European historic climate legislation to be finalized in mid-2022

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The world’s most ambitious set of climate laws is being discussed among the EU institutions; e.g. the European Parliament voted recently on about half the Commission’s “Fit for 55” mega-law package, setting the stage for negotiations with EU governments in the Council after the summer break. With eight proposals and hundreds of amendments, it is going to be a hard time for the EU legislators. 

“Fit for 55” is the EU’s climate law package to cut greenhouse gas emissions, GHG by 55 percent by 2030. This steep and quick GHG elimination is not only part of the main EU climate actions’ agenda, it is going to require dramatic changes and transformations in people’s everyday life, industrial development and manufacturing, transport and agro-sectors, to name a few. The EU will strengthen the EU Emissions Trading System (ETS), update the Energy Taxation Directive, and propose new CO2 standards for cars, new energy efficiency standards for buildings, new targets for renewables, as well as supporting clean fuels and infrastructure for clean transport.
More in: (21 June 2021). Reviewed 6.06.2022)

Climate change directions in the mega-law-package
The following are the main elements in the EU climate legislation package:
= Reforming Emissions Trading System (ETS), including a new controversial carbon price on housing and transport. MEPs discussed and voted (on 7.06.2022) the eight proposals: on ETS (rejected), CBAM, SCF and the two aviation files, as well on ESR, LULUCF and cars/CO2 emissions (the initial ETS draft has been rejected however by the European Parliament plenary).
= the carbon border tax (CBAM);
= the revamped Effort Sharing Regulation (ESR) that sets binding national emission reduction targets;
= the Social Climate Fund (SCF);
= the revision of the land-use and forestry (LULUCF) regulation, which sets targets for carbon sinks; emissions standards for cars and vans (cars/CO2); and
= two proposals concerning aviation emissions under the ETS and Carbon Offsetting for Reduction Scheme in International Aviation (CORSIA).
The European Parliament’s two party groups the EPP and Renew Europe want to achieve an emissions reduction of 63 percent by 2030 in ETS-covered sectors, up from the Commission’s 61 percent but below the 69 percent approved by the European Parliament’s Committee on Environment, Public Health and Food Safety (ENVI). That includes a smaller one-off reduction of permits that faces fierce opposition from left-wing groups.

Legislators’ opinion
The Parliament’s decisions shall be “coordinated” and negotiated with the EU member states; the latter are expected to water down some of the proposals. The degree of MEPs ambition can be measured in targets, like the EU’s overall carbon sequestration goal, and other figures, like how many permits MEPs want to wipe off the ETS. Besides, it is vital how much or little flexibility the member countries will have in achieving European climate goals.
= A cross-party ENVI compromise on exempting private households from the new carbon price on transport and heating means the key battles center around the reform of the existing ETS.
= Discussions on the CO2 file included a critical issue on putting the end to selling the combustion engine-cars and vans in 2035, with a ramp-up of fleet-wide CO2 reduction targets for carmakers in 2025 and 2030. Conservative MEPs want to cut that zero-emissions mandate to 90 percent; the intention could get support to make changes in the final legislation. However, the far right MEPs filed amendments for every proposal that simply meant that the European Parliament wanted to rejects the Commission proposals.

Taxation issues
One of the most controversial proposals in the “Fit for 55-package” was taxing private citizens for their heating and transportation emissions; the European Commission President and its Vice President pushed through the proposal to expand the ETS to cover private households, despite objections from a considerable number of members of the College of Commissioners. One-third of the College requested their dissenting opinions; some of the most experienced politicians inside the Commission feared that further taxing gasoline and household heating would cause public uproar and hit poorer people. While the Commission also planned to redistribute the collected cash to soften the blow on poorer households, the funds will be administered by national governments, so it was unclear how much would actually end up in the pockets of the people who actually paid the price.
While commissioners were not able to stop the Commission leaders’ proposal (i.e. von der Leyen and Timmermans), the Parliament was: the main groups have already reached a cross-party compromise in the Committee on Environment, Public Health and Food Safety (ENVI) to exempt private households from the new carbon price on transport and heating; besides, the EU member states also opposed the idea of expanding the ETS to private citizens.

Other issues under discussion…
= Carbon border adjustment. The key question is whether MEPs will support the plan to end-up the handout free ETS permits; one of the proposals was for a gradual phase-out – starting in 2026 and concluding in 2032, a delay from the 2030 deadline narrowly approved by ENVI with the support of the S&D group, the centrists and other left-wing groups. The industry committee and right-of-center groups, however, are pushing for a slower phase-out while introducing several caveats and flexibilities.
= Social Climate Fund, SCF: A compromise on the SCF and the reduction of its size, which has cross-part backing among MEPs, is interlinked with the issue of inclusion private households in the new carbon price arrangement; there are few major amendments; e.g. the S&D wants to limit the amount of funding that can go to SMEs instead of households.
= Effort Sharing Regulation: The report was approved in ENVI with a comfortable majority; however, right-wing MEPs want to ensure greater flexibility for EU states to achieve their targets in light of the war in Ukraine, while the left parties want to increase the overall target.
= LULUCF: The Greens-led proposal on carbon sinks passed narrowly in ENVI; to secure a bigger majority, the left-leaning party groups were proposing granting EU states more flexibility in meeting targets to account for the impacts of climate change and natural disturbances like fires and droughts. The EPP-group, meanwhile, wanted a “regulatory moratorium” to prevent any new climate standards and higher targets on companies affected by the fallout due to war in Ukraine (except the far-right parties nobody wanted an overall lower targets).
= Cars/CO2: Discussions on this file included an issue to end the sale of combustion engine cars and vans in 2035, with a ramp-up of fleet-wide CO2 reduction targets for carmakers in 2025 and 2030. Conservative MEPs wanted to cut that zero-emissions mandate to 90 percent, the idea that could get enough support to make that change to the final legislation.



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