The EU gets fit for 55

By Giacomo Valentini, 31 July, 2021

On 14 July, the European commission presented its “fit for 55” initiative, a package of measures to ensure that the EU will cut its greenhouse emissions by 55% by 2030. 

The plan radically expands and replaces the bloc’s previous reduction plan, which set a more modest 40% reduction target. The new more ambitious goals will allow the EU to boost its international credentials ahead of the COP26 conference to be held in Glasgow on November 1-12. The EU will be able to tell the conference that it is putting itself on a path to complete decarbonisation of its economy by 2050, thus exceeding the goals of the Paris Agreement. It will also be able to claim to be a key player in talks with other major emitters, most notably the US and China, about how to collectively meet the Paris objectives. 

The plan addresses emissions from all major sectors of the EU economy:

  • Industry and electricity generation
  • Transport (road, air and maritime)
  • Buildings
  • Agriculture and forestry

It presents the vision of a European economy in 2030 where all new cars will be propelled by electric batteries or hydrogen, where renewable energy sources provide at least 40% of total energy use, and where coal, oil and gas will be progressively phased out.

The package of measures will have to go through the normal EU legislative process before becoming law. It is likely many of the individual measures will undergo changes as legislators work to produce agreements they can sell to their voters. Already many member states and industry associations have reacted negatively to several provisions of the package, especially the phase out of ICE cars by 2035 and the introduction of emissions trading for automotive and heating fuels. The Carbon Border Adjustment Mechanism is also likely to raise concerns about its trade impacts.

Assuming these negative reactions can be overcome, the individual measures are to start taking effect in a staggered manner, starting in 2023.

Main actions in the EU’s “Fit for 55” plan

Industrial emissions – EU ETS

  • lower the current cap on EU industrial greenhouse gas emissions, nearly doubling the annual rate of reduction to 4.2%, compared to 2.2% today. This would mean that EU industrial and energy installations would emit 61% less CO2 by 2030 compared to 2005.

Non-industrial emissions

  • Under the EU’s “effort sharing” initiative, each state will be assigned new, more ambitious reduction targets for buildings, road and domestic maritime transport, agriculture, waste and small industries.

Renewable energy and energy efficiency

  • The Commission proposes a new target to produce 40% of energy from renewable sources by 2030, while introducing new sustainability criteria for biofuels
  • EU states will be given new, more ambitious and binding annual targets for reducing energy use at EU level. 

Buildings

  • The public sector will be required to renovate 3% of its buildings each year to drive the renovation wave while creating jobs and saving money for the taxpayer.
  • Fuel for heating buildings will be included in a new fuel emissions trading scheme that will be launched in 2026.

Cars

  • Average CO2 emissions of new cars are to be reduced by 55% by 2030, and 100% by 2035 compared to 2021 levels. All new cars registered as of 2035 will be zero-emission (battery or hydrogen). By that year, EU governments will have to install charging and fueling points at regular intervals on major highways: every 60 kilometres for electric charging and every 150 kilometres for hydrogen refueling.
  • For existing cars and trucks, petrol and diesel are to be  included in the new fuel emissions trading scheme that will start in 2026.

Aviation

  • Jet fuel suppliers at EU airports will be required to blend increasing levels of sustainable aviation fuels in their fuel. This would include biofuels but also synthetic low carbon fuels, known as e-fuels. 
  • The EU will remove most exemptions from its requirement that aircraft flying to or from an EU country are subject to quotas and can trade emissions in the EU ETS.

Shipping

  • Shipping emissions will be included for the first time in the EU ETS.
  • To stimulate the uptake of sustainable maritime fuels and zero-emission technologies, there will be progressively rising purity standards for maritime fuels in EU ports, so that by 2050 these fuels emit 75% less greenhouse gas than today.

Agriculture and forestry (LULUCF)

  • The overall EU target for 2030 will be to remove 310 million tonnes of CO2/equivalent  emissions through carbon sinks. This target would be broken down into individual national targets. By 2035, the EU should aim to reach climate neutrality in agriculture and forestry including both CO2 and methane emissions from fertilisers and livestock.
  • A new EU Forest Strategy will seek to plant three billion trees across Europe by 2030.

Taxation

  • New legislation will be presented to require the 27 EU states to remove all exemptions and reduced rates that currently encourage the use of fossil fuels.
  • To make sure foreign countries with lax environmental standards do not benefit from the increased EU carbon rules, a new Carbon Border Adjustment Mechanism would impose a CO2 tax on imports of certain products.

Funding the transition to a zero-impact economy

  • The entirety of the revenues from the EU ETS scheme will be devoted to funding climate and energy-related projects. This will include a new €72 billion “Social Climate Fund” which in the six years from 2025 to 2030 will help European citizens cope with the costs of installing energy efficient equipment, new heating and cooling systems, and purchasing zero-emission cars. 
  • The EU will increase the funds available under the existing “Innovation” and “Modernisation” funds (intended to help companies meet their EU ETS obligations), and provide new funding to address the possible social impact on vulnerable households, micro-enterprises and transport users. 
  • The EU has established that the €500 billion InvestEU fund (recovery from the COVID-19 crisis) be used in a manner consistent with the EU’s climate and energy goal.s
  • The EU is also requiring that 35% of its €100 billion “Horizon Europe” (2021-2027) research and innovation fund be spent on climate and energy-related innovation. 

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