Fit For 55: Environmental Council Meeting, 17/03/2022

by Clarice Agostini

On 17th March 2022 the Council held a policy debate on several files of the Fit for 55 (FF55) package within the remit of the Environment Council. During the debate, the strong correlation between the objectives of FF55 and the Russian aggression against Ukraine was repeatedly highlighted. Increasing energy efficiency and renewable energy will lead to a reduction in the consumption of fossil fuels.

The French Presidency based the discussion on two questions:

  • Emission Trading System (ETS) for road transport and buildings (RTB): will the extension of ETS to the sectors of road transport and buildings provide effective support to the -55% target in 2030?
  • Social Climate Fund: if the ETS RTB will be set up, how can the most vulnerable groups be safeguarded?

Effort Sharing Regulation and Social Climate Fund

In support of the proposed extension of the Effort Sharing Regulation (ETS RTB) to road transport and buildings sectors, the Commission brings forward an analysis showing that this would not only meet the target set by the package, but also achieve 45% more emission reductions. The Commission also assures that the effects of this measure on the most vulnerable groups would be mitigated by the Social Climate Fund (SCF).

The majority of delegations is in favor of the Commission’s proposal, although half of them have strong concerns. Those completely in favor see RBT ETS as an effective tool for reducing emissions, compared to which there is a lack of equally valid alternatives. Sweden, Denmark and the Netherlands recall the objectives of FF55 and encourage speedy implementation of new measures. Portugal highlights the need for incentives to reduce fossil fuels. Amongst the supportive countries, however, there is some skepticism about SCF, with doubts coming from Germany, Denmark, the Netherlands, Finland and Sweden. According to Austria, conversely, SCF is not only necessary but also suitable. While Portugal calls for allocation methods to reflect national realities for energy poverty, the Netherlands states that flexibility cannot happen at the cost of environmental integrity. Finland also expresses doubts about the shipping sector in the ETS.

Concerns were raised mainly about effectiveness and timing of implementation of the new ETS. While recognising the usefulness of extending the plan, Spain, Bulgaria and Czechia propose a more gradual implementation. There are also concerns about rising energy prices. This would burden the most vulnerable groups, potentially increasing energy poverty. Lithuania points out that the greatest impact would result in countries with lower GDP, and Bulgaria wants to avoid a deepening of the social divide. Italy requests a quantitative impact assessment and states that SCF is not realistically sufficient. With regard to the fund, Lithuania, Croatia, Bulgaria and Czechia call for shared management, with a reduction of administrative burdens and a review of resource allocation methods. Finally, Slovenia and Ireland denounce that the new ETS could conflict with similar systems already in place at national level. 

The reasons given by the countries opposing the extension of the ETS are mainly twofold: the dubious effectiveness of the measure and its socio-economic impact. Poland suggests looking at the American example, where a similar measure did not work. The extension of ETS would also be socially unfair, as it would burden those who are already in poverty. The volatility and uncertainty of the issues at stake also contribute to this, as Greece and Romania point out. The conditions required for the implementation of SCF are mainly low administrative burdens, a proportional and flexible contribution, a fairer allocation of resources, the identification of target groups, co-financing and shared management. Luxembourg requires the fund to be a transformation instrument, not just a compensation mechanism. Cyprus, supported by others, calls for the impact assessment to be updated and the proposal adjusted accordingly. Estonia and Greece express concerns about the maritime sector, Malta and Cyprus also about aviation. However, the common objection of the opposing countries is that there are alternatives to the measures proposed by the Commission.

Other proposals

Many delegations expressed support for the application of ETS to the aviation sector, in particular to limit its application to intra-European flights. However, some delegations raised doubts regarding connectivity and competitiveness for the sector, linked to the cumulative impact on aviation of FF55. In addition, the Commission declared that a general approach on CBAM in the Council has been reached.

The majority of delegations supported the new target for emission reductions in the sectors included in the Effort Sharing Regulation (ERS) and committed to keeping the scope of the regulation unchanged. The proposal for an additional optional reserve was supported. However, some technical issues remain open, such as the need to better align the text of ESR with the 2050 climate neutrality target. A compromise also needs to be found on the degree of flexibility of the measure. Finally, several delegations expressed concerns about the level of ambition of their national target.

With regard to the Regulation on Land use, Land-use Change and Forestry (LULUCF), delegations supported the target of 310 million tonnes of net CO? eq removed at European level by 2030. There was also agreement on a number of provisions proposed by the Commission: the scope up to 2030, the commitments for the period 2021-2025, and the use of revenues. Some delegations expressed concerns regarding LULUCF flexibility mechanism, such as Portugal and Latvia, and its target, such as Estonia and Ireland.

As regards the regulation on CO? standards, most of the outstanding issues seem to be of political nature. Several delegations expressed their support for the Commission’s proposal for quantified CO? emission reduction targets for cars and vans for 2025, 2030 and 2035; delegations were divided between those calling for earlier and intermediate targets, and those for a more gradual approach. The proposal to abolish both the incentive mechanism for zero- and low-emission vehicles and the derogation for manufacturers with a low number of registrations in 2030 was partly supported. While some delegations accepted the revision of the regulation in 2028, as proposed by the Commission, others asked for it to be brought forward.


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