The Commission’s plan is composed of a series of legislative proposals setting out the European Union’s trajectory to achieve climate neutrality by 2050.
The package proposes to revise European climate legislation, including: the application of emissions trading to new sectors and a tightening of the existing EU Emissions Trading System; measures to prevent carbon leakage; new requirements for industry to decarbonize production processes; a faster roll-out of low emission transport modes and the infrastructure and fuels to support them; increased use of renewable energy; greater energy efficiency; an alignment of taxation policies with the European Green Deal objectives; and tools to preserve and grow our natural carbon sinks.
1.1 Industrial transformation and carbon pricing
To meet emissions reduction objectives set by the European Commission, EU industry will need a coherent regulatory framework, access to adapted infrastructure and support for innovation to develop clean technologies.
The proposals included in “Fit for 55” are thus meant for industries to decarbonize their production processes, while seizing the multiple opportunities offered by the green transition.
The Commission has assessed the possibility of reinforcing emissions trading as a tool to achieve greenhouse gas emissions reductions in the European Union. The proposal includes an extension of the EU Emissions Trading System (ETS) to include emissions from maritime transport over the 2023-2035 period. Enhanced efforts will also be required from aviation operators: the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) will be implemented through the EU ETS Directive. Emissions trading in the road transport and building sectors will also be applied from 2026 onward to increase incentives to supply cleaner fuels to the market.
To complement the spending on climate in the EU budget, the Commission’s proposal suggests that Member States spend the entirety of their emissions trading revenues on climate and energy-related projects. Moreover, a dedicated part of the revenues from the new system for road transport and buildings should address the possible social impact on vulnerable households, microenterprises and transport users.
Moreover, a new Carbon Border Adjustment Mechanism will set a carbon price for imports of certain products based on their carbon content. Specifically, importers of iron and steel, cement, fertilizers, aluminum and electricity will be required to pay this CO2 import tax from 2026 onwards. This carbon tax mechanism at the EU’s borders aims to ensure that European emission reductions will contribute to global emission reductions and not push carbon-intensive production beyond Europe’s borders, i.e. cause “carbon leakage”.
The EU Innovation Fund, which supports businesses and SME investments in clean energy will increase its financing capabilities to finance innovative decarbonization projects and infrastructure.
Attention will be given specifically to projects in sectors covered by the Carbon Border Adjustment Mechanism.
The Commission takes into account the fact that Member States have national specificities and different starting points. Thus, the Effort Sharing Regulation (ESR) assigns each Member State particular emission reduction targets for buildings, road and inland shipping, agriculture, waste and small industries. These national targets are based on GDP per capita and adjusted for cost-effectiveness. Overall, the Commission’s proposal should deliver an EU-wide emission reduction of 40% from the aforementioned sectors by 2030, compared to 2005.
Overall, the industrial transition must be a collective and inclusive effort, co-designed with industrial ecosystems across Europe. This is why the amended Industrial Strategy includes the creation of transition pathways with social partners and other stakeholders to identify the scale of the needs, including reskilling, investment and technology needs. Priority will also be given to sectors most impacted by the Covid-19 crisis, such as the mobility, construction and energy industries.
1.2 Clean mobility
On top of carbon pricing, the Commission is proposing new measures to reduce emissions from transport, which represents almost a quarter of the EU’s total greenhouse gas emissions and is the most important source of air pollution across European cities3.
To encourage a faster deployment of lowemission transport modes, the Commission proposes stricter CO2 emission standards for cars and vans, thereby reducing average new vehicle emissions by 55% from 2030 and by 100% from 2035, compared to 2021 levels. This measure is complemented by the amendment of the regulation on the deployment of Alternative Fuels Infrastructure, which will require Member States to increase their recharging capacity in line with the ambition to increase the sales of zero-emission vehicles. It will require governments to install recharging and refueling points at regular intervals on major roads: every 60 kilometers for electric recharging and every 150 kilometers for hydrogen refueling. These measures are meant to reinforce and complement each other: putting a price on carbon for road transport will make the existing fleet drive cleaner, and setting more ambitious CO2 standards will help to get more zero emissions vehicles on the road by 2030.
Amendments to air transport regulation are also included in the Commission’s proposals. The ReFuelEU Aviation Initiative will compel fuel suppliers to increase the share of sustainable aviation fuels into existing jet fuel uploaded at EU airports. A zero emission aviation Alliance, which should emerge at the end of 2021, will complement these efforts to ensure the market is ready for disruptive clean technologies. Then, the FuelEU Maritime Initiative will encourage the use of sustainable maritime fuels and zero-emission technologies by imposing a maximum limit on the greenhouse gas content of the energy used by ships arriving at or departing from EU ports.
To reach the EU’s 2030 target and eventually climate neutrality, the Commission is proposing an increased use of renewable energy, with a proposal to amend the 2018 Renewable Energy Directive. This change intends to raise the production target so that the share of energy produced from renewable sources reaches 40% by 2030, up from the current 32% level. To reach this overall goal, specific targets are proposed for renewable energy use in transport, heating and cooling, buildings and industry.
The Commission also wishes to improve energy efficiency through the recast of the Energy Efficiency Directive that will set a more ambitious binding annual energy reduction target at the EU level. It will notably double the annual energy savings obligation for Member States and will require the public sector to renovate 3% of its buildings each year to drive national efforts. This should lead to a 9% reduction in energy consumption by 2030, compared to baseline projections4.
Then, a revision of the Energy Taxation Directive is set to align the minimum taxation for heating and transport fuels with EU energy and climate policies. This will be done through the promotion of clean technologies and the removal of outdated tax exemptions and other incentives that currently encourage the use of fossil fuels.
1.4 Counting on forestry
The fight against climate change is closely linked to the preservation of biodiversity, and both crises cannot be treated separately. Notably, restoring nature and enabling biodiversity to thrive are essential to help land and ocean ecosystems fulfil their crucial role of carbon absorption and storage.
The updated Regulation on Land Use, Land Use Change and Forestry sets a more ambitious EU target to absorb carbon from natural sinks, equivalent to 310 million tons of CO2 emissions by 2030.
Specific national targets will require Member States to care for and expand their carbon sinks to meet this goal. By 2035, the EU should aim to reach climate neutrality in the land use, forestry and agriculture sectors.
Finally, the new EU Forest Strategy aims to improve the quality, quantity and resilience of EU forests, setting out a plan to plant three billion trees across Europe by 2030.
Together with the forthcoming New Soil Strategy, EU Nature Restoration Law and Carbon Farming Initiative planned for later in 2021, these laws will contribute to strengthening the EU’s natural carbon sinks and support the social and economic functions of forestry and forest-based sectors.