steel furnace

EU aims to lead climate efforts with ‘Fit for 55’ package

Image credit: DT

This week, the EU will announce a raft of ambitious policies which aim to cut emissions by 55 per cent from 1990 levels before 2030 across the bloc, including with a tariff on imported carbon-intensive goods.

The package of measures, which have been dubbed the 'Fit for 55' policies, will face many months of negotiations between the European Parliament and heads of the 27 member states.

The measures are among the most ambitious, aiming to more than halve emissions in the medium-term (by the end of the decade) rather than looking ahead to 2040, 2050 or even further to meet decarbonisation targets. By 2019, the EU had cut its emissions by 24 per cent from 1990 levels.

“Everybody has a target, but translating it into policies that lead to real emissions reductions, that’s the most difficult part,” said Jos Delbeke, a policymaker who was involved with developing some of the EU’s flagship climate measures.

In addition to electricity generation – which is already cutting emissions quickly – the 12 Fit for 55 policies will cover carbon-intensive areas such as heating (buildings produce a third of EU emissions) and transport (cars, aircraft and ships produce a quarter of emissions across the bloc). The extensive measures will encourage the bloc’s tens of millions of companies and hundreds of millions of consumers to choose greener options.

For instance, one leaked proposal seeks to place a levy on high-carbon jet fuel for the first time, while granting low-carbon alternatives a 10-year tax break. Stricter emissions standards could force rapid changes for entire industries; for instance, tougher emissions rules for cars could effectively ban sales of new cars with internal combustion engines by 2035.

“The Commission needs to basically wake up and smell the coffee, that now is the time to actually cement that into legislation,” an EU diplomat told Reuters, commenting on the potential proposal to ban sales of new combustion engine cars by 2035.

The European Commission is expected to reconfigure its flagship carbon trade scheme to cover transport and home heating, potentially raising household fuel bills. It has promised to establish a fund to shield low-income households from bearing the burden of these costs and is encouraging member states to make use of its €800bn Covid-19 recovery fund to help low-income households insulate their homes and to stimulate job creation in green industries such as hydrogen.

The proposals would also incentivise the private sector to invest in the development of green technologies with a high upfront cost, such as carbon capture and low-carbon steelmaking. The scheme is also expected to include a new forest strategy.

Perhaps most ambitiously, it would create the first carbon border tariff, targeting import of goods produced outside the EU with high emissions, such as cement, iron, steel, aluminium and fertiliser. This would target "carbon leakage": the relocation of European firms to countries with looser climate standards in pursuit of savings. This “carbon border adjustment mechanism” would apply from 2026 following a trial period from 2023, leaked documents revealed.

The ambitious proposal could cause friction between the EU and its largest trading partners (the US, China and Russia) and some industry bodies are readying themselves for a fight over the tariff, stating already that they do not want to be included in the scheme.

Commenting previously on the Fit for 55 measures, European Commission President Ursula von der Leyen said: “The 2020s is the make-or-break decade and that’s why Europe has committed to reduce our emissions by at least 55 per cent by 2030 compared to 1990 levels.”

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