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Fit for 55 Package: The transition to a climate neutral economy

On 14 July, The European Commission published the Fit-for-55 Package. The package contains a set of proposals that aim to reduce the EU’s net greenhouse gas emissions by at least 55% by 2030, compared to 1990 levels.

The proposals adopted by the Commission include:

The Revision of the Energy Tax Directive proposes to align the taxation of energy products and electricity with EU energy and climate policies to contribute to the EU 2030 energy targets. The proposal also aims to remove outdated exemptions and reduced tax rates that encourage the use of fossil fuels.

The Directive amending the Renewable Energy Directive will increase the target to produce 40% of energy within the EU from renewable sources by 2030. The current target is 32%. Specific targets are proposed for renewable energy use in transport, heating and cooling, buildings and industry.

The Directive amending the Energy Efficiency Directive will set a higher binding annual target for energy use reduction at EU level, leading to a 9% reduction in energy consumption by 2030. Moreover, the public sector will be required to renovate 3% of its buildings each year to boost employment and reduce costs to taxpayers.

The Carbon Border Adjustment Mechanism proposes to put a carbon price on imports such as steel, iron, cement, fertilisers, and aluminum to prevent ‘carbon leakage’. The Regulation will apply the same carbon price of domestic and imported products, thus eliminating the incentive for companies to import products from countries with lower carbon pricing. The Mechanism will be gradually phased-in while free allowances are phased out.

The Revision of the EU Emission Trading System proposes to put a price on carbon and to lower the cap on emissions from certain economic sectors every year. The proposal seeks to further increase the annual rate of reduction in each given sector.

The Revision of the EU Emission Trading System for Aviation proposes to phase out free emission allowances for aviation and implement the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA).

The Effort Sharing Regulation proposes to increase emissions reduction targets for buildings, road and domestic maritime transport, agriculture, waste, and small industries. The targets are adjusted depending on the capacities of each Member States, such as their GDP per capita.

The Revision of the Regulation on Land Use, Forestry and Agriculture sets a target to reduce CO2 emissions from natural sinks. Carbon removals should lead to a reduction of 310 million tonnes of CO2 emissions by 2030. By 2035, climate neutrality should be reached in the land use, forestry and agriculture sectors, including agricultural non-CO2 emissions.

The Regulation on ensuring a level playing field for sustainable air transport aims to boost the supply and demand for sustainable aviation fuels in the EU, which will resultantly reduce the environmental footprint of the aviation industry. The Regulation would require fuel suppliers to blend increasing levels of sustainable aviation fuels in jet fuel.

The Regulation on the use of renewable and low-carbon fuels in maritime transport proposes a new Regulation on maritime fuels, as well amends the On Port State Control Directive. The Regulation would set a maximum limit on the greenhouse gas emissions of energy used by ships.

The Regulation amending the Regulation on CO2 emission standards for cars and vans proposes average emissions of new cars to decrease by 55% from 2030 and 100% from 2035 compared to 2021 levels. Resultantly, new cars registered as of 2035 will be emission free.

The Decision to amend the Decision establishing the Market Stability Reserve proposes to adjust the Market Stability Reserve (MSR) to address the surplus of emission allowances that has built up in the EU emissions trading system. The proposal aims to ensure that the current parameters of the MSR are maintained beyond 2023 and until the end of Phase IV of the EU ETS on 31 December 2030 to ensure market predictability.

The Revision of the Directive on deployment of the alternative fuels infrastructure aims to ensure drivers have the ability to charge or fuel their vehicles at a reliable network across the EU. The Regulation will require Member States to install charging and fueling stations at regular intervals on major highways.

The Social Climate Fund proposes to dedicate funding to Member States to help citizens finance investments in energy efficiency, new heating and cooling systems, and cleaner mobility. The fund would be financed by the EU budget and it will provide €72.2 billion of funding for the period 2025-2032.

Next Steps: The European Parliament and Council will review and discuss the proposals with the aim of reaching an agreed upon text for each of the proposals. Should the Parliament and Council jointly agree upon a proposal, the proposal will subsequently be adopted and later enter into force.

The proposals adopted by the Commission are open for feedback until 13 September. RidensPA encourages a constructive debate able to deliver a balanced package while guaranteeing EU industry’s global competitiveness and support in its efforts in the field of decarbonisation.

To access the Commission's press release, please click here.

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