Published at 2021, August 3rd
What is the European Commission’s “Fit for 55” climate plan all about? What will this climate package change for companies or individuals? Let’s take a closer look.
What Is EU’s Fit for 55 Package?
It may sound like it, but “Fit for 55” is not the name of a sports program for those in their fifties. Instead, it stands for a package of proposals from the European Commission published on 14 July 2021.
The Fit for 55 package consists of a set of proposals to revise and update EU legislation and put in place new initiatives that guarantee EU policies are aligned with the climate goals agreed by the European Council and the European Parliament for the European Green Deal.
In other words, the package’s main goal is to enable the 27 (countries) to reduce their greenhouse gas emissions by 55% by 2030 compared to 1990 – which would be an important milestone to help Europe become the first climate-neutral continent by 2050.
“We are the last generation to still be able to act before it is too late” is how the European Commission introduces the 13 proposals that make up the “Fit for 55” package.
Carbon taxes (in areas such as aviation or shipping), the regulation of greenhouse gas emissions from land use, reviews of energy directives, a social climate fund, or a forest strategy are some of the Package’s main initiatives.
Fit for 55 and the EU’s Energy Transition
CO2 emissions from the burning of fossil fuels are the largest source of greenhouse gas emissions in the EU. and together with fugitive non-CO2 emissions in the energy system, they are responsible for just over 75% of EU greenhouse gas emissions.State of the Union (2020). Available here.
This underlines the energy system’s central role in the transition to a climate-neutral economy. This is why on the electricity generation side, the “Fit for 55” package has bold renewable energy ambitions: renewables are intended to represent 40% of the EU’s energy mix by 2030 (compared to today’s 32%).
Moreover, the Commission also wants member countries to reduce their total energy consumption by 36% – a 4% increase compared to the previous 32.5% reduction target.
However, electricity accounts for only a quarter of the energy consumed in Europe. And for a global energy transition, it is essential to also focus on the energy (often fossil) used for transportation or to heat buildings.
That is why the “Fit for 55” plan also raises energy efficiency objectives, which should reduce the EU’s energy consumption by 9% compared to previous projections. At the same time, the European Commission is also proposing a target of 3% of buildings renovated annually.
Still within buildings, the Energy Taxation Directive revision should make it possible to put an end to climatic outliers, such as kerosene lamps and heaters.
Fit For 55: Encouraging the Transition in Transportation
On the transportation side, a sector that generates nearly a quarter of EU’s emissions, these will have to be reduced by 90% for the EU to be carbon neutral by 2050.
Will Petrol Cars Be Phased Out and Banned?
The European Commission has decided to apply rigorous standards regarding CO2 emissions from new cars.
By 2030, manufacturers will have to reduce emissions from new vehicles by 55% compared to a current target of 37.5%. And by 2035, emissions from new vehicles will have to be reduced by 100%.
This means that from then onwards, new cars will no longer be allowed to emit greenhouse gases – which means petrol cars will be excluded. Meaning electric (or even hydrogen) cars will keep growing – hopefully under shared mobility schemes.
At the same time, the Commission also wants to ensure that everyone has access to charging points for electric cars, which will mean creating (or adapting already existing) infrastructures to guarantee powering stations are available every 60 km.
Reducing the Impact of Road, Air and Maritime Transport
The Commission also intends to reduce the carbon footprint of transport by promoting “sustainable” fuels.
For instance, the EU Aviation ReFuel initiative will require fuel suppliers to integrate more of the so-called “sustainable” fuels (agrofuels and synthetic fuels) into jet fuels at the expense of paying higher taxes for higher volumes of fossil fuels in the mixture.
A similar, albeit less restrictive, Fuel EU Maritime, was also proposed for maritime transportation.
Moreover, to reduce the impact of the transportation sector, the Commission proposes phasing out exemptions enjoyed by the aviation sector in the emissions trading system, and also the integration of maritime transport into the system ETM.
A separate but similar mechanism will be created for road transportation.
Revision of the Union Emissions Trading System (EU ETS)
The reform of the emissions trading system (ETS-EU) is also at the heart of the “Fit for 55” plan. But what is the EU’s ETS?
The EU ETS is a system that makes it possible to set a price for the emission of one tonne of carbon. It concerns 10,000 installations affiliated with highly polluting industries (electricity, manufacturing, airlines) and covers about 40% of the Union’s total greenhouse gas emissions.
To encourage these sectors to reduce their greenhouse gas emissions by 61% compared to 2005, the Commission has been lowering the emissions ceiling over the past 16 years and gradually reducing the number of free permits and allowances.
This has allowed a 43% reduction of emissions from the energy production sector and from industries that rely on the heavy use of energy – and it will further lead to significant increases in the price per tonne of carbon over the coming years.
And where will the money that gets collected from this trading scheme the funneled to?
Well, the ETS will fund a Climate Social Fund to help European citizens most affected or threatened by fuel poverty or mobility insecurity.
Fit for 55: A Carbon Tax at the Borders
With the EU implementing more severe environmental legislation, companies may feel tempted to relocate their production outside of Europe to avoid making operational/business changes to comply with new standards or even to avoid paying higher taxes.
That is why the goal of this carbon tax at the borders is that those who want to sell polluting products in the EU pay taxes equivalent to those paid by European producers under the EU ETS. This will help, on the one hand, to keep the competition fair and on the other hand, prevent global greenhouse gas emissions from being transferred rather than reduced.
To begin with, only certain products with a very heavy carbon footprint will be affected – this is the case with steel, iron, aluminum, cement, or fertilizers.
Forests: What Does “Fit for 55” Change?
At the same time as the European Union reduces its emissions, it must also increase its carbon sinks, i.e. the ability to store carbon as the soil, wetlands or forests absorb it.
The Commission proposes storing 310 million tonnes of CO2 equivalent by 2030. And for this to become a reality, the “Fit for 55” plan relies heavily on forest management – which currently covers 45% of European land.
The goal is to plant (at least) an additional 3 billion trees by 2030 – an ambition that comes along with strict rules regarding forest management to ensure sustainable practices. Under the biodiversity strategy that makes up the Green New Deal there is also the intention to turn 30% of Europe’s inland and coastal areas into nature reserves.
What to Expect From the “Fit for 55” Plan?
“Fit for 55” is the most comprehensive set of climate proposals ever developed at the European Union level.
We can, however, show some reluctance about some of the proposals – such as the one suggesting an increase in the use of agrofuels (or other biomass alternatives) when we know that their carbon balance is sometimes worse than that of fossil fuels.
In the end, the Fit for 55 package is the result of the recently approved European Climate Law aiming to ensure all EU policies contribute to the goals established at the European Green Deal – particularly economic decarbonization until 2050.
There is still a long way to go for this plan before it is adopted by the European Union. Many travels between the Council and Parliament can be expected, with some proposals which will have a hard time before being accepted.
It will probably be the case with fossil fuel taxation since its fiscal background means it will need the European Council’s unanimity – which has often been a reason for blocking proposals in recent years.