On 14 July, the European Commission adopted the climate change package Fit for 55. The primary goal of the package is to reduce greenhouse gas emissions by at least 55% compared to 1990 levels by 2030, and transforming Europe into the world’s first climate-neutral continent by 2050.
The Package contains a number of legislative proposals, including:
- Changes to the ETS (EU’s CO2 emissions trading system) and an even faster reduction of the pool of emission allowances. The linear reduction factor is set to be nearly doubled from 2.2 to 4.2 percent.
- Phasing out free emissions allowances for aviation and include shipping emissions in the ETS.
- Reduction of pool of free CO2 emission allowances. The annual reduction rate will increase from 1.6 to 2.5 percent, and obtaining them will depend on taking actions towards decarbonisation, which will be measured by the meeting targets set in energy audits.
- A new system for compensating businesses for indirect costs, conditional on achieving targets identified in energy audits.
- All (instead of previous half) of the ETS income collected by member states of the EU is to be used for climate projects (also in the form of compensation for the most affected micro-enterprises, households and transport users).
- Extension of the ETS system to include fuels used for combustion in the construction and road transport sectors.
- A new ETS-linked carbon duty system - CBAM covering imports from outside of the EU. In principle EU importers will have to purchase so-called “carbon certificates”. The idea is for the price of the “carbon certificates” tol correspond to the price of producing the imported goods in the EU. The price of the certificates will relate to the amount of greenhouse gases emitted during production and will be calculated depending on the auction price of ETS allowances. More information on the goods covered by the CBAM and the effective dates of these regulations in our previous article.
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