‘Fit For 55’ – Tightening and broadening to meet Paris Climate Goals
The EU is going for a 55% reduction in its CO2e emissions by 2030 and presents their plan, ‘Fit for 55’, with measures on how this should be achieved. These are mainly about tightening and broadening existing policies, less free emission allowances and (new) obligations. We welcome the fact that ‘the climate’ is thus more embedded in policy and will therefore have a driving effect at national and company level to anchor the limitation of our impact on the climate in policies, strategies, reduction, and our daily behaviour!
What does this mean for the mandatory carbon market?
For large industry, which are covered by current EU ETS, this means that by 2030, its emissions must have reduced by 61% compared to 2005. Before this tightening, it was only 43%. Furthermore, free rights and surplus will be phased out at an accelerated rate within EU ETS. This will be filled in more concretely soon.
There will be a new, separate ETS in addition to the existing EU ETS for the transport sector and built environment, for companies that bring fuel and heat to the market, for the so-called ‘upstream’ scope 3 emissions. This means, for example, Shell, which already participates in EU ETS for its production, oil refineries, now must participate in the new ‘Transport/Building ETS’ system for their division that deliver fuels to the pump. This means that there will be many new entrants who must buy allowances for their scope 3 emissions. Moreover, no allowances will be given away free of charge in this new system. The aviation sector will also receive fewer rights for free. The intra-EU shipping sector, and 50% of international shipping will also have to deal with this. And the use of biomass will be taxed more heavily.
What does this mean for non-(EU) ETS companies?
For companies other than those mentioned above there will be not many changes, except for companies that must comply with the European Energy Directive, (EED), which becomes more ambitious and binding. The national climate agreements will continue to apply to companies in the non ETS sectors. It is very important to continue to monitor national climate policy developments even more closely. It is certain that national climate policy will be tightened up to complement EU target and new measusres to achieve this 55% reduction by 2030. This means that there may be more regulation, but also more subsidies. In the Netherlands, there are more and more voices calling for an obligation to map your CO2 footprint as a company. Which way it is going… for companies it remains very important and wise to continue or use the road to Zero CO2 and therefore to reduce their emissions. This is simply their License to Operate in a world where climate change is going to play an increasingly important role and is more urgent than ever. We hear the term climate crisis more often. On the other hand, the EU’s plan also offers businesses opportunities in this respect through the measures in the other sectors, which our consultants can advise on. There will also be a Modernisation & Innovation Fund for companies, which should support and accelerate the transition to a low carbon economy!
What does this mean for the (business) consumer?
The cost of fuel and heat may increase. How much that is will have to become clear next year. Our initial estimate for petrol is 2-3 cents a litre, which is not much with increases we have seen recently. The EU has built in instruments in its plans to ensure that this is done in a social way. For example, with a rising CO2 price, additional rights can be auctioned to lower the price and an EU Social Climate Fund is set up where part of the revenues of emission rights are collected. This can be used as a dampening effect on prices or as an incentive to accelerate the transition to renewables. In addition, Member States will have the opportunity to reduce excise duties on fuel and heat. The strength of the tightening and widening of the EU policies is that the revenues are guaranteed to be used to reduce our CO2 emissions.
More about the EU GreenDeal
Is the Fit for 55% a concrete plan with measures and laws aiming for realizing the 55% emission target in 2030, the EU GreenDeal is wider and setting up a lot of strategies, which must transform the EU into a modern, resource-efficient and competitive economy, ensuring net zero emissions of greenhouse gases by 2050, economic growth decoupled from resource use while no person and no place are left behind. Here we highlight two strategies, which are trending today, show the integration of climate and environment and the willingness of organisations to work on these startegies.
Lately, you cannot miss this in the media. If your company is active in agrifood, you have to make an effort in the field of biodiversity. In your supplychain Regenerative Agriculture and carbon farming will become increasingly relevant and offer opportunities to reduce and value CO2 and insetting. The new Biodiversity Strategy 2030 ahead of the Fit for 55 plan, and was launched May 2020 already. This Strategy aims to put Europe’s biodiversity on the path to recovery by 2030 for the benefit of people, climate and the planet and -COVID-19 context and build our societies’ resilience to future threats such as:
- the impacts of climate change
- forest fires
- food insecurity
- disease outbreaks – including by protecting wildlife and fighting illegal wildlife trade
Biodiversity and Climate-related important strategy for organisations is the Farm to Fork strategy, which must accelerate our transition to a sustainable food system that should:
- have a neutral or positive environmental impact
- help to mitigate climate change and adapt to its impacts
- reverse the loss of biodiversity
- ensure food security, nutrition and public health, making sure that everyone has access to sufficient, safe, nutritious, sustainable food
- preserve affordability of food while generating fairer economic returns, fostering competitiveness of the EU supply sector and promoting fair trade
We already experience an incresing willingness of agri(food) producers, retailers and their supplychains to act upon these strategies, with insight, reduction and off and insetting strategies via our Climate Neutral Certification Program.
With Climate Neutral Group to Zero CO2
As a company you can be sure that you need to comply with stricter rules in the near future. You must take your responsibility. The EU’s move, the focus on limiting our climate impact, is increasingly entrenched in national policy. Set your goals at a 55% reduction in 2030 and think further: Net Zero in 2050, a matching strategy and pragmatic reduction approach! Keep in mind that the tightening and widening does not mean that the big polluters are at 0. Compensation, as an additional instrument to your own reductions, remains a great means to reduce global CO2 emissions. The result is being climate neutral now and you contribute to the well-being and health of people and, animals and nature! Consider becoming Climate Neutral Certified, on top of your efforts to reduce in line with the Paris Agreement via the Climate Neutral Certification Program for organisations, (agrifood) products and services.
Want to know more about Fit for 55, the EU (GreenDeal), ETS and the price of CO2? Contact one of our advisors via +31302326175 or email@example.com