Here are the contents, objectives and unknowns of the European emissions plan
The study by Massimo Tavoni, full professor at the School of Management of the Politecnico di Milano and director of the European Institute for the Economy and the Environment, for lavoce.info
The long-awaited European Commission document on energy and climate is finally available. Voluminous and with a pop title, it is the first serious legislative proposal in the world to achieve the climate neutrality goals announced at the end of last year.
To achieve zero CO2 emissions in the middle of the century, the EU aims to cut greenhouse gases by 55 percent (compared to 1990) by the end of this decade. An ambitious goal, however necessary, which to be achieved requires a variety of innovative, effective and inclusive strategies and policies. Let's see the proposals that the European Parliament will have to consider and approve.
THE MARKET OF PERMITS
The document reaffirms the central role of the current system of tradable CO2 permits (ETS), which covers the industrial and electricity sectors and which today prices CO2 at over 50 euros per ton. The ETS is strengthened, with a reduction in emissions of more than 60 percent by 2030 (compared to 2005). It will also be extended to the aviation and maritime sectors within the EU and the body that regulates it (the Market Stability Reserve ) will have greater capacity to reduce the volatility of CO2 prices.
Today many of the permits are assigned free of charge to the sectors most at risk of losing competitiveness: this mechanism will be eliminated, but in a very gradual way (with the last date being 2035). Receiving companies will need to demonstrate that they adhere to "strengthened" process benchmarks, which increase over time. Experience has shown that benchmarks do not work well and are easily subject to lobbying: more could have been done on this point.
TRANSPORT AND GREEN BUILDINGS
One of the points of the document on which most attention has been focused is the intention to reduce vehicle emissions by 100 percent by 2035 (but perhaps it will arrive at 2040), thus ensuring a zero-emission car fleet in half. century.
The farewell to traditional vehicles in just over ten years responds to the need to limit emissions in the transport sector, the only one that has been growing in recent years. The construction sector is also involved, albeit in a less drastic way. Both will be part of a new market system similar to ETS, but separate from it, which will be created over the next five years. It will therefore have its own price, even if a progressive alignment with the Ets price is expected, which will be applied upstream of the fuel production chain. At the end of this process, two thirds of all European emissions will have to pay a price on the carbon emitted, generating resources and tax revenues estimated at around 100 billion euros.
RENEWABLES, EFFICIENCY AND DOUBTS
The targets for renewables are also increasing, which will have to cover at least 40 percent of the energy mix within this decade, twice as much as today.
The Commission has proposed binding targets for increasing the share of renewable energy in heating and cooling at member state level. On the other hand, the objectives for industry and buildings remain indicative, while the criteria for defining sustainable biomass are made more stringent, after the criticisms raised by many observers.
As far as energy efficiency is concerned, the target becomes binding and more ambitious: the savings obligations for member countries, in fact, double. This is not an easy challenge, but it is absolutely necessary.
COMPETITIVENESS (NOT) CROSSES BORDERS
Much discussed, even at the G20 meeting in Venice on 7-11 July, is the proposal for the carbon border adjustment measure (CBAM). It is a question of charging the cost of greenhouse gas emissions related to the manufacture of imported products, with the aim on the one hand of avoiding the relocation of companies to countries outside Europe and on the other of encouraging other countries to reduce emissions.
The proposal foresees that the system will initially target a select number of carbon-intensive goods, including concrete, iron and steel, aluminum, fertilizers and electricity. The measure is very complex to implement internationally and the Commission has taken a soft line, with payment obligations for importers not starting for five years. It remains to be seen whether the proposal will actually be implemented and what will be done with any revenues, which are currently entirely reserved for the European budget. A broader cooperation package is likely to be needed for developing countries to accept it, although the most desirable solution remains that they decide themselves to take measures to reduce emissions.
SOCIAL AND ECONOMIC IMPACTS
The question of a "just" transition remains central: it must not come at the expense of increasing inequalities, especially after what the pandemic has already caused.
The Commission expects a quarter of the revenues from the new permit markets to be redistributed to member states to help the most vulnerable families cope with possible price increases. But redistribution is not a blank check and will be conditional on household decarbonisation efforts, a questionable choice. Policies will need to be studied well: the Italian case of 110 percent eco-bonuses is in fact an example of subsidies to those who have economic resources.
The Commission is already requesting today that ETS revenues be used for decarbonisation: an important obligation, which Italy has not yet met.
The European document also speaks of a revision of energy taxation, which appears necessary because at the moment it encourages the use of fossil fuels instead of cleaner alternatives, but which is also much more difficult to achieve.
Regarding the economy, the Commission's estimates are ambiguous. There is talk of both gains and losses: a lot depends on what other countries decide to do. Europe emits less than a tenth of global CO2 emissions and therefore cannot solve the climate challenge alone. Joe Biden has promised equally ambitious goals for the United States, but the legislative process of his measures is much more uncertain than in Europe. For now, the EU can and must move forward: a better environment does not only benefit from the climate point of view, but also from the point of view of health and biodiversity. So the “Fit for 55” is welcome.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/fit-for-55-contenuti-societa/ on Sun, 25 Jul 2021 06:17:44 +0000.