June 5, 2024

Global Regulations

Fit for 55: What You Need to Know About the European Climate Law

Fit for 55: What You Need to Know About the European Climate Law

What is the European Climate Law?

The European Climate Law covers the goal of the European Green Deal which states that Europe will be a climate-neutral region by 2050 and cut their emissions 55% by 2030 compared to 1990 levels, referred to as the Fit for 55 package. It entered into force on 29 July 2021. Climate neutrality means that by 2050 the EU member states will have needed to take measures to get to net zero and implement technologies that replace the existing fossil fuels that are responsible for emissions. Within this broader objective, further regulations have been set to impose that each sector of every member state do its part with sector-specific roadmaps to ensure progress. 

The main aspects of the law will ensure that climate neutrality is irreversible, that investors will have a transparent view of eco-conscience investments, and that the green transition will be socially fair and cost-effective. This is being done by implementing climate change strategies that include carbon mitigation and climate adaptation for a robust plan that will replace old technologies with new, while trying to remove some of the damage that has already been done. This will foster achieving their extended objective of climate negativity after 2050. This legally binding agreement will be reviewed every five years as per the Paris Agreement. 

To give special attention to climate change actions, the European Scientific Advisory Board on Climate Change was established in 2021 out of the European Environment Agency (EEA) to achieve climate neutrality by 2050. This is an advisory board of fifteen senior scientific experts that will give advice regarding the most effective ways to achieve the 2050 goal. 

The Fit for 55 package in detail

What’s encompassed in the Fit for 55 package is a multifaceted plan to achieve a 55% cut in GHG emissions by 2030 compared to 1990 levels. 

The EU Emissions Trading System (EU ETS)

This is the EU’s carbon pricing mechanism based on a cap-and-trade system. It applies to energy-intensive industries, the power generation sector, maritime transport, and the commercial aviation industry throughout the European Economic Area (EEA) through the implementation of the global carbon offsetting and reduction scheme for international aviation (CORSIA) through the EU ETS. The aforementioned list overall covers approximately 10,000 companies. By decreasing its allowances every year, emissions in the EU decreased 41% since 2005.

The EU carbon border adjustment mechanism (CBAM)

Europe also introduced its CBAM in October of 2023. This ensures fair carbon pricing for imports that aren’t required to participate in the EU ETS. Why is the CBAM necessary? This component of the Fit for 55 package ensures that companies doing business with the EU are subject to the same pricing as those doing business from the EU. 

The Carbon Border Adjustment Mechanism was created to address carbon leakage from offshore emissions. Carbon leakage occurs when companies transfer the production of goods to countries with lower emissions standards, often leading to an overall increase in their scope 3 emissions. This can happen if another country has less effective carbon mitigation policies or little climate consideration. This may lead to importing goods with higher production emissions that replace the cleaner domestic products; not only polluting more but making prices unfair. It also prevents greenwashing.

The modernisation fund and the innovation fund

The Modernisation Fund supports the modernisation of energy systems and the improvement of energy efficiency in 13 lower-income EU Member States and is financed by revenues from the auctioning of emission allowances under the EU ETS.

The Innovation Fund is the EU fund for climate policy, which highlights energy and industry. It aims to bring to the market solutions to decarbonise European industry and support its transition to climate neutrality while enhancing its competitiveness.

graphic of the innovation fund from the european commission
Image source: European Commission

The social climate fund

The social climate fund proposal aims to address the social and distributional impact of the new emissions trading system for buildings and road transport. Based on social climate plans to be developed by the member states, the fund will provide support measures, investments, and temporary direct income support for the benefit of vulnerable households, micro-enterprises, and transport users. The EU budget for the social climate fund is up to 65 million euros. 

Entities outside of the EU ETS

The sectors not covered by the EU ETS, which are road and domestic maritime transport, buildings, agriculture, waste, and small industries, are subject to lowering their emissions to 40% by 2030 compared to 2005 levels. 

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

Fit for 55 also aims to enhance Europe’s carbon sinks through the land use, land-use change and forestry (LULUCF) regulation which entered force in May of 2023 and is an important aspect in preserving biodiversity. 

The new rules adopted by The Council in March 2023, set an increased EU-level target of at least 310 million tonnes of CO2 equivalent net removals of greenhouse gases for 2030. Binding national targets are defined for each member state.

