A new and more ambitious EU climate-change package, dubbed “Fit for 55” and just presented by the European Commission, has increased the EU’s RES energy-mix target for 2030 to 40 percent from the previous goal of 32 percent.
The package includes measures covering climate change, energy, land usage, transportation and transboundary taxation, their ultimate aim being to reduce greenhouse gas emissions by at least 55 percent by 2030, compared to 1990 levels.
The measures are seen as crucial for the establishment of a more environmentally friendly energy system, given the fact that energy production and usage account for 75 percent of carbon emissions in the EU.
European industrial producers are anxiously awaiting the details of the European Commission’s Carbon Border Adjustment Mechanism (CBAM), part of the “Fit For 55” climate-change package of measures being presented today, which could greatly influence their energy costs.
Whether the introduction of the CBAM system – designed to introduce transboundary taxes on non-EU countries regarded as making a lesser effort, than the EU, to combat climate change – will be combined with a continuation of free carbon emission rights for certain industrial categories, or spell their end, is a crucial detail for producers active in sectors such as aluminium, cement and steel.
The latter scenario would prompt a sharp increase in energy costs for many energy-intensive producers, and could lead to further closures of industrial plants in Europe.
Latest reports suggest free carbon rights for selected industrial categories, as a cost-offsetting measure, will be maintained until at least 2025 or 2026.
The termination of the carbon cost-offsetting measure would require EU industrial producers to cover emission right costs for their entire production, in other words, sales within the EU and exports beyond, a dreaded prospect that would devastate European industry exports.
In the aluminium sector, for example, the termination of carbon emission cost offsetting measures would result in a 60 percent increase for every ton produced, making business beyond the EU impossible.
To be presented today by the European Commission, the EU’s upcoming “Fit For 55” package of climate-change measures, setting stricter and more ambitious objectives for a 55 percent carbon emission reduction by 2030, compared to 1990 levels, will bring about a series of revisions.
These will include changes to the Emissions Trading System (ETS) and fuel taxation, as well as the introduction of new taxes and a Carbon Border Adjustment Mechanism (CBAM), promising transboundary taxes on non-EU countries regarded as making a lesser effort, than the EU, to combat climate change.
It still remains unclear if consumers or polluters, or both, will cover the cost of the “Fit For 55” measures.
Heating and transportation costs are expected to rise considerably over the next few years, according to a Euractiv report.
The package’s draft proposes an expansion of the ETS into the heating sector, for buildings, as well as into transportation, as a disincentive restricting high-polluting practices, including use of diesel.
The CBAM is expected to be launched on a three-year trial basis, beginning in 2023, before it is officially implemented in 2026.