The European Commission (EC) has presented a package of proposals dubbed "Fit for 55" to make the EU's climate, energy, land use, transport, and taxation policies fit for reducing net greenhouse gas (GHG) emissions by at least 55 percent by 2030, compared to 1990 levels."Europe was the first continent to declare to be climate neutral in 2050, and now we are the very first ones to put a concrete roadmap on the table," said Ursula von der Leyen, President of the European Commission.
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Achieving these emission reductions in the next decade is crucial to Europe becoming the world’s first climate-neutral continent by 2050 and making the European Green Deal a reality. With its proposals, the Commission says that it is presenting the legislative tools to deliver on the targets agreed in the European Climate Law and fundamentally transform the economy and society for a “fair, green, and prosperous future.”
A comprehensive and interconnected set of proposals
According to the European Commission, the adopted proposals will enable the necessary acceleration of greenhouse gas (GHG) emission reductions in the next decade.
They combine the application of emissions trading to new sectors and a tightening of the existing EU Emissions Trading System (ETS); increased use of renewable energy; greater energy efficiency; a faster roll-out of low emission transport modes and the infrastructure and fuels to support them; an alignment of taxation policies with the European Green Deal objectives; measures to prevent carbon leakage; and tools to preserve and grow natural carbon sinks.
The EU Emissions Trading System (ETS) puts a price on carbon and lowers the cap on emissions from certain economic sectors every year. It has successfully brought down emissions from power generation and energy-intensive industries by 42.8 percent in the past 16 years.
The Commission is proposing to lower the overall emission cap even further and increase its annual rate of reduction. The Commission is also proposing to phase out free emission allowances for aviation and align with the global Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) and include shipping emissions for the first time in the EU ETS.
To address the lack of emissions reductions in road transport and buildings, a separate new emissions trading system is set up for fuel distribution for road transport and buildings. The Commission also proposes to increase the size of the Innovation and Modernisation Funds.
To complement the substantial spending on climate in the EU budget, Member States should spend the entirety of their emissions trading revenues on climate and energy-related projects.
A dedicated part of the revenues from the new system for road transport and buildings should address the possible social impact on vulnerable households, micro-enterprises, and transport users.
The Effort Sharing Regulation assigns strengthened emissions reduction targets to each Member State for buildings, road and domestic maritime transport, agriculture, waste, and small industries. Recognizing the different starting points and capacities of each Member State, these targets are based on their GDP per capita, with adjustments made to take cost-efficiency into account.
Improve forest quality, quantity, and resilience
Member States also share responsibility for removing carbon from the atmosphere, so the Regulation on Land Use, Forestry and Agriculture sets an overall EU target for carbon removals by natural sinks, equivalent to 310 million tonnes of carbon dioxide (CO2) emissions by 2030.
National targets will require Member States to care for and expand their carbon sinks to meet this target. By 2035, the EU should aim to reach climate neutrality in the land use, forestry, and agriculture sectors, including also agricultural non-CO2 emissions, such as those from fertilizer use and livestock.
The EU Forest Strategy aims to improve the quality, quantity, and resilience of EU forests. It supports foresters and the forest-based bioeconomy while keeping harvesting and biomass use sustainable, preserving biodiversity, and setting out a plan to plant three billion trees across Europe by 2030.
Energy production and use account for 75 percent of EU emissions, so accelerating the transition to greener energy systems is crucial. The Renewable Energy Directive will set an increased target to produce 40 percent of energy from renewable sources by 2030.
All Member States will contribute to this goal, and specific targets are proposed for renewable energy use in transport, heating and cooling, buildings, and industry. To meet both climate and environmental goals, sustainability criteria for the use of bioenergy are strengthened and Member States must design any support schemes for bioenergy in a way that respects the cascading principle of uses for woody biomass.
To reduce overall energy use, cut emissions and tackle energy poverty, the Energy Efficiency Directive will set a more ambitious binding annual target for reducing energy use at the EU level.
It will guide how national contributions are established and almost double the annual energy saving obligation for Member States. The public sector will be required to renovate 3 percent of its buildings each year to drive the renovation wave, create jobs and bring down energy use and costs to the taxpayer.
Zero-emission vehicles from 2035
A combination of measures is required to tackle rising emissions in road transport to complement emissions trading. Stronger CO2 emissions standards for cars and vans will accelerate the transition to zero-emission mobility by requiring the average emissions of new cars to come down by 55 percent from 2030 and 100 percent from 2035 compared to 2021 levels.
As a result, all new cars registered as of 2035 will be zero-emission. To ensure that drivers are able to charge or fuel their vehicles at a reliable network across Europe, the revised Alternative Fuels Infrastructure Regulation will require Member States to expand charging capacity in line with zero-emission car sales and to install charging and fuelling points at regular intervals on major highways: every 60 kilometres for electric charging and every 150 kilometres for hydrogen refueling.
Aviation and maritime fuels cause significant pollution and also require dedicated action to complement emissions trading. The Alternative Fuels Infrastructure Regulation requires that aircraft and ships have access to clean electricity supply in major ports and airports.
The ReFuelEU Aviation Initiative will oblige fuel suppliers to blend increasing levels of sustainable aviation fuels (SAF) in jet fuel taken on-board at EU airports, including synthetic low carbon fuels, known as e-fuels.
Similarly, the FuelEU Maritime Initiative will stimulate the uptake of sustainable maritime fuels and zero-emission technologies by setting a maximum limit on the greenhouse gas content of energy used by ships calling at European ports.
Revised energy taxation
The tax system for energy products must safeguard and improve the Single Market and support the green transition by setting the right incentives. A revision of the Energy Taxation Directive proposes to align the taxation of energy products with EU energy and climate policies, promoting clean technologies and removing outdated exemptions, and reduced rates that currently encourage the use of fossil fuels.
The new rules are aimed at reducing the harmful effects of energy tax competition, helping secure revenues for Member States from green taxes, which are less detrimental to growth than taxes on labour.
Finally, a new Carbon Border Adjustment Mechanism (CBAM) will put a carbon price on imports of a targeted selection of products to ensure that ambitious climate action in Europe does not lead to ‘carbon leakage’.
This will ensure that European emission reductions contribute to a global emissions decline, instead of pushing carbon-intensive production outside Europe. It also aims to encourage industries outside the EU and international partners to take steps in the same direction.
New Social Climate Fund
While in the medium- to long-term, the benefits of EU climate policies clearly outweigh the costs of this transition, the Commission notes that climate policies risk putting extra pressure on vulnerable households, micro-enterprises, and transport users in the short run.
The design of the policies in today’s package therefore fairly spreads the costs of tackling and adapting to climate change. In addition, carbon pricing instruments raise revenues that can be reinvested to spur innovation, economic growth, and investments in clean technologies.
A new Social Climate Fund is proposed to provide dedicated funding to Member States to help citizens finance investments in energy efficiency, new heating, and cooling systems, and cleaner mobility.
The Social Climate Fund would be financed by the EU budget, using an amount equivalent to 25% of the expected revenues of emissions trading for building and road transport fuels.
It will provide EUR 72.2 billion of funding to Member States, for the period 2025-2032, based on a targeted amendment to the multiannual financial framework. With a proposal to draw on matching Member State funding, the Fund would mobilize EUR 144.4 billion for a socially fair transition.
