10 key policies in Brussels' plan to slash emissions

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This article is part of POLITICO’s Fit For 55 series.

The hard work of cutting Europe’s emissions to net-zero starts now.

The European Commission proposed a legislative package Wednesday that aims to take major steps forward in the effort to eradicate fossil fuels.

The plans will be discussed over the coming months by the European Parliament and national governments. If approved they will stretch Europe’s climate efforts into new sectors and spark new political fights.

Here are 10 of the key changes, and the initial reaction, from the landmark proposals.

1. An end to the combustion engine

What’s the plan? The Commission has pulled the trigger on proposing an end date for the internal combustion engine from 2035, mandating a 55 percent fleetwide CO2 emissions cut from 2030 on the way to 100 percent target five years later. That gives industry over a decade to retool and boost local production of battery cells. It also gives the bloc a 15-year window to get polluting vehicles off the road through natural churn ahead of the EU’s 2050 zero-emissions target. Accompanying legislation on alternative fuels infrastructure would compel nations to start building out charging points and hydrogen refueling stations that can cater for the uptick in demand in zero-emissions vehicles. 

What will that mean? A rapid acceleration in efforts to boost the production of electric vehicles, and a lot more roadworks on city streets from 2025 as the infrastructure rules come into play. Much of the auto industry is already pushing ahead with building electric cars — some, like Volkswagen and Volvo, for longer than others — but the new targets pose a critical challenge for the bloc’s components industry. Attention is quickly turning to retraining programs that can help forge a workforce to handle battery chemicals rather than engine pistons. That will take time.

Initial reactions: Green groups are broadly happy. The auto industry may have lost its battle to avoid a mandatory phaseout in the draft proposal, but it got rules that will get infrastructure up and running quickly. The main complaint is that the 2035 date mandates e-mobility rather than give the industry time to develop cleaner fuels. “It is not the internal combustion engine that is detrimental to the environment, but fossil-based fuels,” car lobby ACEA said.

2. Carbon pricing is king

What’s the plan? To double down on the recent success of the European Emissions Trading System (ETS) by tightening the number of permits issued and expanding the scheme to hit shipping and tighten requirements for the aviation industry. The “most controversial” part of the whole package, according to Green deal chief Frans Timmermans, will be the Commission’s proposal to create a second ETS that covers fuels used for road transport and building heating. Costs are likely to be passed on to consumers.

What will that mean? The new measures show Brussels views carbon pricing as the most effective way to lower emissions. That’s despite the potential hit to drivers and households who can’t afford the extra cost — and despite the risk that it causes social blowback on the scale of the Yellow Jackets movement that rocked France in 2018. Timmermans admitted to being skeptical at first but his analysis is “that the existing ETS system delivers.”

Initial reactions: “Couldn't ‘more norms, more standards, more milestones & more taxes’ be a decent alternative to a regressive mechanism?” asked Ruth Schofield Owen, deputy director at FEANTSA, a homelessness charity. 

3. A new social fund

What’s the plan? The Commission knows that applying a new ETS to the cars and homes of citizens is going to cause real financial pain for millions of Europeans — and risks blowback. To soften the blow, it plans to create a Climate Social Fund, which will direct 25 percent of revenues from the ETS and funds from the EU budget to help drivers buy zero-emissions vehicles or homeowners insulate their homes. National governments will have to submit plans for how they’ll spend the money to the Commission for approval and match the EU financing with their own cash. The fund is expected to swell to €72.2 billion.

What will that mean? In an ideal world, it means the EU will convince Europeans that the effort of cutting emissions is being shared fairly. But it’s unclear whether member countries will be willing to give the Commission oversight of a significant part of the new cash they will rake in from the new system.

Initial reactions: There’s skepticism that the fund would prevent a social backlash. Carbon pricing risks “trapping people in a more expensive system with no alternatives,” whereas compensation funds “risk being an overly complex system that will not deliver to those in our societies that need it most,” Monique Goyens, the director of consumer organization BEUC, warned. 

