Fit for 55: the Pathway to Salvation?

by Reinout Debergh

What is ‘fit for 55’ and why is it being done?

On April 21st, the EU agreed to reduce emissions by 55% by 2030 compared to 1990 [1]. Though this is a net target and includes carbon removals meaning the actual reduction target is 52.8% [2]. To set the EU on course to reach that target, it published a whole package of legislation, some revised and some new, ranging from energy to forestry on July the 14th [3, 4]. This package is referred to as the ‘fit for 55’ package [3]. 

What policies does it include? 

The package can be divided into three categories: energy, transport and emission reductions [4]. The latter consists of the pillars for achieving the 55% target [5]. 

Figure 1. Overview of legislative proposals included in the fit for 55 package. RED = renewable energy directive, EU ETS = EU emissions trading system, CBAM = carbon border adjustment mechanism, ESR = effort sharing regulation, LULUCF = land use, land use change and forestry regulation.

Energy

In 2017, energy supply was responsible for 29% of EU emissions (excl. LULUCF) [6]. The energy legislation includes three key directives to address this: renewable energy, energy efficiency and energy taxation. The first two are to help the EU to reach specific targets on its share of renewable energy and improvements of energy efficiency [7, 8]. The energy taxation directive sets minimum fuel tax rates but includes many exemptions amounting to fossil fuel subsidies and does not tax maritime and aviation fuels [9]. 

Transport

These proposals aim to shift mobility away from fossil fuels towards cleaner alternatives. For aviation these are known as sustainable aviation fuels (SAFs). They include biofuels and synfuels [10]. For the maritime sector, it includes for example ammonia and hydrogen [11]. Infrastructure needed for the alternatives is addressed by the alternative fuels infrastructure directive (AFID) and includes requirements on charging stations, standards, etc. [12]. Important for road transport are the CO2 standards for cars and vans. Tightening these standards encourages a shift to cleaner transport thereby also reducing air pollution [13]. 

Emission reductions

The three main systems under which emissions are to be reduced are the EU ETS, the ESR and LULUCF. The ETS currently covers most industries, electricity and aviation. Under this cap and trade system, installations have to surrender allowances for their emissions while the total amount of available allowances decreases annually. Linked to this is CBAM which will put a carbon tax on some imported goods into the EU. Some of the ETS revenue would go to a Social Climate Fund to address the social costs of the ecological transition [4]. 

The ESR covers agriculture, waste, buildings, transport and non-ETS industry and sets national reduction targets for member states based on GDP/capita [4, 14]. LULUCF covers emissions and removals from forestry and is complemented by a new forest strategy [4]. 

What will happen next?

Now it is up to the member states and the European parliament to find an agreement on the proposals. Nearly all will follow the ordinary legislative procedure in which the proposals go back and forth between the Council and Parliament up to two times (known as two readings). If no agreement is reached by then, a conciliation committee is created after which the proposal is either adopted or rejected [15]. However, since taxation falls under the unanimity rule, revision of the energy taxation directive will require unanimous approval within the Council while the Parliament will only be consulted [16]. 

Adopting all this legislation is a process that could take months or even years [17].

References

[1] Climate change: EU to cut CO2 emissions by 55% by 2030, BBC, https://www.bbc.com/news/world-europe-56828383, accessed on 10/07/2021.
[2] Aragonès, M.P., Wang, F. , New EU climate law delivers innovative policy framework to advance carbon removal and avoid moral hazard, Climateworks, https://www.climateworks.org/blog/innovative-european-union-climate-law/, accessed on 10/07/2021. 
[3] Oroschakoff, K., 5 things to know about EU’s Fit for 55 climate package, Politico, https://www.politico.eu/article/fit-for-55-eu-5-things-to-know/, accessed on 10/07/2021.
[4] Taylor, K., Carroll, S.G., Europe’s ‘Fit for 55’ climate package: What to expect, Euractive, https://www.euractiv.com/section/energy-environment/news/europes-fit-for-55-climate-package-what-to-expect/, accessed on 10/07/2021.
[5] 2030 climate & energy framework, European Commission, https://ec.europa.eu/clima/policies/strategies/2030_en, accessed on 10/07/2021.
[6] Greenhouse gas emissions by aggregated sector, European Environmental Agency, https://www.eea.europa.eu/data-and-maps/daviz/ghg-emissions-by-aggregated-sector-5/#tab-dashboard-02, accessed on 10/07/2021.
[7] Renewable energy – directive, targets and rules, European Commission, https://ec.europa.eu/energy/topics/renewable-energy/directive-targets-and-rules_en, accessed on 10/07/2021. 
[8] Energy efficiency directive, European Commission https://ec.europa.eu/energy/topics/energy-efficiency/targets-directive-and-rules/energy-efficiency-directive_en, accessed on 10/07/2021. 
[9] Anderson, P., The EU’s broken Energy Taxation Directive: ripe for revision, Investigate Europe, https://www.investigate-europe.eu/en/2020/energy-taxation-directive-explained/,  accessed on 10/07/2021. 
[10] Sustainable aviation fuels – ReFuelEU Aviation, European Commission, https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/12303-Sustainable-aviation-fuels-ReFuelEU-Aviation_en, accessed on 10/07/2021. 
[11] Boffey, D., Draft EU policy to cut shipping emissions condemned as ‘disaster’, The Guardian, https://www.theguardian.com/environment/2021/jun/23/eu-policy-to-cut-shipping-carbon-emissions-would-be-disaster-leak, accessed on 10/07/2021.  
[12] Report on EU-wide alternative fuels infrastructure deployment, European Commission, https://ec.europa.eu/transport/themes/urban/news/2021-03-09-report-eu-wide-alternative-fuels-infrastructure-deployment_en, accessed on 10/07/2021.   
[13] Revision of the CO2 emission standards for cars and vans, Eurelectric, https://cdn.eurelectric.org/media/5226/revision_of_the_co2_emission_standards_for_cars_and_vans-2021-030-0049-01-e-h-DC9364AE.pdf, accessed on 10/07/2021.   
[14] Effort sharing 2021-2030: targets and flexibilities, European Commission, https://ec.europa.eu/clima/policies/effort/regulation_en, accessed on 10/07/2021. 
[15] Overview Ordinary legislative procedure, European Parliament, https://www.europarl.europa.eu/olp/en/ordinary-legislative-procedure/overview, accessed on 10/07/2021.
[16] Decision making on EU Tax Policy, European Commissions, https://ec.europa.eu/taxation_customs/taxation/decision-making-eu-tax-policy_en, accessed on 10/07/2021.[17] Fit for 55 – EU gets ready for complete overhaul of climate and energy legislation, Clean Energy Wire, https://www.cleanenergywire.org/events/fit-55-eu-gets-ready-complete-overhaul-climate-and-energy-legislation, accessed on 10/07/2021.