European Union Has Ambitious Carbon Policies: An Overview of Fit for 55 Package, Other Initiatives
The European Union (EU) has bold plans to address climate change and promote sustainability in business, including the Fit for 55 Package and other key initiatives.
Dating back to the 1990s and early 2000s, the EU has been at the forefront of addressing climate change. However, the current goal of achieving climate neutrality by 2050 was formalized in the Green Deal of 2019, with details provided in the Fit for 55 Package.
European Trading Scheme
One of the EU’s flagship programs, the European Trading Scheme (ETS), was instrumental in significantly reducing greenhouse gas emissions. Under the ETS, energy-intensive industries were mandated to gradually reduce emissions each year through ETS allowances. However, criticisms arose regarding the distribution of free allowances, which were provided to industries at risk of carbon leakage. This led to some industrial sectors being left outside the ETS, creating a debate about the effectiveness of this approach.
Fit for 55 Package
The Fit for 55 Package is a comprehensive set of regulations, directives, and reforms aimed at rectifying past mistakes and advancing the EU’s climate ambitions. Its primary goal is to achieve carbon neutrality by 2050. This package covers around 15 different regulations and introduces deep reforms to the ETS, widening its scope to include sectors such as aviation and maritime.
Implementing CBAM and Reporting Requirements
One significant change within the Fit for 55 Package is the Clean Border Adjustment Mechanism (CBAM), which replaces free allowances. CBAM places a carbon price on imported products from third countries to ensure that the EU imports goods with the same climate impact as domestically produced ones. The CBAM regulation entered into force in May, with a transitional phase for reporting and monitoring from October until the end of 2025.
In the initial phase, economic operators can choose between the EU method or the method used in their country of origin. However, they must prove the reliability of the chosen methodology. From 2025 onwards, the EU method will become mandatory.
The Net 0 Industry Act
The Net 0 Industry Act is a policy aimed at attracting industry to the EU. It cannot be directly compared to the U.S.’s Inflation Reduction Act due to the EU’s decentralized nature. The EU relies on soft measures like coordination, fund access, and permitting processes, while Member States play a vital role in creating favorable taxation schemes and energy transition plans.
Biofuels and the Renewable Energy Directive
The EU has set targets for the share of land-based biofuels, reducing it to 0 percent by 2030. Additionally, the use of advanced feedstocks that do not require land cultivation is encouraged. The EU’s policies on biofuels are part of a broader effort to transition to more sustainable alternatives.
Overlapping Policies
Lastly, the Renewable Energy Directive (RED) and the ETS programs. The EU is working on aligning these policies, which will be further consolidated with the introduction of the cap-and-trade system for transportation fuels.
Key Takeaways
In conclusion, here are a few takeaways:
- The EU is implementing a comprehensive climate and energy package with ambitious goals
- CBAM is a central component of this package, aiming to ensure imported products meet EU climate standards
- The Net 0 Industry Act reflects the EU’s efforts to attract sustainable industries
- Biofuels are evolving in the EU, with a shift towards advanced feedstocks and reduced reliance on land-based options
- Policies like RED and ETS are becoming more interconnected as the EU strives for greater policy coherence
Businesses aiming to operate in or export to the EU should stay informed about these multifaceted policies and their implications for sustainability and compliance. As the EU continues to lead in climate action, understanding its evolving regulatory landscape is crucial for sustainable business strategies.
For more information about EU climate policies and programs, please contact Urszula Szalkowska at uszalkowska@ecoengineers.us.
Urszula Szalkowska is based in Poland and is the managing director and senior consultant, Europe for EcoEngineers.