Transport workers’ federation ETF said Brussels should focus on developing sustainable public transport options, arguing that a social fund “to reimburse commuters or subsidize electric vehicle purchase will not prevent transport poverty” or make alternatives more widely available.

4. A carbon border tariff

What’s the plan? Polluters of the world, look out. The Commission will tax imports of iron and steel, cement, aluminum, fertilizers and electricity, lumping them with a tariff equivalent to what EU producers pay under the home carbon market. If other countries have similar measures, their companies won’t get hit. 

As the levy is phased in from 2026 — after a mock run from 2023 to 2025 — free pollution quotas that are currently part of the EU system will be decreased gradually and eventually phased out over a decade, ending in 2035. That is designed to keep the whole thing from running afoul of the World Trade Organization.

The revenues will feed into the EU’s budget, and be partly used to repay the EU’s multibillion-euro recovery package. 

What will that mean? The levy is double-edged: The EU is seeking to protect its industry from cheaper and more polluting imports as it tightens environmental regulation at home. “We're not going to make climate policies into a policy to deindustrialize Europe, it would make no sense from an economic and from a climate point of view because you will see production move somewhere else,” a senior EU official said.

At the same time, the EU is nudging other economies to decarbonize their economies, as this would exempt them from the levy. “We're doing our job and inviting our partners to do the same,” the EU official said. 

Initial reactions: The so-called Carbon Border Adjustment Mechanism is less controversial within the EU than it is overseas. “It is questionable whether CBAM is compatible with WTO law,” said Georg Roderburg, a partner at law firm Freshfields. That could prompt retaliatory tariffs. In Washington there is unease. Former Barack Obama White House adviser John Podesta warned of “trade frictions,” in an interview with POLITICO. China and other emerging economies have condemned the tool for months. But if other countries cut emissions as quickly as the EU then polluting imports “will not be an issue between us,” said Timmermans. 

5. A new battle over who contributes most

What’s the plan? Brussels wants governments to increase greenhouse gas emission reductions from the road transport and building sectors, agriculture, and industry and waste plants by 11 percentage points to help reach the bloc’s tougher 2030 climate goal. That’s a considerable jump from current requirements — and is expected to trigger a new round of clashes between Brussels and capitals. 

What will that mean? The Effort Sharing Regulation set national binding goals in 2018 after tough battles between EU capitals and Brussels on how best to divvy up emission reductions across the bloc. In its proposals, the Commission largely stuck with distributing emission reduction goals based on GDP per capita — crucial to poorer and often coal-reliant EU members concerned that richer capitals were trying to shift more of the burden onto the bloc’s more polluting economies.

The proposal means that by 2030 “Germany cuts by 50% its emissions in road transport, buildings, agriculture, SMEs & waste compared to 2005. 47% effort for France, 43% for Italy, 38% for Spain – down to only 10% for Bulgaria,” according to Simone Tagliapetra, a senior fellow with the Brussels-based Bruegel think tank.

 “Obviously, many member states will say this is unfair, they will say it, but let's see if they really think it,” said EU Green Deal chief Frans Timmermans.

Initial reactions: The proposal passed largely unnoticed, judging from a lack of reaction from NGOs and others. Still, NGOs like Transport & Environment agitated for months in the run-up to the proposal’s unveiling, worried that the Commission would ease pressure on governments by weakening the Effort Sharing Regulation and outsourcing most emission-cutting responsibilities to the market. Sofie Defour, of T&E, cautioned that although Brussels opted for higher national targets “all the old loopholes that allow countries to escape their climate responsibilities remain.”

6. Renewables are set to surge

What’s the plan? The EU won’t make its Green Deal targets without a massive expansion of renewable energy, so it’s proposing to increase the targets for wind, solar and other clean power sources. The revamped Renewable Energy Directive sees the current bloc-wide target of having 32 percent of energy come from renewables by 2030 raised to 40 percent, and it also sets the benchmark of having renewables account for 49 percent of the energy used in buildings by 2030.

