A post by Julia Teebken and Klaus Jacob (Environmental Policy Research Centre, Freie Universität Berlin)*
In the lead up to the next global climate summit in Glasgow in November 2021, the EU’s “Fit for 55” policy package is the talk of the town. The package is a set of legislative proposals, which presents the EU’s pathway of reducing its net greenhouse gas emissions to “at least 55%” by 2030 and achieving climate neutrality by 2050. The package is considered a revision of the current 2030 Climate and Energy framework, which was rated insufficient, as it would project only a 60% emissions reduction by 2050 (for more information, see the European Parliament’s “Legislative train schedule”).
Increasing the ambition of emissions reductions and related policy efforts are important for keeping global warming to “well below 2°C” and, if possible, to 1.5°C as foreseen in the 2015 Paris agreement. The EU has played a key role in raising global ambitions in climate policy by taking leadership on this matter and constantly adjusting its own policy parameters. The Fit for 55 package is yet another example of how the EU intends to advance the climate agenda at home and abroad: The package includes an ambitious set of revised climate policies, which will have very tangible implications for different levels of governance and government across the globe.
Within the EU, the package sends clear and concrete signals: For instance, the Revision of the Energy Taxation Directive shifts taxation to polluting industries by proposing to tax fuels according to their energy content and CO2 emissions. Additionally, the Revision of the Energy Efficiency Directive will zoom in on sectors with high energy-saving potentials (heating and cooling, industry and energy services). As a result, emissions from buildings will become a top area of concern, likely increasing energy efficiency investments in this context and encouraging the renovation of buildings. The legislative revision expects the public sector to lead by example. Thus, looking at how different actors in the public sector, such as the political administration and governmental agencies, are adjusting may have some insights to offer for an adjusted renewable energy performance in the buildings sector.
Another building block of the package is the revision of the EU Emissions Trading Scheme (EU ETS). The EU ETS would be extended to include emissions from shipping and aviation. The free allocation of certificates for energy-intensive materials such as steel, aluminium or cement is to be phased out. This will be made possible without impeding competitiveness of European industries by introducing a carbon border tax adjustment (CBAM): imports of selected carbon intensive goods from non-European countries without comparable carbon pricing will be charged. In addition, a separate emissions trading scheme is to be established for buildings and road transport to provide further incentives for efficient forms of mobility and for increasing efficiency of buildings. By putting a price on emissions from road transport and buildings, it will directly impact European citizens. Existing national schemes covering introduced by countries including Germany and Austria to cover the emissions of these sectors are likely to be replaced by the envisaged European approach.
In the upcoming years, the European Council and the European Parliament will negotiate over the adoption of the package. In the Council unanimity is required for taxation-related directives. All of these legislative revisions will likely trigger new legislation in EU Member States and potentially rekindle some of the old conflicts between different Member States groupings. For example, the Central European Times recently reported that Hungary is skeptical towards the approach. Against the background of Hungary’s flourishing car industry, one main issue of contestation is the introduction of ETS for transport and buildings, and the proposal of having to cut CO2 emissions from new cars to zero by 2035. At the same time, Hungary plays a central role in the Viségrad Group of Four, which has historically impeded more ambitious climate policy efforts of the EU.
Creating mechanisms so that the costs are not rolled off to the residents and Member States with lower capacity will be key for guaranteeing a socially just transition. The creation of the Social Climate Fund is a cornerstone of the Fit for 55 package to help EU citizens and Member States meet the social and economic costs of the climate and energy transition. Whether it will be enough to counter internal EU frictions remains to be seen.
When looking at the global governance landscape, several external effects of the Fit for 55 package are to be expected: in terms of policy transfer and emulation, other global governance actors like China, India and the United States are likely to follow closely how the EU is implementing this legislation. These countries are also legally committed to level up their ambitions within the Paris agreement. Non-EU trading partners will be directly affected by the above-mentioned border tax adjustment (CBAM) and will be encouraged to introduce carbon pricing on their own to avoid taxation of their industries. However, CBAM also carries some risks, such as heightened geopolitical tensions with actors such as China, and a revival of old dichotomies, e.g., disadvantages for imports from developing countries.
Aside from having to address these challenges related to the EU’s internal and external cohesion, the EU’s Fit for 55 package also demonstrates its desire of sticking to certain ethical and global governance principles. Diverting the costs to polluting industries is in line with the Polluter Pays Principle, which refers to the practice of bearing the costs when managing or preventing damage to human health or the environment. The idea of creating a Social Fund reminds of the principle of Common But Differentiated Responsibilities (CBDR) as set forth under the United Framework Convention on Climate Change (UNFCCC). CBDR acknowledges all states have a shared obligation but carry different responsibilities. The EU played a key role in pushing a dynamic interpretation of the CBDR principle and “respective capabilities” add-on as part of the Paris Agreement and mobilizing international climate finance. Although the EU has undertaken several efforts for enabling a socially just transition, at home and abroad, it is also well-advised confronting its shortcomings.
Despite being the biggest legislation package the EU has ever seen, the Fit for 55 package is not yet consistent with the 1.5°C temperature limit (also see the overall rating of the EU by the Climate Action Tracker). Yet, it provides a solid basis from which more ambitious policy efforts can be taken, which matters not just in terms of the warming target, but also in terms of cohesion and the EU taking on a fairer share in light of its historically high emissions when compared to other global governance actors.
*Both are members of the research team of the Horizon 2020 TRIGGER project (TRends In Global Governance and Europe’s Role).
The views and opinions expressed in this post are solely those of the author(s) and do not reflect those of the editors of the blog of the project LIFE DICET.