The trio of essential elements in the ‘Fit for 55’ package – a carbon border levy, a just transition fund, and a carbon tax for gasoline and household heating – have recently been approved into law.
The European Union (EU) has adopted a landmark “Fit for 55” climate package, aimed at meeting its ambitious target of reducing greenhouse gas emissions by at least 55% by 2030. The package includes proposals for a carbon border tax, the end of the sale of new combustion-engine cars by 2035, a tax on aviation fuel, and an expansion of the EU emissions trading system to include buildings and road transport.
The package was proposed in July 2021 and has since undergone intensive negotiation between the EU’s member states and the European Parliament. While some EU countries have raised concerns about the impact of the package on their economies, the majority support the proposals, recognizing the urgent need to tackle climate change.
The carbon border tax proposal is particularly significant, as it aims to ensure that companies importing goods into the EU pay a price for the carbon emissions generated in the production of those goods. The tax will be phased in over time, starting with a few sectors in 2023 and expanding to cover all relevant sectors by 2026. The tax will be set at the price of carbon under the EU emissions trading system and is expected to raise around €10bn ($12bn) per year.
The phase-out of new combustion-engine cars by 2035 will have a significant impact on the automotive industry, which will need to accelerate the development and production of electric vehicles to meet the target. The tax on aviation fuel will similarly have implications for the aviation industry, which has been criticized for its high carbon emissions.
The expansion of the EU emissions trading system to include buildings and road transport is aimed at reducing emissions in the two sectors, which together account for around 40% of the EU’s emissions. The system will cover the sale of fuel for transport and the heating and cooling of buildings. The inclusion of buildings has been particularly contentious, with some member states expressing concern about the impact on households and the cost of retrofitting buildings to improve energy efficiency.
The EU’s climate package is seen as a key step towards achieving the bloc’s goal of reaching net-zero emissions by 2050. The package has been widely welcomed by environmental campaigners, who see it as a significant milestone in the fight against climate change. However, some critics argue that the package does not go far enough, and that more needs to be done to address the urgent threat of global warming.
The adoption of the Fit for 55 package is a significant moment for the EU and the global fight against climate change. While there are concerns about the impact of the package on some industries and households, the urgent need to tackle climate change means that bold action is required. The EU’s climate package is a step in the right direction, but more needs to be done to ensure a sustainable future for all.
