Fit for 55: New European Climate Law

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Recently, the European Commission has announced a plan called ‘Fit for 55 Package’ for all its members against climate change.

About

• The deal aims to cut carbon emissions, achieve economic growth not tied to resource use and ensure no one is left behind.
• EU countries have set binding emission targets for key sectors of the economy to substantially reduce greenhouse gas emissions.
• By 2017, the EU had reduced its emissions by almost 22% compared to 1990, reaching its 2020 emission reduction target three years ahead of schedule.

Fit for 55 Package

• It will make the EU’s climate, energy, land use, transport and taxation policies fit for reducing net greenhouse gas emissions by at least 55% by 2030, compared to 1990 levels.
• These measures are the EU’s roadmap to achieve its target to reduce emissions by 55% by 2030, compared with 1990 levels.
• Its target is more aggressive than that of the United States, which committed to reducing emissions by 40% to 43% over the same period, but behind Britain, which pledged a 68% reduction.
• It includes a contentious plan called “Carbon Border Adjustment Mechanism” which would impose tariffs on imported products based on the greenhouse gas emissions associated with them.
  • The aim is to ease pressure on European producers that cut emissions but struggle to compete with importers that don’t have the same environmental restrictions.

Image Courtesy: BS

Implications

• On Goods and Services
  • The European Union’s plan to cut its greenhouse gas emissions by more than half by the end of the decade will touch almost every industry in the trade bloc.
  • This transition would be painstaking for some companies and customers due to the rise in the cost of a variety of goods and services.
• On Automobile sector
  • Automobile companies have announced plans to shift to electric vehicles, but many have resisted putting an expiration date on the fossil-fuel-powered vehicles, which still generate the most profits.
  • The European Commission plan would effectively require all new cars to be emissions-free by 2035, removing any flexibility for companies to continue selling some gasoline or diesel vehicles.
• On Airline Sector
  • The aircraft are major producers of carbon dioxide emissions but also difficult to convert to emission-free operation.
  • Under the new proposal, the airlines would be compelled to begin mixing synthetic fuel with the fossil fuels they now use, and they will no longer receive tax breaks on fossil fuels.
• On Energy Sector
  • The electricity producers will be pushed to speed up the switch to wind, solar and hydropower from coal.
  • The goal is to raise the figure for electricity generation by renewables to 40% by 2030, largely by increasing the penalty that utility companies pay for power generated by fossil fuels.
• On Heavy industry
  • The European Commission plan would raise the cost of polluting by tightening the European Trading System, which compels companies to effectively pay for the dangerous carbon dioxide they release into the environment. 
    • Anticipation of the changes has already helped drive up the price of credits by about 50%.
  • Steelmakers made concerns that the proposals could further erode their competitive advantage over producers in China and discourage the investment needed to shift to lower emissions.
• On Shipping Sector
  • The deal singles out companies that ship cargo by water, making them pay more for the emissions they generate to encourage their transition to cleaner energy. 
  • Most ships plying the seas today run on low-grade oil and are major polluters.

Source: IE