European Council Agrees on Legislative Proposals for EU “Fit for 55” Package: Promising or Still Not Ambitious Enough?

On June 29, 2022, the European Council came together to discuss the EU’s “Fit for 55” package, which is a set of climate and energy legislation proposed by the European Commission that has the purpose of providing a concrete pathway for the EU to reach its goal of reducing greenhouse gas emissions by 55% when compared to 2005 levels by 2030.  This package is meant to provide a starting step that will allow the EU to reach its goal of being climate neutral by 2050. While the European Commission first presented “Fit for 55” to the European Council on July 14, 2021, just under a year later Member States came together in the European Council and were able to adopt a common position on pivotal topics like the EU emissions trading system (ETS), emissions and removals from land use, land-use change and forestry (LULUCF), effort-sharing regulation (ESR), the creation of a social climate fund (SCF) and new CO2 emission performance standards for cars and vans, creating the foundation necessary for negotiations with the European Parliament on final legislative texts to begin.

The European Council’s concrete agreement on the legislative proposals in “Fit for 55” marks the largest step taken yet within the EU in 2022 that will help facilitate a sustained decrease in emissions. While this legislation will not be adopted until it obtains the European Parliament’s approval, a consensus being reached on the legislative proposals that will be sent to the European Parliament is significant. Some of the positions agreed upon by member states include sustaining the goal of 61% emissions reduction in the sectors covered by the EU ETS by 2030 as well as strengthening the Market Stability Reserve, the Innovation Fund, and the Modernization Fund. The decision to strengthen the transparency and governance of the Modernization Fund and the Innovation Fund is especially notable, as the Modernization Fund will provide a funding source to member states who may be struggling to pay for the development of renewable energy resources and/or a shift in technology. In comparison, the Innovation Fund will ideally facilitate the development of innovative technologies that will aid in decreasing emissions.

The European Council also agreed to include maritime shipping emissions in the EU ETS and to reallocate 3.5% of the ceiling of auctioned allowances available under the EU ETS to the member states who are most reliant on maritime shipping. Other noteworthy points from the Council’s discussion include that member states agreed that it is necessary to create a new and separate ETS for the buildings and road transport sectors, to phase out free emission allowances from the aviation sector by 2027, to create a Social Climate Fund that will help to support vulnerable households and micro-enterprises in the climate transition, to adopt an emissions reduction target of 40% compared to 2005 levels for sectors not covered by the EU ETS, to reach an overall objective of 310 Mt CO2 equivalent of net removals in the LULUCF sector in 2030 at EU level and to raise the targets for reducing CO2 emissions for new cars and new vans by 2030 to 55% for cars and 50% for vans.

Thus, this agreement between the Member States signifies that there is a more clearly marked path that the EU can take in order to reach its 2030 climate goals. Yet, issues remain both within the “Fit for 55” framework and outside of it that may block the EU from reaching its goals. While the framework is ambitious, the fact that it has delayed the auctioning and surrender obligations of allowances by a year in the buildings and road transport sectors, as well as that it is not phasing out free emission allowances from the aviation sector until 2027, is discouraging given that the buildings and road transport sectors by themselves currently generate around 60% of EU greenhouse gas emissions. Another potentially problematic part of the framework is that the European Council agreed to enhance flexibilities to support Member States that face difficulties in trying to meet their LULUCF targets, as long as, the entirety of the EU meets its 2030 LULUCF target. While greater flexibility is not necessarily a negative thing, this could act as an incentive for certain member states who are already less enthusiastic about pursuing the EU’s climate goals to state climate targets, but not engage in the action that would be necessary to achieve these targets, because they know that they will be granted flexibilities and will not face significant repercussions for failing to meet their stated goals.

Therefore, while the detailed agreement reached by the European Council regarding the “Fit for 55” proposal is promising, taking a more hardline approach with clearly outlined consequences for states who do not achieve their emissions goals could be beneficial in ensuring that the EU indeed reaches a 55% reduction in emissions compared to 2005 levels by 2030. This could be especially useful given the ongoing Russia-Ukraine crisis and how this has spurred certain EU member countries to extend the lives of their coal-fired power plants and create infrastructure for natural gas pipelines in order to meet their energy needs in the short-term.

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This Post was submitted by Climate Scorecard EU Manager Brittany Demogenes

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