Europe’s ambitious CO2 reduction plan in a reality check

Europe wants to become the first climate-neutral continent. In order to get a little closer to this ambitious goal, 54 laws and regulations of the EU are to be revised by the end of 2022. This means that there is not only a bureaucratic marathon ahead, but tough negotiations between the EU Parliament and the member states: Who does how much? And above all: how should it work?

The Commission has now presented the first batch of twelve legal acts in the “Fit for 55” package. The heart of the reform is the CO2 emissions trading system: the market for pollution rights is being severely restricted and by 2030 it is expected to save an impressive 61 percent of CO2 compared to 2005 – that is 20 percent more than was previously aimed for.

Experts estimate that this should push the prices for one tonne of CO2 from the current 55 euros to well over 80. However, emissions trading has so far proven to be the most effective means of saving CO2 and has even exceeded its climate targets, especially as coal-based electricity has been pushed out of the market by renewables. By 2030, the coal phase-out could be completed across Europe, which would bring the EU a significant step closer to its climate target.

Consequences for companies

To this end, a tax is to be introduced for companies that want to import their products into the EU. European companies should be protected in the face of rising CO2 prices in global competition. The project is highly controversial because it is difficult to bring into line with the rules of the World Trade Organization and could put a strain on EU trade relations, experts warn. On the other hand, the mechanism could also encourage foreign producers to produce with less CO2 in order to continue serving the EU market.

The directive for renewable energies is also being reformed: the proportion of green electricity in energy consumption is to increase by 40 percent. That is ambitious; it is currently 19 percent. Because the best energy source is the one that does not use energy in the first place, Brussels would like to almost double the EU member states’ energy saving commitments. This prioritization is welcomed by experts, but the financing has not been resolved: It is more difficult to find investors for energy efficiency projects than, for example, for green electricity generation.

Brussels wants to encourage people to save energy

In order to stimulate energy saving, new minimum energy tax rates should also apply, which are based on energy content rather than volume – a paradigm shift. Fossil fuels are likely to become even more expensive, tax breaks for kerosene and heavy fuel oil are to be eliminated, and shipping is to be incorporated into emissions trading.

In addition, binding quotas for sustainable aviation fuels are to apply from 2025. However, there are doubts about the feasibility of the measures. Above all, the refueling and reporting requirements for non-European airlines could easily fail due to aviation agreements at bilateral and UN level.

A lot is also likely to change in road traffic: by 2035, only emission-free cars should be allowed. This is definitely feasible, with this objective the commission oriented itself towards the ambitious announcements of the carmaker, said commission president Ursula von der Leyen. In the future, there will be an e-charging station every 60 kilometers along important expressways and a hydrogen filling station every 150 kilometers – the EU is currently a long way from this.

In order to achieve the promised climate neutrality, the EU Commission is now firing from all pipes.

The hardest part is yet to come

The difficult part is still to come: If the existing CO2 reduction potential is fully utilized, the industry will have to invest in completely new technologies and machines that do entirely without oil and gas. That will be expensive and impossible without government aid.

The task of converting the traffic and heating of all buildings to electricity or hydrogen is even more difficult. For the EU, this is a huge balancing act: Despite all the new laws and requirements, in most areas it is ultimately up to the member states to do their part. The Commission cannot force them to do so.