In Strasbourg, even the smallest details of the ‘Match 55’ legislative package were at issue until the very end. During the historic voting marathon that took place in the European Parliament on Wednesday, the direction of the future of European climate policy had to be mapped out. But things turned out differently: the plenary was disagreed on several major points. All items have been referred back to the Environment Committee, which will now deal with them again. The fractions were too fragmented and the proposals too controversial.
There were big differences of opinion among the deputies, especially with regard to the planned correction of the CO2 limit by the European Commission. The main question is how long industry should continue to benefit from free emission rights in emissions trading. That this dossier blocked everything was “irresponsible policy” and “ridiculous”, commented Peter Liese (CDU), who is the emissions trading negotiator. Overview of why the EU is grappling with the climate package and what changes it is bringing to consumers.
What is behind the “Fit for 55” legislative package?
The program covers all the European Union (EU) climate goals by 2030. Thanks to “Fit for 55”, carbon dioxide emissions are to be cut by 55 percent compared to 1990. The legislative package is part of the Green Deal that European Commission President Ursula von der Leyen (CDU) presented three years ago and aims to make the EU climate neutral by 2050. Fit for 55 covers only twelve of the more than 50 legislative initiatives planned under the Green Deal. However, the package already contains far-reaching measures to be taken already in this decade. This should pave the way to climate neutrality.
To this end, the Commission has also announced reforms in many different areas: for example, emissions trading is to be expanded. The new CO2 border correction aims to prevent companies from migrating abroad to avoid CO2 taxes in Germany. The EU also wants to introduce binding regulations for member states in order to reduce their domestic emissions. The end of the internal combustion engine is also particularly controversial.
Why is the EU pursuing all of these goals?
The implementation of the new rules is a real marathon for the Commission, Parliament and the European Council. In July last year, the European Commission presented the “Fit for 55” package. There have been months of difficult negotiations in the environment committee and its accompanying committees, which should end on Wednesday in the European Parliament.
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In addition to the green transformation of the economy, the European Union also wants to use “Fit for 55” to mitigate the social consequences of structural changes. EU climate commissioner Frans Timmermans (PvdA) said ahead of the parliamentary vote on Tuesday: “Our policy will be fair or it will not be a policy.” to EUR 72 billion.
What’s the resistance to that?
The Commission’s proposal to expand CO2 trade, whereby industry and the energy sector had to purchase CO2 certificates since 2005, was highly controversial from the outset. For the first time, private consumers in the EU would have 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 highly critical of the proposal and fear social upheaval over new costs.
The lines of conflict in the negotiations were between the conservative EPP, the liberals and some right-wing parties, on the other hand, the Greens and Social Democrats formed a camp and made their own proposals. The compromise attempt by EPP rapporteur Liese failed in April. The left-wing alliance voted him out. However, it is not without contradictions that show how controversial topics are perceived even in parliamentary groups. For example, while the Social Democrats advocated ending free industrial pollution laws by 2034 in the Industry Committee, they rejected it in plenary.
The question of how ambitious the emissions trading should be carried out has also raised considerable disputes. While rapporteur Liese has focused more on the European Commission proposals and called for a very rigorous yearly restriction of pollution rights in the market, the Greens and Social Democrats have advocated the removal of millions of certificates once, but a slower, then one reduction. Liberals favored an intermediate course.
The vote failed on the proposal to adjust the CO2 limits, which is closely linked to emissions trading. This documentation specifies when free industry certifications will expire. The rapporteur in charge wanted to end this practice by 2028, while the rapporteur on emissions trading wanted to do so only in 2034. Leftists and liberals called for 2030 and the Greens called for an immediate end. In the end, the entire proposal was rejected, and with it the emissions trading and the climate and social fund fell.
What exactly were voted for?
Hundreds of corrections appeared on the table on Wednesday. The current legislation related to the reform of emissions trading, the climate social fund, the correction of CO2 limits, the tightening of emission allowances for aviation, new CO2 limits for vehicles, the applicable climate targets of individual Member States and the climate targets, the so-called land use sector, mainly forests, and includes Moore. Parliament sent the last two proposals on Wednesday.
In aviation, as in industry, free CO2 emission allowances should disappear 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.
For emissions trading, which is currently being renegotiated, the environment committee has proposed that from 2025 also commercial road traffic and buildings used for commercial purposes would have to purchase CO2 certificates. Shipping would be fully priced from 2024, air travel in 2025 and waste incineration in 2026.
What is the situation with the internal combustion engine?
According to the European Commission, CO2 limits for newly registered cars are to drop by 100%. from 2035 compared to 2021, which would result in a complete ban on the sale of internal combustion engines. The European Parliament agreed to this in a narrow decision on Wednesday evening. Conservatives and liberals in particular, in particular, previously pushed for a reduction of just 90 percent to make new registrations using old technology also possible after 2035. Environment Minister Steffi Lemke (Greens) declared in spring that “Germany supports the end of combustion engines for passenger cars and light commercial vehicles in the EU from 2035”.
Nevertheless, millions of internal combustion engines will continue to be on the road in the coming decade and beyond. The average life of a car in the EU is 15 years. However, even with internal 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 green hydrogen-based e-fuels.
So what does this mean for consumers?
As most of the ‘Match 55’ legislative package was postponed on Wednesday, no consequences are to be expected for the time being. But in the long run, energy prices are sure to rise. Because even if the emissions trading reform has been postponed, it aims to reduce the amount of emissions and increase the cost of CO2 emissions. However, much will depend on what the Environment Committee agrees.
The Environment Commission has made a relatively mild proposal that the CO2 price would be capped initially and private consumers would be exempted from the second ETS until at least 2029. However, as Germany already has a CO2 price of € 30 per tonne sharp jumps in prices are not to be expected in the coming years. Nevertheless, the rising price of CO2 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 pay more for their emissions in the future. If long-haul flights departing from Europe were also included in emissions trading, certification costs for airlines would double. Experts expect airlines to pass the increased costs on to passengers. However, this should create an incentive to fly less. Airlines should be encouraged to invest in reducing emissions. However, the rise in the current CO2 price should be rather moderate and should be low, double-digit, for most flights.
One thing is certain: in the 1930s, running an internal combustion engine is unlikely to be profitable. Major manufacturers are facing a comprehensive fleet conversion to electric drives, the scaling effects will reduce the price difference to the internal combustion engine. In the long term, there is also the fact that the price of fossil fuel CO2 will increase and the price of synthetic fuels will be much higher than the price of gasoline today.
While many proposals have been put off by Parliament, there is agreement on many details of the Fit for 55 package. It will now be the task of the Environment Committee to eliminate the last disagreements. According to reporter Peter Liese, this could happen quickly: he suspects that in two weeks, by the end of the month at the latest, a new vote may be held. Negotiations with the Council of the EU will then start in the fall.