On 14 July 2021, the European Commission launched the Fit-for-55 package, a large set of legislative proposals to revise the EU 2030 climate and energy framework. Key elements of the package are the revision and scaling up of the Emissions Trading System (ETS) to cover a broader array of sectors, introducing a Carbon Border Adjustment Mechanism (CBAM), and the creation of a Social Climate Fund among other proposals.The EU asks for feedback on new legislation and revisions in public consultations. WISE had a number of concerns regarding the proposals, and therefore submitted feedback to 3 consultation rounds. Check out our feedback on the revision of the EU Emission Trading System here.
WISE supports the increased ambition in reducing greenhouse gas emission by 2030 and towards climate neutrality by 2050 through the EU ETS. However, the current proposal is not ambitious enough to limit global warming to 1.5°C per the Paris Agreement. In what areas and recommended alternatives can be summarized as follows:
First, a reduction of 55 % GHG emissions by 2030 is not ambitious enough to achieve the Paris Agreement Target of 1.5°C. A UNEP report shows this should be at least -68%, to stay within a 1.5 degree global warming. The various elements of ETS should be implemented better and faster to ensure a faster transition. This means a more ambitious one-off reduction of the cap, a faster introduction of CBAM and corresponding facing out free allowances, full inclusion of the shipping and aviation sector by 2023, and a stronger and dynamic MSR.
Secondly, the ETS should contribute to a just transition with real climate benefits. WISE welcomes the amendment to the provision on the use of auction revenues, demanding Member States to use all the revenues for climate-related purposes, including to support low-income households’ sustainable renovation. To ensure this, the revised ETS should include more stringent and clear criteria on what is – and what is not - considered a climate-related purpose, and exclude all investments in fossil fuels, unsustainable biomass, nuclear energy and ETS indirect cost compensation through state aid schemes.
Third, the ETS revision should better address the distributional and social effects of the energy transition. WISE does not support the proposal to include emissions trading for buildings and road transport because of the disproportionate burden on households with lower incomes and from lower income countries versus higher income countries. In addition, WISE is concerned about the social implications of a CBAM on Low- and Lower Middle-Income countries and calls for a tailor made CBAM to address this.
Finally, the revision of the ETS does (properly) include major polluting sectors, such as Municipal Solid Waste incineration and the use of Biomass for energy production. WISE calls for the ETS Directive to regulate Waste incineration, and revise the zero rating of ‘sustainable’ biomass greenhouse gas emissions in order to ensure that it fully reflects the balance of the net effect of the production and use of bioenergy to get rid of perverse incentives that can increase greenhouse gas emissions.