Fitter for 55? MEPs call for wholesale changes to key Commission proposals on how to reach net zero by 2050

Fitter for 55? MEPs call for wholesale changes to key Commission proposals on how to reach net zero by 2050

Following the publication of the Fit for 55 Package in July 2021, Europe’s landmark legislative package to meet net-zero by 2050, lead Committees for parliamentary scrutiny have been appointed, with key MEPs selected as Rapporteurs and Shadow Rapporteurs for their political groups.

With the publication of their reports, Rapporteurs have now begun to share their views on how the European Commission proposes to transition Europe to a net-zero economy by 2050, with many calling for wholesale change and increased ambitions.

With Rapporteurs’ reports now published, deadlines for amendments are imminent, and votes on the final Committee reports are scheduled for the coming weeks. These votes will determine the final content of the report to be sent to a plenary siting of the European Parliament for adoption, and will therefore play a major role in the formulation of inter-institutional negotiating positions.

With just 3 months until a possible plenary adoption of key files, Hume Brophy has been taking a closer look at the views of MEP Peter Liese on the ETS Directive, MEP Mohammed Chahim on the CBAM Regulation, MEP Nils Torvalds on the RED II review and MEP Ville Niinistö on the LULUCF Regulation.

Summary of MEP proposed changes to Fit for 55

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Revision of the ETS Directive: Liese calls for quicker phase-in of ETS, but potential for a delay to private road transport and buildings credits

The proposed revision of the EU Emissions Trading System Directive (ETS), which sets a price for carbon, aims to align the existing scheme with the increased ambitions of the Fit for 55 legislative package. This includes extending the scope to include road transport, buildings, maritime transport and aviation, reducing the linear reduction factor and adjusting the Markets Stability Reserve. These policy levers, working in tandem, would increase the price of carbon on the EU market by 60% according to the Commission.

In his opinion on the file, ENVI Committee Rapporteur Peter Liese (EPP, Germany) proposes a broad range of changes aimed at increasing the speed of decarbonisation, without impacting the carbon price. His proposals include an earlier phase-in date of 2024; a bonus-malus system for those making lesser and greater decarbonisation efforts; the inclusion of methane (CH4) emissions from the maritime transport sector; and the creation of a Carbon Leakage Protection Reserve, which would safeguard covered sectors against an ineffective Carbon Border Adjustment Mechanism (CBAM).

Perhaps most consequential, however, is that Liese proposes to allow discretion to Member States to delay the implementation of private road and buildings ETS, instead looking to an earlier phase-in of other covered sectors (see maritime and aviation) to compensate for lost emissions savings.

The proposal has thus far received some cross-party political endorsement, although with some opposition from the Greens/EFA and will be voted on in the full Committee meeting on 16 May 2022.

Carbon Border Adjustment Mechanism (CBAM): Chahim looks to expand the scope of the Regulation and increase the pace of free allocation phase-out.

The Carbon Border Adjustment Mechanism (CBAM) – which aims to extend EU carbon pricing to third country imports – is one of the most contentious aspects of the Fit for 55 Package. The proposal seeks to both solve carbon leakage in ETS-covered, high-polluting sectors, and to nudge international policy to be in line with the EU climate objectives.

In the Parliament, the EP ENVI Committee Rapporteur Mohammed Chahim (S&D, Netherlands) proposes a sweeping overhaul of the Commission proposal, by integrating indirect emissions from all covered sectors; broadening the scope of the Regulation to include organic chemicals, hydrogen and polymers; accelerating the phase-in of the CBAM by a year; and proposing a centralised model for enforcement as opposed to one based on national authorities.

Perhaps most controversially, however, Chahim has also proposed that an “explicit” carbon price would be needed in order for trade from a given country / sector to be exempted from the scope of the Regulation. The proposal follows on from a high-profile debate between some WTO member countries and the EU, citing a potential breach of its rules and thus the possibility of third-country reciprocal measures.

