19 December 2022 - Over the weekend, the European institutions reached a provisional agreement on the key files under the Fit for 55 Package. These colossal, agreed pieces of legislation aim to regulate the EU’s Emission Trading Scheme (ETS), its global dimension (Carbon Border Adjustment Mechanism - CBAM), extension to buildings and road transport (ETS 2), as well as on the Social Climate Fund (SCF) which aims to support vulnerable households and micro-businesses with the price impacts of an emissions trading system for the buildings and road transport and fuels for additional sectors.
The final agreement slightly increases the ambition level of EU ETS, encourages Member States to use all ETS revenues for climate action and increases the size of Innovation Fund. Additionally, the final agreement enables phasing out free allowances by 2034, one year earlier than the Commission proposal – yet 2 years later that the European Parliament’s position-.
Ursula Woodburn, Head of EU Relations, CLG Europe said: “Scaling up climate action is essential to deliver a secure, prosperous EU. This agreement goes some way to providing the long-term certainty that will support businesses to decarbonise. In this sense, the agreed climate legislation of the Fit for 55 Package is critical to decarbonising European industry and giving clear policy direction to the economy.
Besides the slight increase of the overall ambition of the package, we welcome the coherence between EU ETS free allowance phase out dates and CBAM. It was clear that the free allowances cannot continue in their current form if the EU is to meet its 2030 and 2050 emissions reduction objectives and should be phased out as fast as possible for those sectors which do not face low-carbon competition from overseas on a large scale. In this regard, it is also an important step that the new legislation includes a conditionality clause that encourages companies that belong to the 20% worst performers need to develop climate-neutrality plans.
Now, it is time to focus on the implementation of these legislations. This should go hand in hand with measures aimed at enabling a competitive, frontrunning and climate neutral industry. The legislation on the EU ETS should not be seen as the only way to achieve the EU’s targets and must be complemented by initiatives aimed at developing lead markets for innovative, climate neutral materials.”
CLG Europe’s recent report Context is everything: Insights and lessons for successfully delivering the European Green Deal looks into the implementation of the EU’s new climate and energy targets under the Fit for 55 Package. It shows how targeted policies and financial measures to implement the EU’s climate and energy targets could instigate change that can have broader societal co-benefits.
Commenting on the implementation of the EU’s climate targets, Sanna Markkanen, CISL’s Research Programme Lead and head author of the report said: “It is an important step that the size of the Social Climate Fund is increased compared to the Council position and there are safeguards put in place to protect the most vulnerable households and small businesses. However, questions remain about how fairly Member States will receive and distribute these funds.
Our recent “Context is Everything” report shows that financial schemes that allow a certain degree of flexibility at Member States, regional and local levels with a clear targeted approach addressing the key challenges at the local level generally achieve best outcomes. This means a key step should be to engage those who will be most affected by ETS2 in the design of the financial support schemes.”