What will that mean? Renewables account for around 20 percent of energy consumption so the bloc needs to double its capacity by the end of the decade. Specific language is included to make that happen in the burgeoning offshore sector — with countries instructed to work together on the development of European sea basins — and with a new obligation to speed up cross-border cooperation in general. 

Initial reactions: International Renewable Energy Agency Director-General Francesco La Camera said the legislative package “confirmed the EU’s energy transition leadership” and predicted the measures would foster economic growth, create jobs and drive competitiveness. Renewable groups like SolarPower Europe were also pleased, but urged Brussels to do more in order to address administrative bottlenecks by issuing EU permitting guidelines to simplify procedures at a national level. “This is an urgent move to prevent any further delays to solar projects,” said Walburga Hemetsberger, the group’s CEO.

7. Europe gets a renovation

What’s the plan? Buildings use around 40 percent of the EU’s energy: the new package requires nearly half of that energy is renewable by 2030. EU countries will also need to increase the share of renewable energy used in heating or cooling buildings by 1.1 percent each year. Plus, the Commission wants countries to renovate public buildings at all levels at a rate of 3 percent each year. And a new standalone Emissions Trading System for buildings ramps up pressure on governments to speed up the pace of energy-efficient renovations — or risk dealing with social discontent from people burdened with ever-growing power bills.

What will that mean? The legislation reinforces the Renovation Wave Strategy, which Brussels says is both good for the environment and also a great job creator. This was identified early on in the pandemic as a key stimulus measure to get countries on board. The obligation to renovate public buildings will extend to social housing, which accounts for roughly 10 percent of the EU’s buildings. 

Initial reactions: Industry voices such as Mirella Vitale, senior vice president and insulation manufacturer Rockwool, called the measures a “big step forward” in tackling building emissions. But she also echoed the concerns of countries that admit they don’t have the cash to underwrite the needed renovations. The package’s success “hinges on the financial and advisory support the EU is able to provide to households and businesses,” she said. “Action has to be easier and cheaper than inaction.” Freek Spinnewijn, of the Right To Energy Coalition, had harsher words for the package, which he said included targets that were insufficient to address the climate crisis and would give “energy-poor people a punch on the nose” by exposing them to higher energy bills.  

8. Taxing polluting energy

What’s the plan? The Commission aims to make cleaner fuels and renewables more attractive by changing the way energy is taxed. Currently, fuels and electricity are mostly taxed on volume rather than energy content but the reform would ensure the most polluting fuels are taxed the highest. It also updates minimum rates, which have remained unchanged for 18 years, and axes tax exemptions and rate reductions offered by national governments.

What will that mean? The Commission has been trying to change energy taxation laws for years, but it keeps running into the roadblock of national capitals. Taxation policy is jealously guarded by national governments and any effort to make changes will require unanimous agreement among the EU27. This is so consequential for efforts to cut emissions that the Commission attempted in 2019 to change the voting rules on energy taxes, but so far it has failed. Expect this fight to drag on and on.

Initial reactions: Truckers fear that energy taxation changes — combined with plans to apply emissions trading to road transport — will mean transport operators will be paying for their emissions twice over. “The revised energy taxation framework will raise the fiscal burden for the most commonly used fuels in commercial road transport today,” Raluca Marian, the EU director for road transport organization IRU, said. “On top of this, road transport companies will foot the emissions trading bill at the pump.” 

9. Cleaning up aviation and shipping

What’s the plan? Brussels is doing something environmentalists have long clamored for: taxing aviation fuel. It will also require all but the smallest EU airports to provide greener jet fuel to airlines by 2025. The big question is whether this will help drag down the price of sustainable alternatives, which currently cost three to five times more than traditional fossil fuels.

