What is the Fit-for-55?
Summary
The Fit for 55 package sets a roadmap for Europe to achieve a 55% reduction in carbon emissions by 2030, paving the way for carbon neutrality by 2050, primarily through updates to the EU Emissions Trading System (ETS) and the introduction of the Carbon Border Adjustment Mechanism (CBAM). This includes investing in green finance and responsible investing.
The 2030 milestone on the path to 2050 goals
The Fit for 55 package offers a roadmap for achieving 2030 climate targets, setting the stage for Europe to reach carbon neutrality by 2050.
The objective of all climate policies is to prevent global warming caused by carbon emissions from human activities. In turn, political commitments to fight climate change take the shape of specific carbon emissions reduction targets.
The European Green Deal declares that Europe will be carbon neutral by 2050. However, this long-term goal, established 31 years ahead of its target date, may have appeared too abstract and far in time to prompt immediate action.
This is where the Fit for 55 package comes in. It provides a more tangible path toward the 2050 climate neutrality goal by establishing an intermediate target for 2030. This legislative package not only outlines where Europe should be in terms of carbon emissions by 2030 but also specifies concrete steps to achieve these targets.
The 2030 Fit for 55 targets
The Fit for 55 package sets a clear target: a 55% reduction in carbon emissions across the European bloc by 2030 compared to 1990 levels. For sectors covered by the EU Emissions Trading System (EU ETS), the goal is a 62% reduction in carbon volumes compared to 2005 levels.
Ways to achieve the 2030 targets
To achieve these ambitious targets, the Fit for 55 package concentrates on several areas. It tackles questions like the adoption and integration of renewable energy sources, promotes sustainable land use, land change, and forestry practices, and advocates for the use of alternative, lower-emission fuels. However, the core strength and most valuable update brought about by the Fit for 55 package, are the updates related to the EU ETS.
The fundamental EU ETS changes by the Fit for 55
The EU ETS updates
The Fit for 55 package introduces several major updates to the already existing EU ETS:
- Scope expansion: The EU ETS now includes emissions from maritime transport. Also, there will be considerations to extend the ETS to cover all flights arriving at or departing from European territory.
- Faster reduction of allowances supply: There is a quicker pace of emissions allowances supply reduction, with a gradual phasing out of free allowances for most sectors.
- Increased funding for EU climate projects: There is more funding for the Modernisation Fund and Innovation Fund, which finance green projects using auction revenues from the EU ETS.
- Revision of the Market Stability Reserve (MSR): The reserve has been revised to ensure an even stronger market balance.
A new EU ETS to come
The package also introduces a new ETS specifically for buildings and road transport. This new scheme will operate alongside the existing EU ETS, featuring different pricing mechanisms and enhanced funds redistribution to protect the most vulnerable.
The Carbon Border Adjustment Mechanism (CBAM)
Perhaps the most significant aspect of the Fit for 55 package is the introduction of the Carbon Border Adjustment Mechanism (CBAM). The CBAM requires importers to pay for the carbon emissions associated with the production of goods outside the EU in order to fight against carbon leakage. This mechanism is designed to preserve European competitiveness while sending a strong international signal for the adoption of carbon pricing.
By setting clear intermediate 2030 targets and outlining specific measures, the Fit for 55 package ensures that Europe remains on track to meet its long-term climate goals.
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