On Wednesday, the European Commission finally adopted a package of proposals to make the EU’s climate, energy, land use, transport and taxation policies fit for reducing net greenhouse gas emissions by at least 55% by 2030, compared to 1990 levels. Achieving these emission reductions in the next decade is crucial to Europe becoming the world’s first climate-neutral continent by 2050 and making the European Green Deal a reality. With these proposals, the Commission is presenting the legislative tools to deliver on the targets agreed in the European Climate Law .
A comprehensive and interconnected set of proposals
The new set of proposals seek to use a combination of market led ideas and legislation to achieve goals. It’s not something that has worked till now, but the EU clearly believes responsible behaviour from polluters will follow this time. Thus, it uses application of emissions trading to new sectors and a tightening of the existing EU Emissions Trading System; increased use of renewable energy; greater energy efficiency; a faster roll-out of low emission transport modes and the infrastructure and fuels to support them; an alignment of taxation policies with the European Green Deal objectives; measures to prevent carbon leakage; and tools to preserve and grow our natural carbon sinks.
- The EU Emissions Trading System (ETS) puts a price on carbon and lowers the cap on emissions from certain economic sectors every year. The new commission proposals plan to lower the overall emission cap even further and increase its annual rate of reduction. The Commission is also proposing to phase out free emission allowances for aviation and align with the global Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) and to include shipping emissions for the first time in the EU ETS. To address the lack of emissions reductions in road transport and buildings, a separate new emissions trading system is set up for fuel distribution for road transport and buildings. The Commission also proposes to increase the size of the Innovation and Modernisation Funds.
- To complement the substantial spending on climate in the EU budget, Member States should spend the entirety of their emissions trading revenues on climate and energy-related projects. A dedicated part of the revenues from the new system for road transport and buildings should address the possible social impact on vulnerable households, micro-enterprises and transport users.
- The Effort Sharing Regulation assigns strengthened emissions reduction targets to each Member State for buildings, road and domestic maritime transport, agriculture, waste and small industries. Recognising the different starting points and capacities of each Member State, these targets are based on their GDP per capita, with adjustments made to take cost efficiency into account.
- Member States also share responsibility for removing carbon from the atmosphere, so the Regulation on Land Use, Forestry and Agriculture sets an overall EU target for carbon removals by natural sinks, equivalent to 310 million tons of CO2 emissions by 2030. National targets will require Member States to care for and expand their carbon sinks to meet this target. By 2035, the EU should aim to reach climate neutrality in the land use, forestry and agriculture sectors, including also agricultural non-CO2 emissions, such as those from fertiliser use and livestock. The EU Forest Strategy aims to improve the quality, quantity and resilience of EU forests. It supports foresters and the forest-based bioeconomy while keeping harvesting and biomass use sustainable, preserving biodiversity, and setting out a plan to plant three billion trees across Europe by 2030.
- Energy production and use accounts for 75% of EU emissions, so accelerating the transition to a greener energy system is crucial. The Renewable Energy Directive will set an increased target to produce 40% of EU’s energy from renewable sources by 2030. All Member States will contribute to this goal, and specific targets are proposed for renewable energy use in transport, heating and cooling, buildings and industry. To meet both their climate and environmental goals, sustainability criteria for the use of bioenergy are strengthened and Member States must design any support schemes for bioenergy in a way that respects the cascading principle of uses for woody biomass.
- To reduce overall energy use, cut emissions and tackle energy poverty, the Energy Efficiency Directive will set a more ambitious binding annual target for reducing energy use at EU level. It will guide how national contributions are established and almost double the annual energy saving obligation for Member States. The public sector will be required to renovate 3% of its buildings each year to drive the renovation wave, create jobs and bring down energy use and costs to the taxpayer.
