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European Green Deal and Fit for 55: The Pathway To Carbon Neutrality or A Far From Assured Ambition?

Europe’s Green Deal is a 24-page document with a massive scope and, paradoxically so, scarce detail. This was set out by the European Commission in December 2019 and is described as the most ambitious attempt to date to counter climate change.

What is the Deal and What is the Fit for 55 Package?

The objective of the deal is for the EU to eliminate or offset its greenhouse gas emissions by 2050, and to become the first carbon neutral continent - sounds ambitious, right? Underpinning this is the complete reshuffling of society and the economy with policies targeting every considerable aspect of the European Union’s economy and community. These include decoupling economic growth and resource consumption by moving to a circular economic model that will encourage recycling and reduce waste, the prevention of deforestation and electrifying transport.

The Deal itself is not a piece of legislation. Rather, it is a set of agreeing objectives and achieving them requires new rules. The steps taken to enshrine these ambitious goals into law started in 2021, with the most notable step to the right direction being the Commission's Fit for 55 legislative package on 14 July 2021. What the Economist characterised as a gentle aerobics course for the middle-aged, is actually the interim package of legislative reforms that push the slashing of emissions by 55% from 1990 levels by 2030.

At a glance the package includes the following legislative proposals and policy initiatives.

  1. Member States’ Emissions Reduction Targets

  2. Emissions and removals from land use, land use change and forestry

  3. Renewable Energy

  4. Energy Efficiency

  5. Alternative fuels infrastructure

  6. CO2 emission standards for cars and vans

  7. Energy Taxation

  8. Carbon border adjustment mechanism

  9. Sustainable Aviation Fuels

  10. Green fuels for shipping

  11. Social Climate Fund

In Summary & Some Projections

The package aims to fill various gaps and add ambitions to the European climate solutions in place. The changes resulting from the package will have an impact on every aspect of the European economy and the lives of its citizens, from transport and foreign travel to heating, consumer goods, electrical devices and food production. Hence the references to "a revolution". One of these is CBAM which aims to ensure that imports have the same embedded price on carbon as within the EU. Further, the proposals introduce carbon pricing for heating fuels, road transport and maritime and aviation; it sets stronger emissions standards for vehicles, with all new cars and bans being net-zero by 2035; it introduces a 13 percent reduction in the GHG intensity in shipping fuels by 2035 and increases taxes in fossil fuels. The proposals seek to increase the share of renewables in the power sector to 40 percent of final energy consumption and to reduce energy demand by making energy efficiency goals binding.

Tackling the growing climate crises is “a matter of intergenerational and international solidarity. What we achieve in the next decade will determine our children’s future,” said Frans Timmermans, the executive vice-president for the European Green Deal.

EU's Emissions Trading System

The EU’s Emissions Trading System is placed at the epicentre of the Green Deal. ETS sets prices for emissions permits needed by 11,000 power plants and industrial installations, as well as airlines, with prices covering 40 percent of the EU’s GHG. After years of low prices, reforms and pressure from tougher climate legislation led to a sharp increase in prices, with prices peaking in late August to more than €60 per ton of emitted carbon.

The investment plan of the Green Deal demands massive investments to support the proposed €1trn of which half is meant to come from the ETS and the EU budget. The rest relies on mobilising private investment which will pose a challenge for member states to agree on how to spend the money with the balance of interests being roughly the following: the northwest proposing the allocation to technological investments while southeastern European nations rushing to support their economies through the transition - a dilemma that is already felt through the European energy crisis we are facing.


The impact of CBAM which would come into force in 2023 with a three-year transitional period will initially only consist of reporting requirements with payments for emissions being phased in between 2026 and 2035.

“EU importers will buy carbon certificates corresponding to the carbon price that would have been paid, had the goods been produced under the EU’s carbon pricing rules. Conversely, once a non-EU producer can show that they have already paid a price for the carbon used in the production of the imported goods in a third country, the corresponding cost can be fully deducted for the EU importer.”

Value of goods affected by the EU CBAM, by country and sector in 2019, billions of euros. Source: Centre for European Reform.

The national emissions limits under effort-sharing regulation (ESR)

The Commission proposed the reduction of ESR emissions by at least 40 percent within member state targets ranging from 10 to 50 percent. This will contribute to a fair and just climate action with national targets being based on GDP. Below, you can see the existing 2030 targets per country with the green bars indicating the commission’s proposals.

Emission reduction targets for 2030 of each member state, with the commission’s proposals in green. Source: European Commission.

In Greta’s words, too much “blah, blah, blah” and too little action?

As energy prices have soared in 2021, and do not seem to stop increasing in 2022, and climate change intensifies, the current proposals may seem as a step to the right direction but have also been characterised as a far cry from delivering the EU’s fair share of emission cuts to limit temperature increases to below 1.5C.

The EU’s fragmented policy initiatives aim to reduce emissions, without the complete phaseout of fossil fuels, but with a virtual rush to decrease reliance has led to a conflicted Union with people suffering the consequences of what is labelled by many as a rushed transition that has led to massive inflation during the COVID-19 recovery and the shift to green energy. Nevertheless, the EU Taxonomy’s proposal to include natural gas as a green investment comes in complete contradiction with the rest of its goals to reduce emissions. Commenting on the ‘Gas Package’, Eilidh Robb, fossil fuels campaigner for Friends of the Earth Europe said:

“The excessive influence of the fossil fuel industry has brought us to the brink of climate breakdown, yet these latest proposals continue to facilitate the privileged position of the gas industry. It’s time to burst the gas bubble and free Europe from the stranglehold of fossil fuels – but we will need much sharper instruments than the blunt measures put forward today.”

Further, the question hanging over the ambitious package is its cost implications: who will bear the burden - governments, corporations or consumers who may be unable and unprepared to pay the price premiums (as they have already been proven to be)?

Despite the above, promises and ambitions, Europe continues to act against its own climate goals:

  • New gas projects worth 104 billion Euros are underway; capacity for LNG terminals is to be increased by 54%; An extra 12,842 km of pipelines are anticipated down the line

  • In the European Commission’s list of the so-called “Projects of Common Interest”, there are 32 gas projects that have been deemed eligible for funding by the EU.

  • The Commission repeatedly overestimated the gas demands in the past ten years, according to the European court of Auditors.

May I, boldly, argue that Europe needs to get its priorities straight before threatening its economic, market and social stability through radical but empty regulatory reforms. The fragmented approach taken by the Europe show the Union's indecisiveness and misdirection based on political and financial short-sightedness on a manner than is anything but short-term.


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