The European Commission's new legislative package "Fit for 55" still needs to be approved by the EU member states and the European Parliament, but its main goals are already known and cover many key areas of the European Union's policy and economy.
This is stated in an article by Iryna Stavchuk, Deputy Minister of Environmental Protection and Natural Resources of Ukraine.
As is known, in July the European Commission published the "Fit for 55" legislative package aimed at revising the EU's current climate and energy targets for 2030. The package strengthens eight existing pieces of legislation and proposes five new initiatives across a range of policy areas and economic sectors: climate, energy and fuels, transport, buildings, land use and forestry, which will help achieve the set goal in the most effective way.
Revision of the EU Emissions Trading System
"Experience in recent years has shown that emissions trading is an effective and cost-efficient mechanism for reducing emissions, and the revenues it raises by auctioning emission allowances can be used by countries to support the transition to cleaner production and stimulate innovation," Stavchuk stressed.
As noted, the "Fit for 55" package includes a proposal to lower the overall emissions cap further and increase the annual rate of reduction by gradually cutting the number of CO2 emission allowances (including free ones) granted to companies under the EU ETS. This should lead to a higher price per tonne of emissions and thus encourage companies to reduce emissions. It is also proposed to phase out free emission allowances for steel companies and sectors covered by CBAM, as well as for airlines, while including maritime shipping in the system from 2023. The argument is that a single ship produces as much carbon emissions as 8,000 cars a day.
In addition, the EU intends to create a separate new emissions trading system for road transport and buildings heating and to start applying it from 2026.
Carbon Border Adjustment Mechanism (CBAM)
One of the new proposals in the document is the creation of the Carbon Border Adjustment Mechanism (CBAM), which will set a price on imports of a limited number of polluting goods based on the carbon emissions generated during their production.
"This measure is aimed at protecting European businesses from environmental dumping and preventing "carbon leakage" in situations where European companies want to relocate outside the EU to avoid paying for CO2 emissions. The mechanism is also intended to encourage industry outside the EU and to encourage the EU's international partners to take steps in the same direction," the Deputy Minister emphasised.
She noted that CBAM will operate in addition to the European Emissions Trading System, but instead of allowances, special CBAM certificates will be introduced, which importers will buy in the EU according to the volume of emissions generated in the production of their goods. Certificate prices will be calculated on the basis of the average auction price of EU ETS allowances. CBAM will initially apply to imports of fertilisers, electricity, cement and metallurgical products (iron, steel, aluminium) and will take into account only direct emissions from production. As noted, these are the sectors with the highest CO2 emissions and high trade intensity, which creates a risk of "carbon leakage" to other countries.
CBAM applies to companies from all non-EU countries, except those that participate in the European Emissions Trading System or have a national ETS linked to the EU one. This applies to members of the European Economic Area and Switzerland.
At the same time, it is noted that Ukraine can count on special conditions, namely an exemption from CBAM in the energy sector.
"The preamble of the document notes that as soon as third countries are closely integrated into the EU electricity market through market coupling, technical solutions should be found to ensure the application of CBAM to electricity exported from such countries into the customs territory of the Union. If no technical solutions can be found, third countries with market coupling should benefit from a temporary exemption from CBAM until 2030 at the latest, only for electricity exports, provided certain conditions are met. However, these third countries must develop a roadmap and commit to introducing a carbon pricing mechanism with a price equivalent to the EU ETS, and must commit to achieving carbon neutrality by 2050, so as to align it with Union legislation on the environment, climate, competition and energy. This exemption should be withdrawn at any time if there are grounds to believe that the country concerned is not fulfilling its commitments or has not adopted an ETS equivalent to the EU ETS by 2030," Stavchuk said.
Changes in the transport sector
As noted, the EU wants to ban the registration of new petrol and hybrid cars in the EU from 2035. It also plans to tighten CO2 emission standards for cars and vans, which will accelerate the transition to zero-emission mobility. From 2030, average emissions of new cars must fall by 55%, and by 100% from 2035, compared to 2021 levels. As a result, all new cars registered as of 2035 will be zero-emission.
Under the revised Alternative Fuels Infrastructure Regulation, the EU plans to ensure the necessary roll-out of interoperable and user-friendly infrastructure for charging and refuelling clean vehicles across the entire EU, keeping pace with market developments and guaranteeing that rural and remote areas are covered too. This is because consumers are increasingly buying electric vehicles. That is why it is proposed to build charging stations for electric vehicles every 60 kilometres along the EU's main motorways, and hydrogen refuelling stations every 150 kilometres.
