipping sector.

Housing and energy

The EU currently aims to have 32 percent of renewables in the bloc's energy mix by 2030. However, an analysis by the commission suggests a 38 to 40-percent-reduction target is needed to reach EU climate goals.

Renewables represent only around 20 percent of the current EU energy mix. Some 60 percent comes from combusting biomass or biomass-derived fuels.

Under the updated renewable energy directive, the commission is expected to strengthen the "sustainability criteria" used to determine whether a form of forest biomass can be considered renewable - with the commitment to protect EU old forests.

For environmentalists, however, the draft proposal shows a "clear denial of science" and "dangerous greenwashing".

Hundreds of scientists have urged the EU to exclude biomass from renewable energy policies.

However, Finland and Sweden, two of the most heavily-forested countries in the EU, are considered biomass' most notable proponents.

Additionally, the EU is expected to increase its current energy-efficiency target of saving 32.5 percent energy by 2030, and make it legally-binding.

As energy efficiency is closely linked to renovation, NGOs wants to make renovation of public buildings requirements more meaningful, and to look at households' options for heating and cooling in the medium-term.

Given that some 34 million Europeans were unable to keep their homes adequately warm in 2018, consumer groups and NGOs are also calling for an energy poverty reduction target.

Forestry and land-use

Land-use and forestry are two key elements for the bloc's climate policy - and they have been gaining more attention and importance since the inclusion of carbon sinks in the EU's 2030 emission-reduction target.

Brussels designed a regulation for land-use and forestry (known as LULUCF), adopted in 2018, to ensure that the accounted total emissions in these sectors do not exceed the 'accounted sinks' - also known as the "no-debit" rule.

During negotiations on the climate law, MEPs called on the commission to increase EU carbon sinks to levels above 300 million tons CO2-equivalent, by 2030.

The commission draft proposal would set out a target of net removals of 310 million tons CO2-equivalent by 2030 - to be distributed among member states from 2026 to 2030.

However, monitoring and reporting obligations, as well as financial penalties for missing national targets, are seen by NGOs as too weak or non-existent, and new rules are expected to fall short on addressing these issues.

Also on Wednesday, the EU is expected to present its forest strategy, which targets planting three billion trees by 2030 - which green groups see as at odds with the idea of counting forest biomass as a renewable source of energy.

Price signals

The emissions-trading system (ETS) is the bloc's market-based mechanism which sets a carbon price on CO2 emissions of power plants, factories and airlines operating within Europe.

But Brussels is expected to propose a new separate emissions-trading system for the building and road-transport sectors.

These currently fall under the EU's effort-sharing regulation, which sets out national targets based on GDP-per-capita covering 60 percent of the EU's emissions for sectors such as agriculture and waste management.

ETS is considered a cornerstone of the EU's policy to combat climate change since polluters pay to offset the harm done, establishing economic incentives to reduce emissions.

However, NGOs point out that integrating buildings and transport into a separate ETS risks shifting the burden from industry to households.

"The EU must not lay all its eggs in the 'carbon price' basket for climate action. Not only would this be ineffective, it would be unfair on poorer households: making consumers potentially bear the brunt of price increases in heating or transport," Imke Lübbeke from WWF EU told EUobserver.

Acknowledging that the commission's plans may have a potential social impact, the proposal will be coupled with a fund to support the most vulnerable households.

Consumer groups pointed out that any subsidies to fossil-fuel intensive industries under the ETS must be phased out as they could easily undermine public support.

Under the revision of the energy-taxation directive, which sets out the basic rules for taxing electricity, motor and heating fuels, consumer organisations expect the commission to fully adopt the "polluter pays" principle in energy products.

The tax exemption on aviation fuel (kerosene) is also expected to end, while green fuels could benefit from a 10-year tax break, under the commission proposal.

Carbon border tax

By making polluting companies pay an emissions-based fee to sell their products in the EU, Brussels wants to further prevent businesses from transferring production to non-EU countries with less strict climate rules - dubbed 'carbon leakage".

This proposal, expected to be a regulation, will cover cement, fertilisers, iron, steel, aluminium, and electricity, according to a draft proposal.

The EU tax would begin gradually in 2023, enabling a "transitional" period.

The carbon border mechanism would require a phase-out of free allowance subsidies, which heavy industry receives under the bloc's internal carbon market, to make it compatible with World Trade Organization rules.

Industry lobbied against quick climate action in 'Fit-for 55'

A new report reveals how key industry groups in Europe have been actively lobbying against some of the upcoming proposals under the 'Fit for 55' package, to weaken climate regulation - despite their public support for net-zero emissions by 2050.

MEPs approve EU climate law - without Greens' support

The European Parliament has given the final green light to the first-ever EU climate law - despite Green and left-wing MEPs voting against it. They argue that the bill is not aligned with the 2015 Paris Agreement.

Column

How to make 'Fit for 55' fit for citizens

The first battle of the 'Fit for 55' package has to be fought on the home front. Europe will also have to win the battle for the hearts and minds of citizens, mindful of the 'yellow vests'-style protests.

ETS expansion to homes and cars raises bills fears

The EU wants to become the first continent to reach net-zero. But revenues from the Social Climate Fund will be low, and not commensurate with the task of renovating 35 million homes or getting millions of cars off the road.

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