In Strasbourg, even the smallest details of the “Fit for 55” legislative package had been the subject of disputes to the very end. In a historic voting marathon on Wednesday in the European Parliament, the course for future European climate policy should have been set. But things turned out differently: there was no agreement in the plenum on several central aspects. The points were all referred back to the Environment Committee, which will now deal with them again. The factions were too fragmented and the proposals too controversial.
There were major differences of opinion among the MPs, especially with regard to the CO2 border adjustment planned by the EU Commission. The main question is how long the industry should continue to benefit from free pollution rights in emissions trading. The fact that this dossier blocked everything was “not a responsible policy” and downright “ridiculous”, commented Peter Liese (CDU), who is the negotiator for emissions trading. An overview of why the EU is struggling with its climate package and what the changes mean for consumers.
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The program includes all the climate targets of the European Union (EU) up to 2030. With “Fit for 55” the emission of carbon dioxide is to be reduced by 55 percent compared to 1990. The legislative package is part of the Green Deal that EU Commission President Ursula von der Leyen (CDU) presented three years ago and which is intended to make the EU climate-neutral by 2050. The “Fit for 55” project includes only twelve of the more than 50 legislative initiatives planned for the Green Deal. However, the package already includes far-reaching measures that are to be taken as early as this decade. This should pave the way to climate neutrality.
To this end, the Commission has also announced reforms in a wide variety of areas: for example, emissions trading is to be expanded. A new CO2 border adjustment is intended to prevent companies from migrating abroad to avoid their CO2 taxes in Germany. The EU also wants to introduce a binding regulation for the member states to reduce their national emissions. The end of the internal combustion engine is also particularly controversial.
The implementation of the new regulations means a veritable marathon for the Commission, Parliament and the European Council. In July of last year, the EU Commission presented the “Fit for 55” package. Months of tough negotiations followed in the environment committee and the accompanying committees, which should come to a conclusion in the European Parliament on Wednesday.
In addition to the green transformation of the economy, the European Union also wants to use “Fit for 55” to cushion the social consequences of structural change. EU Climate Commissioner Frans Timmermans (PvdA) said before the vote in Parliament on Tuesday: “Our policy will be fair or it will not be policy.” Part of the legal reform should therefore include the establishment of a climate social fund with a volume of be 72 billion euros.
The Commission’s proposal to expand CO2 trading, in which industry and the energy sector have had to purchase CO2 certificates since 2005, was extremely controversial from the outset. For the first time, private consumers in the EU would have had to pay for every tonne of CO2, as is already the case in Germany. However, the poorer EU member states in particular and France, which has been shaped by the yellow vest protests, are very critical of the proposal and fear social upheaval in view of the new costs.
The lines of conflict in the negotiations had run between the conservative EPP, the Liberals and some right-wing parties, on the other side the Greens and Social Democrats had formed a camp and submitted their own proposals. A compromise attempt by EPP rapporteur Liese failed in April. The left alliance had outvoted him. However, not without contradictions that show how controversial the topics are viewed even within the parliamentary groups. For example, while the Social Democrats had spoken out in favor of an end to free industrial pollution rights by 2034 in the Industry Committee, they rejected this in the plenum.
The question of how ambitiously emissions trading should be pursued also caused a lot of dissent. While the rapporteur Liese oriented himself more closely to the proposals of the EU Commission and called for a very strict annual reduction in the pollution rights on the market, the Greens and Social Democrats had spoken out in favor of a one-time deletion of millions of certificates, but for a slower, later one Reduction. The Liberals advocated a middle ground.
The vote failed on the proposal for CO2 border adjustment, which is closely linked to emissions trading. This dossier determines when the free certificates for industry will end. The responsible rapporteur had wanted to end this practice by 2028, while the rapporteur on emissions trading only wanted to do so in 2034. Leftists and liberals called for 2030 and the Greens for an immediate end. In the end, the entire proposal was rejected, and emissions trading and the climate social fund fell with it.
Hundreds of amendments were on the table on Wednesday. The existing laws related to the reform of emissions trading, the climate social fund, the CO2 border adjustment, the tightening of emission rights for aviation, the new CO2 limits for vehicles, the binding climate targets of the individual member states and the climate targets of the so-called land use sector, primarily forests and Moore includes. Parliament waved the last two proposals through on Wednesday.
In aviation, as in industry, free CO2 rights should come to an end within a few years. For the first time, all flights taking off in the EU are to be subject to emissions trading, including long-haul flights. With regard to emissions trading, which is now being renegotiated, the environment committee had proposed that commercial road traffic and commercially used buildings should also have had to purchase CO2 certificates from 2025. Shipping would have been fully priced from 2024, air travel in 2025 and waste incineration in 2026.
According to the EU Commission, the CO2 limits for newly registered cars are to drop by 100 percent from 2035 compared to 2021, which would result in a complete ban on sales of combustion engines. The European Parliament agreed to this in a narrow decision on Wednesday evening. Conservatives and liberals in particular had previously pushed for a reduction of just 90 percent so that new registrations with the old technology would also be possible after 2035. Environment Minister Steffi Lemke (Greens) declared in spring that “Germany supports the end of internal combustion engines for cars and light commercial vehicles in the EU from 2035”.
Nevertheless, millions of combustion engines will still be on the roads in the coming decade and beyond. The average lifetime of a car in the EU is 15 years. However, even with combustion engines, road traffic must become climate-neutral in the long term. Due to the limited availability of biofuels, this would probably only be possible with expensive e-fuels based on green hydrogen.
Since the majority of the “Fit for 55” legislative package was adjourned on Wednesday, no consequences are to be expected for the time being. But in the longer term, energy prices will definitely rise. Because even if the reform of emissions trading has been postponed, it is designed to become scarce and make CO2 emissions more expensive. However, much will depend on what the Environment Committee agrees on.
There was a relatively gentle proposal from the Environment Committee, according to which the CO2 price would initially have been capped and private consumers would have been exempted from the second emissions trading scheme at least until 2029. However, since a CO2 price of currently 30 euros per tonne already applies in Germany, no sudden price jumps are to be expected here in the coming years. Nevertheless, a rising CO2 price in commercial emissions trading is likely to have an impact on all emissions-related products.
It is also likely that airline tickets and shipping costs will become more expensive if these sectors are to pay more for their emissions in the future. If long-haul flights departing from Europe were also included in emissions trading, the certificate costs for airlines would double. Experts expect airlines to pass on the increased costs to passengers. However, this should create an incentive to fly less. And the airlines should be encouraged to invest in emission reductions. However, the increase in the current CO2 price should be rather moderate and in the low double digits on most flights.
One thing is clear: driving a combustion engine is unlikely to be worthwhile in the 2030s. The major manufacturers are facing a comprehensive fleet conversion to electric drives, the scaling effects will reduce the price difference to the combustion engine. In the long term, the CO2 price of fossil fuels will increase and the price of synthetic fuels will be significantly higher than today’s petrol price.
Although many of the proposals have been deferred by Parliament, there is agreement on many of the details in the Fit for 55 package. It will now be the task of the Environment Committee to iron out the last differences of opinion. According to reporter Peter Liese, this could happen quickly: in two weeks, at the latest by the end of the month, he suspects, a new vote can be taken. Negotiations with the EU Council will then begin in the autumn.