Such concerns had earlier sought be assuaged by European Commission Executive Vice President Timmermans when he stated that an “effective” carbon price may be sufficient to exempt trade, while a more recent proposal from INTA CBAM Rapporteur Karin Karlsbro, who is responsible for submitting a non-binding opinion on the file, allowed for measures with ‘equivalent efficiency other than carbon pricing mechanisms’.

Chahim’s proposal, and all subsequent Committee amendments, will be put to a vote at the ENVI Committee on 11 May.

RED III: Torvalds throws out the cascading use principle, but cuts off financial supports to primary biomass for energy

Coming just two years after the enactment of a revised Renewable Energy Directive (RED II), the proposed RED III aims to align the Directive with the EU climate goals of carbon neutrality by 2050, and the intermediate target of reducing greenhouse gas (GHG) emissions by 55% by 2030. In order to achieve its increased ambition of reaching at least 40% renewables by 2030 – an almost doubling on current numbers – the directive will be modified to encourage the uptake of renewable energies into energy grids and the transport sector.

The most controversial aspect of the proposal, however, deals not with what level of renewable energy will be needed; but instead, which energy sources will take us on that journey, and how these energy sources can be sustainably sourced.

In light of this controversy, a decision was made to split the competency of the RED II review between the ITRE Committee , where Rapporteur Markus Pieper (EPP, Germany) leads the review and the ENVI Committee, where Rapporteur Nils Torvalds (Renew, FI) is responsible.

While Pieper is yet to deliver his report, Torvalds has proposed significant changes to the sustainability criteria for biomass for energy production, including the removal of the ‘cascading use principle’, and replacing it with restrictions on the ability of Member States to financially support primary biomass for energy production. Torvalds does so by defining both primary biomass (from the forest) and secondary biomass (from the sawmill).

In a bid to move away from primary biomass for energy purposes, Torvalds also proposes that the Commission adopts a legislative proposal by 2027 which sets out maximal levels of such feedstocks for energy purposes under the Directive.

Debates on the ENVI Committee report are ongoing, with a final vote expected on the Committee report on 16 May.

LULUCF Regulation: Niinistö ramps-up sequestration targets and removes supports for sector through carbon sequestration products

The Commission’s proposed revision of the Land Use, Land Use Change and Forestry (LULUCF) Regulation aims to remove 310 million tonnes of CO2eq by 2030, and necessitates climate-neutrality for covered sectors by 2035.

Rapporteur for the ENVI Committee, Ville Niinistö (Greens/EFA, FI), however, seeks a substantial increase to the EU sequestration targets, increasing to 490 million tonnes of CO2eq by 2030. The 60% increase in carbon sequestration also comes with increased penalties for Member States who fail to meet annual targets for two consecutive years. In such an event, National Climate Energy Plans must be amended to enhance carbon sink targets, and fines will be levied against the offending Member State to the value of €375 per tonne.

Niinistö also seeks to remove one of the more novel aspects of the Commission proposal, which would amend the current provision of supports for Harvested Wood Products, to Carbon Storage Products (CSP) and the delegation of powers to the Commission to adopt acts providing for new categories thereof. In his justification for the deletion, Niinistö claims that scientific consensus is lacking on the issue, but the measure seems to have broad support from across Committees, with the AGRI and ITRE rapporteurs both giving the measure its support.

The ENVI Committee will hold its final vote on the report on 28 April, before it is sent forward for plenary consideration.

Author

Eamonn Lawler

I joined Hume Brophy over five years ago and currently work as an Account Director, where I lead our Brussels office’s Energy & Environment Team. Since joining the company, my focus areas have been on energy, environment, transport and circular economy policies. My client work tends to focus on planning and executing public affairs campaigns, with a specific public policy or legislative target to work towards. Advising major MNCs, innovative start-ups and EU trade associations, we analyse the business implications of a legislative proposal and then leverage political, third-party and media engagements for the clients’ policy goals.
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