What Is the “Fit for 55” Legislative Package?

Fit for 55 is the EU’s climate package implementing the Green Deal, aiming for 55% emissions reduction by 2030 compared to 1990 levels.
It combines reforms of the EU ETS, the upcoming ETS2 (covering buildings and road transport), the CBAM/Carbon Border Adjustment Mechanism, renewable energy and efficiency targets, and sector-specific measures. This guide explains the key measures, timeline, and impacts.

Fit for 55: Simple Definition and Green Deal Context

Fit for 55 is the set of laws under the European Green Deal that makes operational the EU’s target to reduce net greenhouse gas emissions by 55% by 2030.

It is not just a statement of intent. It’s a comprehensive climate package of 13 legislative proposals (new and revised) touching every sector of the economy. Its goal is to reshape EU climate, energy, and transport laws, paving the way for carbon neutrality by 2050.

Key components include:

• Major reforms of the carbon market (EU ETS)
• Creation of a second ETS market (ETS2) for buildings and road transport
• The Carbon Border Adjustment Mechanism (CBAM/MACF)
• Ambitious rules on renewable energy (RED), energy efficiency (EED), sustainable mobility (AFIR), and carbon sinks (LULUCF)

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Key Measures in the Climate Package

The Fit for 55 package is extensive. Here’s a summary of the main measures, objectives, and affected sectors:

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[For official details, see the European Commission and Council pages.]

How Carbon Prices Are Formed in ETS and ETS2

ETS1 (Industry & Power)

Carbon prices on the ETS/ EU ETS market are fully market-driven, determined by supply and demand:

• Supply: Set by the EU as a declining cap of emission allowances. Fit for 55 accelerates this decline. The Market Stability Reserve (MSR) also adjusts supply to avoid surpluses.
• Demand: Comes from energy producers and industrial companies needing allowances for their emissions. It depends on economic activity, weather (e.g., a cold winter), and low-carbon technology costs.

By reducing supply faster, Fit for 55 is designed to push carbon prices higher in the medium and long term, reinforcing the incentive to invest in decarbonization.

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ETS2 (Buildings & Road Transport)

ETS2 will work similarly (cap & price) but upstream, targeting fuel suppliers for heating and transport.
To protect vulnerable households, a Social Climate Fund will be financed from ETS2 revenues. A price stabilization mechanism is planned if ETS2 allowances exceed €45.

[-> Read our detailed EU ETS carbon market analysis]

Timeline of Fit for 55 (Key Milestones)

Fit for 55 is deployed gradually to allow sectors to adapt. Most texts were adopted between 2023 and 2024, with ETS2 launching in 2027 (possibly 2028). Key milestones include:

• CBAM transitional phase: October 2023
• Gradual removal of free ETS allowances for CBAM sectors: 2026–2034
• Achieve 55% emission reduction by 2030, in preparation for net-zero by 2050

Impacts on Businesses, Households, and Investors

Impact on Companies

• Carbon-intensive industries: ETS ceilings decrease rapidly, raising carbon costs. Gradual removal of free allowances between 2026–2034 forces full carbon cost integration.
• SMEs & energy suppliers: ETS2 requires fuel suppliers to purchase allowances from 2027, increasing operational costs for gas/oil heating and transport-intensive businesses.
• Importers: CBAM introduces new reporting obligations and the need to purchase certificates aligned with the EU carbon price.
• Investment opportunities: Decarbonization technologies, renewables, energy efficiency, electric mobility, green hydrogen, carbon capture, and circular economy solutions.

Impact on Households

• Energy bills: ETS2 will directly affect heating and fuel costs. A typical family could see an annual increase of €150–€200 from 2027.
• Social Climate Fund: Around €65B (2026–2032), supplemented by member states, will support vulnerable households and micro-enterprises with energy renovation, EV subsidies, and direct compensation.
• Air quality & health: Reduced GHG emissions improve long-term air quality and public health.

Impact on Investors

Fit for 55 reshapes European investments:

• Creates a regulatory tailwind for green technologies
• Increases risk for carbon-intensive assets
• Investors should factor carbon pricing into valuations and prioritize companies aligned with 2030 decarbonization pathways
• Key sectors: renewables, energy efficiency, sustainable mobility, circular economy, green hydrogen, carbon capture technologies

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Fit for 55 FAQ

Q: What is Fit for 55?
A: It’s the EU legislative package implementing the Green Deal, targeting a 55% emissions reduction by 2030.

Q: What are its main measures?
A: ETS reform, ETS2, CBAM/MACF, ESR, LULUCF, RED/EED, AFIR, ReFuelEU Aviation, FuelEU Maritime.

Q: How does it differ from the Green Deal?
A: The Green Deal is the EU’s overall climate strategy for carbon neutrality by 2050. Fit for 55 is the concrete set of laws implementing the 2030 target.

Q: What is ETS2?
A: A second carbon market covering buildings and road transport, upstream on fuel suppliers, starting 2027.

Q: What is CBAM/MACF?
A: The Carbon Border Adjustment Mechanism prices carbon on certain imports to prevent carbon leakage and ensure fair competition for EU producers. Covered sectors: cement, steel, aluminum, fertilizers, electricity, hydrogen.

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