- A combination of measures is required to tackle rising emissions in road transport to complement emissions trading. Stronger CO2 emissions standards for cars and vans will accelerate the transition to zero-emission mobility by requiring average emissions of new cars to come down by 55% from 2030 and 100% from 2035 compared to 2021 levels. As a result, all new cars registered as of 2035 will be zero-emission. To ensure that drivers are able to charge or fuel their vehicles at a reliable network across Europe, the revised Alternative Fuels Infrastructure Regulation will require Member States to expand charging capacity in line with zero-emission car sales, and to install charging and fuelling points at regular intervals on major highways: every 60 kilometres for electric charging and every 150 kilometres for hydrogen refuelling.
- Aviation and maritime fuels cause significant pollution and also require dedicated action to complement emissions trading. The Alternative Fuels Infrastructure Regulation requires that aircraft and ships have access to clean electricity supply in major ports and airports. The ReFuelEU Aviation Initiative will oblige fuel suppliers to blend increasing levels of sustainable aviation fuels in jet fuel taken on-board at EU airports, including synthetic low carbon fuels, known as e-fuels. Similarly, the FuelEU Maritime Initiative will stimulate the uptake of sustainable maritime fuels and zero-emission technologies by setting a maximum limit on the greenhouse gas content of energy used by ships calling at European ports.
- The tax system for energy products must safeguard and improve the Single Market and support the green transition by setting the right incentives. A revision of the Energy Taxation Directive proposes to align the taxation of energy products with EU energy and climate policies, promoting clean technologies and removing outdated exemptions and reduced rates that currently encourage the use of fossil fuels. The new rules aim at reducing the harmful effects of energy tax competition, helping secure revenues for Member States from green taxes, which are less detrimental to growth than taxes on labour.
- Finally, a new Carbon Border Adjustment Mechanism will put a carbon price on imports of a targeted selection of products to ensure that ambitious climate action in Europe does not lead to ‘carbon leakage’. This will ensure that European emission reductions contribute to a global emissions decline, instead of pushing carbon-intensive production outside Europe. It also aims to encourage industry outside the EU and our international partners to take steps in the same direction.
A Socially Fair Transition
The commission acknowledges that climate policies risk putting extra pressure on vulnerable households, micro-enterprises and transport users in the short run. The design of the policies in the package therefore fairly spreads the costs of tackling and adapting to climate change.
In addition, carbon pricing instruments raise revenues that can be reinvested to spur innovation, economic growth, and investments in clean technologies. A new Social Climate Fund is proposed to provide dedicated funding to Member States to help citizens finance investments in energy efficiency, new heating and cooling systems, and cleaner mobility. The Social Climate Fund would be financed by the EU budget, using an amount equivalent to 25% of the expected revenues of emissions trading for building and road transport fuels. It will provide €72.2 billion of funding to Member States, for the period 2025-2032, based on a targeted amendment to the multiannual financial framework. With a proposal to draw on matching Member State funding, the Fund would mobilise €144.4 billion for a socially fair transition.
Background
The European Green Deal, presented by the Commission on 11 December 2019, sets the goal of making Europe the first climate-neutral continent by 2050. The European Climate Law, which enters into force this month, enshrines in binding legislation the EU’s commitment to climate neutrality and the intermediate target of reducing net greenhouse gas emissions by at least 55% by 2030, compared to 1990 levels.The EU’s commitment to reduce its net greenhouse gas emissions by at least 55% by 2030 was communicated to the UNFCCC in December 2020 as the EU’s contribution to meeting the goals of the Paris Agreement.
As a result of the EU’s existing climate and energy legislation, the EU’s greenhouse gas emissions have already fallen by 24% compared to 1990, while the EU economy has grown by around 60% in the same period, decoupling growth from emissions. This tested and proven legislative framework forms the basis of this package of legislation.
The EU’s long-term budget for the next seven years will provide support to the green transition. 30% of programmes under the €2 trillion 2021-2027 Multiannual Financial Framework and NextGenerationEU are dedicated to supporting climate action; 37% of the €723.8 billion (in current prices) Recovery and Resilience Facility, which will finance Member States’ national recovery programmes under NextGenerationEU, is allocated to climate action.