EU leaders clash over how to get to climate-neutrality

The so-called 'Fit for 55' package, seen as a credibility test of Europe's commitment to the Green Deal, refers to the alignment of EU key policy with the new 55-percent net emissions reduction by 2030. The EU's previous target was 40 percent.

German chancellor Angela Merkel had said on arrival at the summit on Monday that member states would provide an "overview" over how they would reach net-zero emissions by 2050.

"This is not about decisions, but about preparations," she said.

But the outcome of the physical summit of EU leaders in Brussels revealed member states are still partly divided on how to implement EU-wide climate goals.

The discussions led to the removal of some paragraphs from the climate conclusions, detailing upcoming effort-sharing rules, after some member states tried to include specific requests that could have limited the commission's proposal.

Under 'Fit for 55', Brussels will propose an emissions-trading system for the buildings and road-transport sectors. These currently fall under the EU's effort-sharing regulation, which sets out national targets based on GDP-per-capita for sectors such as agriculture and waste management.

"The idea is to have, complimentary, the introduction of an own, separate emission trading system at a very low scale at the beginning," the EU Commission president Ursula von der Leyen said.

Acknowledging that the commission's plans "may have a social impact," von der Leyen said that the upcoming proposal will be coupled with "a clear social compensation structure".

"We have to get this right because the transition should be just," she said.

The EU emissions trading scheme (ETS) currently applies to power plants, factories and airlines operating within Europe.

It 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.

Shift burden to consumers?

However, according to NGO Carbon Market Watch, extending the EU carbon market to cover buildings and transport would not reduce emissions from these sectors, but risk instability in the market.

"Expanding carbon pricing to the transport and buildings sectors would shift the burden of cutting pollution from industry to consumers," they said, arguing that a few more cents per litre at the fuel pump is unlikely to make people drive less and a price-increase in heating fuel is unlikely to decrease demand.

Under such a plan, the carbon price in the EU would reach an estimated €180 per tonne by 2030, a study by Cambridge Econometrics finds. In recent weeks, carbon prices hit a record high of over €50 per tonne.

Von der Leyen also promised to keep "the scope and fairness principle" of the EU's effort-sharing regulation.

Meanwhile, a key uncertainty is how to ensure the implementation of these proposals.

While the ETS is the responsibility of the EU Commission, member states are responsible for ensuring compliance with the targets set out in the EU's effort-sharing regulation.