"In addition, the revised Regulation aims to put an end to the current lack of pricing transparency and to facilitate cross-border payments when charging electric vehicles. The European Commission has already announced its intention to increase the number of electric vehicle charging points to 1 million by 2025 and to 3 million by 2030," Stavchuk added.
Changes in the energy and renewables sector
As reported, energy production and use account for 75% of emissions in the EU, so accelerating the transition to a clean energy system is crucial for cutting emissions. The Renewable Energy Directive performs two main functions: it defines which energy sources are considered "renewable" and sets binding targets for renewable energy in Europe's energy mix. The revised Directive proposes a higher target of producing 40% of energy in the EU member states from renewable sources by 2030, compared to the previous 32%. The action plan states that all EU member states should contribute to this goal, and specific targets are proposed for the use of renewable energy in transport, heating and cooling of buildings, and industry. The sustainability criteria for the use of bioenergy are also to be tightened.
In addition, the European Commission has revised the Energy Efficiency Directive, which aimed to achieve savings of at least 32.5% by 2030. At present this target is not binding, but the European Commission now plans to make it a legal obligation. During the latest revision of the Directive, the European Commission also set more ambitious annual targets for reducing energy consumption at EU level. The Directive will set out how national contributions are determined and will raise the annual obligation to reduce primary energy consumption for member states from the current 32.5% to 39%. The public sector will have to renovate 3% of its buildings every year to drive the renovation wave, create jobs and reduce energy consumption and costs for taxpayers.
Also, the new version of the Energy Taxation Directive in the "Fit for 55" package proposes to align the taxation of energy products with EU energy and climate policy, promoting clean technologies and removing outdated exemptions and reduced rates that currently encourage the use of fossil fuels.
"The new rules aim to reduce the harmful effects of energy tax competition and will help secure revenues for member states from green taxes, which are less detrimental to growth than taxes on labour," Stavchuk commented.
Aviation and maritime fuels
The ReFuelEU Aviation initiative aims to reduce carbon emissions from fuel by increasing the amount of green jet fuel used in the EU. To boost the supply of sustainable aviation fuels (SAFs), the EU intends to introduce a fuel blending mandate. All aircraft departing from EU airports will have to refuel with green aviation fuel, with a minimum share of 2% in 2025 and 5% in 2030.
"Similarly, the FuelEU Maritime initiative will stimulate the uptake of sustainable maritime fuels and zero-emission technologies by setting targets for reducing the carbon intensity of fuels used by ships calling at European ports. Over time, these limits will become increasingly strict," the official explained.
Social Climate Fund and effort sharing between member states
As noted, the European Commission plans to set up a Social Climate Fund, which will provide member states with funding of EUR 72.2 billion for the period 2025-2032, based on a targeted amendment to the multiannual financial framework. In total, the Fund will mobilise EUR 144.4 billion for a socially fair transition by 2032. The Fund will be financed from the EU budget, and from 2026 it will also receive 25% of the revenues from allowance trading for companies that will pay for emissions from heating buildings with fossil fuels and from road transport under the newly created emissions trading system for road transport and buildings heating.
The European Commission has also revised the Effort Sharing Regulation (ESR), which covers agriculture, transport, buildings, waste and other sectors not covered by the ETS – in total, the ESR covers about 60% of emissions in the EU. The revised Regulation sets stronger emission reduction targets for each EU 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 to take cost-efficiency into account. However, the revised ESR should ensure a 40% reduction in emissions from these sectors by 2030 compared to 2005.
As the Deputy Minister noted, the "Fit for 55" plan needs to be approved by all EU member states and the European Parliament. At the same time, it is expected that the discussions on its approval may take at least one year.
Ukraine's climate commitments
As is known, Ukraine is also an active participant in the international fight against global warming.
"In 2016, the country was one of the first to ratify the Paris Agreement. In 2020, Ukraine joined the European Green Deal at a high political level, which aims to achieve climate neutrality of the European continent by 2050. In March 2021, the Government approved the National Economic Strategy until 2030, which forecasts quite significant industrial development and GDP growth. Moreover, according to this strategy, Ukraine is expected to achieve climate neutrality no later than 2060," Stavchuk emphasised.
"The draft Updated Nationally Determined Contribution (NDC2) – Ukraine's climate target for 2030 – is currently at the final stage of adoption by the Cabinet of Ministers of Ukraine. In NDC2, Ukraine has set itself a more ambitious target of reducing GHG emissions to 35% of the 1990 level by 2030," the official summed up.
EcoPolitic previously reported that the EU had published a plan to combat climate change until 2050.
It also became known how the EU's climate neutrality plan will affect Ukraine.
