Climate Change

EU’s new climate proposal is vast. But is it transformational?

Economy-wide package of creative proposals may or may not bring fundamental changes that wealthy countries must implement to halt climate crisis

By Avantika Goswami
Published: Thursday 15 July 2021

The European Commission July 14, 2021 released the Fit for 55 package of climate and energy proposals.

The European Union (EU) in December 2020 submitted a revised Nationally Determined Contribution (NDC) under the Paris Agreement: Of reducing greenhouse gas emissions by 55 per cent below 1990 levels by 2030. It also set a long-term goal of achieving carbon neutrality by 2050.

A set of strong sectoral emission reduction targets or pathways to achieve the new NDC, however, was lacking. The Fit for 55 package of climate and energy proposals released by the European Commission on July 14, 2021 has attempted to address that.

It includes a new emissions trading system for transport and buildings, a ban on the sale of polluting cars from 2035 and a carbon border price on imported goods.

The new package attempts to deliver the NDC and carbon neutrality goal through proposed changes that would impact the economy, society and industry, as well as ensure “a fair, competitive and green transition by 2030 and beyond”. It claims to achieve a balance between “regulatory policies” and market-based carbon pricing to avoid the pitfalls of each.

Of the former, it proposes to increase the binding target of renewable sources in the EU’s energy mix to 40 per cent (compared to the earlier goal of 32 per cent) and improve energy efficiency by 36 per cent (compared to 32.5 per cent earlier) by 2030.

Vehicular carbon emissions must be cut by 55 per cent by 2030 and by 100 per cent by 2035, which means a phaseout of petrol and diesel vehicles by 2035.

Of the latter, it calls for the creation of an emissions trading system (ETS) for buildings and road transport, separate from the EU’s current ETS, to become operational from 2026.

The EU has had success in reducing emissions from sectors such as energy and industry; however, sectors such as transportation, particularly domestic transport, have seen emissions rise drastically. This is a worldwide trend in developed nations due to extensive private vehicle usage.

2019 GHG Emissions for EU-27 Percentage change since 1990
Domestic transport 24.17%
Energy supply -39.23%
Industry -35.78%

Data collation: Avantika Goswami. Source: GHG data from the European Environment Agency

To help low-income citizens and small businesses adjust to the new ETS, the EU proposes the creation of a Social Climate Fund, which will take various forms ranging from funding for renovation of buildings, and access to low carbon transport, to direct income support.

They expect to build up this fund using 25 per cent of revenues from the new ETS. The current ETS is proposed to extend to the maritime sector between 2023 and 2025.

Among other market-based mechanisms, the EC is proposing a carbon-border adjustment mechanism, which will put a price on imports from places that have carbon-intensive production processes. This instrument has been deemed to have a small impact on global carbon dioxide emissions by the United Nations Conference on Trade and Development, and could instead have negative impacts on developing countries.

Its updated NDC, submitted December 2020, was criticised for counting carbon removals from natural sinks. In response, the EU clarified that 52.8 per cent of the 55 per cent goal would be attributed to actual emissions reductions, ie, excluding the land use, land-use change and forestry sector and that carbon removal from natural sinks would be capped at 225 million CO2 equivalent.

The new package has set a target to enhance the EU’s sink capacity to 310 million tonnes of CO2 equivalent, which they hope will be achieved through specific national targets by member countries. Notably, bioenergy is still clubbed under renewable energy, despite widespread criticism that it is inherently unsustainable, and the EU hopes to address this by simply strengthening the “sustainability criteria” for bioenergy such as expanding no-go areas for sourcing.

While the economy-wide coverage and multilateral nature of the Fit for 55 package are unprecedented, many of the measures fall back on the incremental and moderate approach to emissions reduction via measures such as emissions trading and carbon taxes.

This is when the changes needed by wealthy nations need to be drastic, with rapid decarbonisation of their economies and curtailing of their societal consumption levels.

As a June 2021 discussion paper by the Delhi-based Centre of Science and Environment (CSE) showed, in 2019, the EU had reduced its CO2 emissions by 25 per cent since 1990. Its emissions peaked in 2005, and in 2019 it contributed 8 per cent of world CO2 emissions.

Yet historically, it is responsible for 17 per cent of the world’s carbon emissions since 1900, making it one of the major historical contributors to the climate crisis.

Activist Greta Thunberg said that the EU must “tear up their new #Fitfor55 package”, while Friends of the Earth Europe commented that the new ETS “could push millions more Europeans into energy poverty” despite the miniscule funding support planned via the Social Climate Fund.

The package will now be followed by extensive negotiations among the EU member states to adopt its proposals as law in each country. Pushback can be expected from sectors that could be impacted such as industry, and citizen groups who may fear a hike in prices such as fuel and energy costs.

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