EU Unveils Detailed Plans to Go Carbon Neutral

Copyright © 2021 Energy Intelligence Group

The European Union has unveiled detailed energy, climate and tax proposals to ensure the 27-nation bloc more than halves its greenhouse gas emissions by 2030 so that it can attain carbon neutrality by 2050. Many of the main proposals had been leaked in advance and much of the new information presented on Wednesday consisted of details of how the proposals would work in practice and how they would be funded (IOD Jul.12'21). There was a particular emphasis on providing financial help to the EU's poorest citizens, to offset the impact of higher energy costs once the EU finalizes its rules for reducing greenhouse gas emissions. European Commission President Ursula von der Leyen said the package of proposals includes the creation of a new Social Climate Fund for that purpose which would amount to €144 billion (170 billion) for 2025-32. The "Fit for 55" package she presented with Commission Vice President Frans Timmermans is named after its goal of reducing emissions 55% from 1990 levels by 2030 in support of attaining net-zero emissions by 2050. 40% Renewables Target The commission -- the EU's executive body -- has proposed that renewables should meet 40% of the bloc's final energy demand by 2030, compared with 32% today. Energy Commissioner Kadri Simson said the share of renewables in the EU's energy mix has already hit 33% and that it is "time to raise the bar." All member states will contribute to this goal, and specific targets are proposed for the use of renewables in transport, heating and cooling, buildings and industry. Concerns about the sustainability of using large amounts of biomass have been addressed by proposing tighter rules for feedstocks, which emphasize the use of waste or residual products rather than trees. Aviation Emissions The commission has proposed a revision of the bloc's Energy Taxation Directive to promote clean energy technologies and stop favoring the use of fossil fuels. Among other things, this would end the current tax exemption for aviation fuel. It has also proposed a phasing out of free emissions allowances for the aviation sector under the EU's Emissions Trading System (ETS), and it wants to require suppliers to blend increasing levels of sustainable aviation fuel (SAF) into jet fuel. Auto and Shipping Emissions Brussels plans to set up a separate emissions trading scheme for the road transport sector and buildings, both of which are not currently covered by the ETS. It has also called for a 55% reduction in the average tailpipe carbon dioxide emissions of new cars and vans by 2030 (from 95g/km in 2020) and a reduction of 100% from 2035. That is generally understood to mean that cars and vans running on gasoline and diesel will no longer be sold in the EU after 2035. The commission has proposed that there should be fast-chargers for electric vehicles every 60 kilometers along major highways and a hydrogen-refueling station every 150 kilometers (IOD Jul.6'21). The package also calls for the shipping sector to be brought into the ETS and includes a plan to stimulate the uptake of sustainable fuels and zero-emission technologies in maritime transport. Emissions Trading System The commission is proposing to strengthen the bloc's ETS cap-and-trade system for carbon emissions, which Timmermans said "is front and center to all our efforts." It has advocated lowering the overall cap and stepping up the rate at which it is decreased each year. The maritime sector would be brought into the existing ETS, while a similar system would be created for the road transport and building sectors. Carbon Border Tax A carbon border adjustment mechanism -- or a carbon border tax -- is planned that would be compliant with World Trade Organization (WTO) rules. It would be introduced in phases. The aim is to make sure that EU manufacturers are not undercut by competitors in other countries that make the same goods but are not subject to the EU's strict emissions regulations -- a phenomenon known as "carbon leakage." At first the border tax would apply only to iron and steel, cement, fertilizers, aluminum and electricity. But it would gradually be extended to other products. Reporting requirements would start in 2023 to ensure a "smooth rollout and to facilitate dialogue with third countries." Importers would have to start paying the tax from 2026. Forests and Sinks Under rules governing land use and forestry, the commission proposes setting an overall EU target for carbon removal via natural sinks at 310 million tons of carbon dioxide equivalent by 2030, with national targets put in place to achieve this. Recognition of the role to be played by carbon sinks will be welcome news to European oil and gas majors, which intend to use carbon sinks as part of their energy transition plans (IOD Dec.16'20). The commission's package calls for the planting of three billion trees in the EU by 2030. Response to the Plans The EU proposals drew a mixed response. The CEO Alliance, a group of energy sector CEOs, voiced broad support, saying "carbon should have a price across the whole economy." The EPEE, an association that represents Europe's heating and cooling sector, described the package as a "golden opportunity" to upgrade heating and cooling equipment to make it friendlier for the environment. However, Airlines for Europe said the proposed policies "risk affecting the competitiveness of the aviation sector." And organizations representing the cement and steel sectors said the proposals could make it more expensive and difficult for their industries to decarbonize. They also expressed concerns that the proposals would not fully address the problem of carbon leakage. What Comes Next Now the commission has presented its proposals, negotiations will start between the commission, leaders of the various EU nations and the European Parliament to finalize the rules and amendments that will be adopted. Jay Eden, London

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