THE EU’S AMBITIOUS FITFOR55 CLIMATE INITIATIVE PASSES THE EU PARLIAMENT
Context: Last year, the EU Commission put forward a group of new laws and regulations, FitFor55, aiming to reduce emissions 55% by 2030 — particularly, reforms to its Emissions Trading System (ETS).
Currently: Some of the most important pieces of Europe’s highly publicized FitFor55 climate initiative passed the European Parliament in an second vote, including:
- the reform of the ETS
- the introduction of a carbon border tax
- and the establishment of a Social Climate Fund.
It is hoped that a new ETS, in particular, will help set a precedent for other regions to emulate.
Background: The ETS is Europe’s central tool to cut emissions and reach its climate targets. Today, certain industries that are deemed at risk of carbon leakage (cement, steel, chemicals etc.) receive free carbon emission allowances. They will have to invest in emissions reduction innovation and the EU ETS review now plans to shorten the timeline to phase-out free allowances. A new parliamentary compromise demands an end to CO2 emissions by 2032, while the EU Commission had originally proposed 2035.
The Carbon Border Adjustment Mechanism (CBAM) is supposed to build a level playing field and diminish the possibility of carbon leakages. It gives EU companies the chance to develop disruptive technologies and increases requirements for non-EU-suppliers.
The sectors proposed by the EU Commission for increased investment in innovation: aluminum, cement, fertilizer, electricity, iron and steel. The Parliament also added: hydrogen, ammonia, organic chemicals and polymers.
Timeline: The EU Parliament plenary voted in favor on June 22, and the EU Council agreed in its “general approach.” The “trilogues” between the EU Council, the EU Commission, and EU Parliament will now begin.
The ETS revision and CBAM could be adopted by the first half of 2023.
