In addition to ensuring a just and socially fair transition towards carbon neutrality, the package seeks to maintain the innovativeness and competitiveness of the EU industry while also providing a level playing field with third-country companies. The package also ensures that the EU will maintain its leadership position in fighting global climate change.
The package consists of thirteen legislative proposals, including:
EU emissions trading system:
Currently covering around 40% of the EU's GHG emissions, the Emission Trading System (ETS) is the EU's mechanism for putting a price on GHG emissions for energy-intensive industries. This is accomplished by capping the GHGs that EU installations and covered aircraft operators can emit annually.
The Commission seeks to underpin the ETS by strengthening the current provisions and extending the scheme's scope. The proposal notably aims to add emissions from maritime transport to the EU ETS and gradually eliminate the free allocation of emission allowances to aviation and the sectors covered by the carbon border adjustment mechanism (CBAM)*. Additionally, it seeks to implement the global carbon offsetting and reduction scheme for international aviation (CORSIA)** through the EU ETS and increase funding from the modernization and innovation funds. Finally, to provide price stability for installations covered under the EU ETS scheme, the proposal seeks to revise the market stability reserve to ensure a stable and well-functioning EU ETS. Through the reserve, the current surplus of allowances is addressed, and the supply of allowances for auction is adjusted to make the system more resilient to major shocks.
Carbon border adjustment mechanism*:
Designed to function in parallel with EU ETS, the objective of the Commission's proposal for a carbon border adjustment mechanism is to impose a carbon charge and administrative requirements on certain imported products. A phasing-out of specific free allowances may put affected EU industries at a competitive disadvantage and result in "carbon leakage"; this system should ensure a level playing field for EU corporates.
As a result of the Council's decision, free emission allowances for the aviation sector will gradually be phased out by 2027 and aligned with the global Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). While flights within the EU (including United Kingdom and Switzerland) will be subject to the EU ETS, flights to/from third countries will be subject to CORSIA.
Social climate fund:
The social climate fund addresses the social and distributional effects of the new emissions trading system for buildings and road sectors.
Funds will be established according to social climate plans developed by member states to benefit vulnerable households, microbusinesses, and transportation users. Funds can also be used to provide temporary direct income assistance. The idea is to fund social causes, especially those affected by the transformation to a carbon-neutral economy.
Land use and forestry:
Under the current Land use, Land-use change, and forestry (LULUCF) Regulation, the EU sets emission reduction targets for agriculture and forestry, two sectors not covered by the ETS, which not only emit GHG but could also remove GHG (by absorbing CO2 in soil and biomass). The Commission proposesEU-wide and national targets to reduce emissions and increase removals by 2030 to strengthen regulation in this area. Namely, a binding EU-level target for net greenhouse gas removals of at least 310 million tons of CO2 equivalent by 2030 is established. To avoid current implementation challenges, the second goal involves enhanced monitoring and simplification of accounting and compliance rules.
For EU sectors not covered by the EU ETS and the LULUCF (domestic maritime transport, waste, agriculture, and maritime industries), the effort-sharing regulation is currently setting annual greenhouse emission targets via amendments to existing legislation related to targets for greenhouse gas emissions reduction by 2030. Notably, the proposal increases EU-level reduction targets of CO2 from 29% to 40% (compared to 2005) for these sectors and updates national targets to reflect that increase. For calculating the national targets, GDP per capita is used with limited, targeted corrections to account for cost-efficiency concerns.
Co2 emissions standards for cars and vans:
In the Commission's proposal aimed at revising car and van CO2 emissions regulations, the EU sets new targets for 2030 and a new target of 100% zero emission vehicles for 2035. The former means that cars and vans with an internal combustion engine will no longer be able to be marketed in the EU after 2035.
With the proposed tightened CO2 standards for cars and vans, member states can achieve their increased national standards under the effort-sharing regulation while also stimulating technological innovation.
Alternative fuels infrastructure:
In its proposal to revise existing legislation, the Commission recommends accelerating infrastructure deployment to refuel and recharge vehicles with alternative fuels and providing alternative power sources to stationary aircraft and ships. Interoperability and user-friendliness are addressed in the proposal, which pertains to all modes of transportation and sets infrastructure deployment targets.
The ReFuelEU Aviation proposal aims to reduce aviation's environmental footprint. Under the proposal, a required minimum share of sustainable aviation fuel (SAF) is to be provided by fuel suppliers to aircraft operators, starting from 2% in 2025 and gradually increasing to 63% by 2050.
Even though progress has been made in recent years, the maritime sector still relies heavily on fossil fuels and emits significant levels of greenhouse gases. With this proposal on the use of renewable and low-carbon fuels in marine transport (FuelEU maritime), the aim is to achieve a 75% reduction in greenhouse gas emissions from ships' onboard energy use by 2050, compared to 2020 levels.
A proposed revision to the renewable energy directive is included in the Fit for 55 package, which offers to increase the current EU-level renewable energy target of at least 32% to at least 40% by 2030. In addition, sectoral sub-targets and measures are proposed, focusing on industries where progress with integrating renewables has been slower, including transport, buildings, and industry.
As a first goal, the Commission seeks to revise the Council's directive on the taxation of energy products and electricity and align it with the EU's energy, environment, and climate policies. By updating the scope of energy products, the structure of rates, and the rationalization of the use of tax exemptions and reductions by member states. It also seeks to preserve and improve the EU internal market. Last but not least, the proposal aims to preserve the capacity to generate revenues for the budgets of the member states.
The Commission proposes that the current energy efficiency directive be revised by increasing the current target from 32.5% to 36% for final energy consumption and 39% for primary energy consumption at EU level by 2030.
Additionally, it outlined several provisions for member states to increase energy efficiency efforts, including an increased annual energy savings obligation, new rules to lower the energy consumption of public buildings, and targeted consumer protection measures.
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