CO2 emission standards for cars and vans

By 2035 all new cars and vans sold in the EU will be zero emissions. 

The targets for performance standards are:

  • Cars: 93,6 g CO2/km (2025-2029) and 49,5 g CO2/km (2030-2034) 
  • Vans: 153,9 g CO2/km (2025-2029) and 90,6 g CO2/km (2030-2034)

Methane emissions reduction in the energy sector

The proposal was set out in the EU Methane Strategy in 2020. The European Commission and Parliament agreed on it in November of 2023 but it has yet to reach concrete legislation. The idea was to reduce their methane emissions by 30% by 2030 compared to 2020 levels. 

Sustainable aviation fuels

The ReFuelEU Aviation proposal aims to reduce the aviation sector’s environmental footprint to further the EU’s climate targets. 

Decarbonised shipping fuels

In July 2023, The Council adopted the new rules regarding the FuelEU maritime initiative that reduces the greenhouse gas intensity of the energy used on-board of ships by up to 80% by 2050. This promotes the use of renewable and low-carbon fuels in the shipping industry.

Infrastructure for alternative fuels

The regulation on alternative fuels infrastructure (AFIR) will ensure that drivers will have ample infrastructure in place to charge and recharge EVs. in July 2023 The Council adopted the new legislation agreeing upon recharging stations for cars and vans to be installed every 60 km, hydrogen refuelling stations serving both cars and lorries to be deployed from 2030 onwards in all urban nodes, users of electric or hydrogen-fuelled vehicles to be able to pay easily at recharging or refuelling points.

Renewable energy

In October 2023 The Council adopted the legislation to increase the current EU-level target of at least 32% of renewable energy sources in the overall energy mix to at least 40% by 2030. There are also sector-specific goals to further along the transition more smoothly.

Energy efficiency

The EU energy efficiency directive, which will become law after it’s published in the EU’s official journal, will reduce final energy consumption at EU level by 11.7% in 2030, compared to projections made in 2020.

Energy performance of buildings

The main goals of the directive are to make all new buildings will be zero-emission buildings by 2030 and to have existing buildings be transformed into zero-emission buildings by 2050. The new rules were adopted by the Council in April 2024.

Hydrogen and decarbonised gas market package

The hydrogen and decarbonized gas market package presents updated regulations aimed at reducing the carbon impact of the gas industry. Its objective is to transition away from conventional natural gas towards renewable and low-carbon gas sources, thereby promoting their adoption across the EU by 2030 and beyond.

Composed of a regulation and a directive, this package establishes uniform internal market guidelines for renewable and conventional gases, as well as hydrogen. These measures seek to establish a structured regulatory environment for specialized hydrogen infrastructure and markets, along with comprehensive network planning. Additionally, they outline consumer protection measures and reinforce supply security protocols.

Energy taxation

The proposal for a revision of the directive on the taxation of energy products and electricity aims to align the taxation of energy products and electricity with the EU's energy, environment and climate policies. It also aims to preserve and improve the EU internal market by updating the scope of energy products and the structure of rates and by rationalising the use of tax exemptions and reductions by member states. And finally, to preserve the capacity to generate revenues for the budgets of the member states. The proposal is currently under discussion within the Council.

Related Content

Please check out the latest on how to calculate and measure your carbon data for the European Climate Law:

Article: How Are Carbon Emissions Measured?
Article: A Decision-Making Framework for Choosing Effective Decarbonization Initiatives
Article: How to Calculate Your Carbon Footprint
Article: Carbon Footprint Measurement: What It Means for Your Business

How Net0 can help companies align with the European Climate Law

In conclusion, the journey towards a net zero economy by 2050 and a 55% reduction in greenhouse gas emissions by 2030 is undoubtedly challenging. However, the EU has demonstrated commendable efforts in assisting member states and sectors in charting a successful and cost-effective path towards a low-carbon society. With steady progress, we can collectively achieve our ambitious goals.

At Net0, we stand ready to support your company in addressing its carbon footprint and providing the necessary tools to reduce emissions. Take the first step towards a sustainable future by requesting a free demo with one of our experts today.

Written by:

Kristin Irish

As a content writer for Net0, Kristin harnesses her expertise and enthusiasm for carbon emissions reduction, merging it with her other passion: the B2B SaaS industry. Her global outlook and dedication enrich the sustainability sector with insightful perspectives.
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