November 26, 2022

A passenger aircraft approaching Hanover Airport flies over a field of rape.

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LONDON – The European Union on Wednesday detailed how it will reduce greenhouse gas emissions in the coming years, with the plan potentially set to revolutionize many sectors from aviation to shipping.

The 27-strong bloc has vowed to become climate neutral by 2050 and to reduce its greenhouse gas emissions by at least 55% compared to 1990 levels by 2030.

In a far-reaching proposal, the European Commission, the executive branch of the EU, has shown how this can be achieved.

“The fossil energy industry has reached its limits. We want to leave the next generation a healthy planet as well as good jobs and growth that does not harm our nature,” said the President of the European Commission, Ursula von der Leyen, in a statement as the Blueprint read published.

The centerpiece

The main policy change is to expand the bloc’s emissions trading system. Under the plan, companies can trade certificates to keep the total number of greenhouse gas emissions from facilities and aircraft operators within a certain limit.

The Commission wants to let the free emission allowances for the aviation industry expire and include shipping for the first time. Independently of this, the EU executive also wants a new emissions trading system for fuel distribution for road traffic and buildings.

The automotive sector is hardest hit by the new rules, with the Commission proposing a de facto ban on diesel and gasoline vehicles by 2035.

A senior EU official who refused to be named due to the sensitivity of the talks said on Wednesday that all new cars and vans must be emission-free by 2035.

This means that charging points must be regularly available on motorways: every 60 kilometers for electric charging and every 150 kilometers for hydrogen refueling.

The same official added that while there will be incentives, they will be phased out from 2030. “We will be monitoring (this sector) very closely,” the source said.

In addition, the latest plans aim for EU countries to meet 40% of their energy needs from renewable sources by 2030.

Environmental taxes

The Commission wants to introduce a mechanism to adjust the CO2 limits, which can be described as an environmental tax. It aims to prevent goods that are manufactured elsewhere with less stringent emission regulations from being imported into the EU.

It would force EU companies to pay a CO2 adjustment for importing goods from outside the bloc. The price would be the same as would have been paid by EU companies if the goods had been manufactured according to the EU’s carbon pricing rules.

The United States had previously raised concerns about Europe’s plan for a carbon border tax. John Kerry, the US chief climate officer, told the FT in March that this border tax was having serious economic and trade repercussions, calling it a “last resort.”

The same senior EU official said Wednesday that the tax would target companies rather than individual countries.

The Commission’s idea is to introduce this levy gradually. First the cement, iron and steel, aluminum, fertilizer and electricity sectors would follow the new rules, and then other sectors would follow.

The commission also said it wants to update the rules on taxing electricity, motor and aviation fuels, and heat – known as the Energy Taxation Directive.

This has been in force since 2003 but the Commission believes that it is now no longer in line with its green agenda.

In a document handed to reporters on Wednesday, the commission said the current minimum rates were out of date. There is no incentive for cleaner fuels and there is no link between the level of taxation and the environmental impact.

This means airlines could likely pay more for fuel and pass those costs on to consumers. The same could be true of households if they heat their homes.

Financial support

The Commission recognizes that all of these proposals come at a cost. Vulnerable and low-energy households will be exempted from taxation on heating fuels and Member States will receive funding for investments in energy efficiency.

One of the ideas is to use revenues from the emissions trading system so that EU countries can offset the transition costs for vulnerable citizens.

implementation

Wednesday’s proposals open the discussion within the EU institutions. It takes time and tough negotiations to get all EU countries and the European Parliament on the same side.

Because the Commission’s ideas will affect the different economies of the EU in different ways. Countries like Poland, the Czech Republic and Hungary are particularly concerned as they are facing massive and costly transformation.

In addition, officials will also recall widespread protests in France that stalled the nation in late 2018 and early 2019 after French President Emmanuel Macron tabled an eco-tax on fuel.