The Commission also wants to apply emissions trading to maritime transport, covering all emissions from trips between EU ports and half of the trips beyond Europe. The aim is to avoid handing European shipping companies a competitive disadvantage or stepping on trading partners’ toes. “We don’t have the pretense of being able to regulate the entire world,” a senior EU official said Wednesday.

The package also includes a push to get rid of tax exemptions for shipping fuels and boost the uptake of sustainable fuels.

What will that mean? These measures mark the start of the EU’s efforts to rein in emissions from two sectors that reach far beyond the bloc and were largely missing in the EU’s previous climate pushes. The Commission is determined to make up for lost time and disappointing progress from international regulators: the International Maritime Organization and the International Civil Aviation Organization

“You cannot continue to say you will do nothing, or near nothing, in shipping and aviation because of the international playing field,” Timmermans said. “I can no longer explain to a European citizen that we pay tax on the fuel you put in your car, you pay tax on the electricity that drives our trains, but you don't pay tax on the kerosene that fuels our aircraft.” 

Initial reactions: Environmental campaigners and lawmakers cheered the push to extend the bloc’s emissions trading scheme to shipping, while EU shipowners called for ETS revenue to be used to help green the sector. Others in industry aren’t so happy. Guy Platten, secretary-general of global industry group ICS, called it “an ideological revenue-raising exercise” that “will greatly upset the EU’s trading partners.” 

Green lobby Transport & Environment warned that the EU Commission’s sustainable fuel initiative will end up boosting LNG and unsustainable biofuels, rather than “genuinely green” fuels such as ammonia. “The EU will start making shipping polluters pay, but by pushing them to use gas and biofuels, the cure will be worse than the disease,” said T&E’s Executive Director William Todts.

The aviation industry, meanwhile, welcomed plans to scale up the use of sustainable fuels. But the fuel tax is less popular: KLM said it believes it may have the “opposite effect of detours and additional emissions,” given it only applies to intra-EU flights. 

10. Using forests

What’s the plan? The Commission wants to use the bloc’s forests and peatlands to absorb some 7 percent of current annual emissions — and plans to lean on the agricultural and forestry sectors for help. It set an overall EU target of removing 310 million tons of CO2 equivalent in 2030. To that end, a proposed revision to its land use, land-use change and forestry regulation (LULUCF) will set binding annual national targets for CO2 removals for 2026 to 2030. It also wants to set a climate neutrality target for the land sector — including the LULUCF and the non-CO2 agricultural sectors — to reach by 2030. The Commission also committed to plant at least 3 billion more trees within the decade and wants to incentivize farmers to take up practices that help trap carbon on their land under the new Common Agricultural Policy. 

What will that mean? EU countries will have to increase the capacity of their forests and lands to suck carbon out of the atmosphere to meet the bloc’s 2030 climate goals. That’s already getting pushback from a number of countries with strong forestry sectors that want Brussels to butt out of their national land management strategies. Striking a balance won’t get any easier, as scientists warn that the impact of climate change, including drought, fires and pests, will ramp up to threat to forests’ CO2 storage capacity. 

Initial reactions: Industry largely welcomed the fact that the new plan boosts the bioeconomy, but the Confederation of European Paper Industries called it an “incomplete toolbox for the industrial energy transition.” NGOs say the focus on forests is a climate cheat: “Using land use credits to cover up for failure in reaching national climate targets is simply unacceptable,” said T&E's Defour. German MEP Delara Burkhardt of the Socialists and Democrats said she fears natural carbon sinks will “become a catch-up tool where other things don’t work,” adding: “It sort of sounds like it’s okay to continue to pollute the environment because it will be sorted out afterward.”

Hanne Cokelaere, Mari Eccles, Louise Guillot, Aitor Hernández-Morales, Karl Mathiesen, Kalina Oroschakoff, Josh Posaner and Paola Tamma contributed reporting.

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