Would you like to have more sustainable or local products to choose from? More climate-friendly alternatives for living, traveling and doing business altogether? And have fewer environmental risks and catastrophes as a result?
Yes, consumer prices are likely to soar with the EU’s new climate package called Fit for 55, but it also holds bright future scenarios for consumers and businesses – alongside its ultimate promise to reduce greenhouse gas emissions by 55% by 2030 (compared to 1990 levels) in Europe.
Fit for 55, the biggest climate package the world has ever seen, was unveiled by the European Commission in July and is a step towards Europe becoming the world's first climate-neutral continent by 2050.
There is much to gain. The 27 nations of the EU are significant contributors to global emissions, having produced 2.54 billion metric tonnes of carbon dioxide emissions in 2020 (down 13% on the year before largely due to the coronavirus pandemic). The continent already experienced severe impacts of the climate crisis this year as the south battled wildfires, while Germany and Belgium were hit by deadly floods.
It is not yet possible to say exactly how consumers and businesses will be affected by the package because many of the new and updated regulations will take around two years to pass through the European Parliament and Council, before being adopted into national and local laws and implemented.
But one thing is clear: the climate tab is getting out of control and it’s better to pay now than later.
Road transport will drive change
Road transport is one of the few sectors in which greenhouse gas emissions are continuing to rise, and Fit for 55 takes action.
The Commission’s proposals include a 55% cut to the CO2 emissions of new cars and vans by 2030, rising to 100% in 2035. That allows 15 years for the last sales of new gasoline and diesel cars to be phased out in time for the 2050 net-zero target.
Road transport will also be included in the Emissions Trading System (ETS) CO2 market for the first time – although what shape that will take, and if that will even happen, remains to be seen.
The European Commission has highlighted transport decarbonization as a core objective of the legislative package, and this is reflected in the serious hike in GHG reduction obligations for all Member States set in the Effort Sharing Regulation. All parts of the package will need to deliver their fair share towards that goal.
Samuel Maubanc is Head of EU affairs at Neste, the world’s leading producer of renewable diesel and sustainable aviation fuel (SAF). Maubanc supports the move away from fossil fuels and views electric cars as one of the many solutions that the world needs for emissions reductions (Neste is piloting its first e-vehicle charging service). He, however, sees the current excessive focus on tailpipe emissions instead of considering all well-to-wheel emissions as misleading.
“The total emissions and the performance of a regular car running on waste-based renewable liquid fuels is similar to an e-car. We don’t think this forced march towards e-vehicles only – forbidding people to buy anything else after 2035 – provides the silver bullet that it is expected to provide.”
Maubanc says that by supporting a range of options - fit for both new vehicles and those already on the road - the EU could make sure that more people have the chance to choose a less polluting way of moving around.
“What if someone cannot afford a new electric car, or no charging point is available? They will just keep their old car. It is ill-conceived and just favors the status quo. The average car is 11 years old, and for trucks it is even more. The forced electrification will result in the existing fleet staying on our roads for even longer,” Maubanc argues.
Can air travel ever be sustainable?
Another Fit for 55 proposal which tackles a sector lagging behind in emissions reduction is the ReFuelEU Aviation initiative.
Sustainable aviation fuel (SAF) is currently used globally but in relatively small quantities to reduce the aviation sector emissions. But demand is expected to rise rapidly as ReFuelEU Aviation increases the amount of SAF blended into the jet fuel mix from 2% in 2025 to 5% in 2030, rising to 63% in 2050.
This legal certainty that the initiative would provide would encourage SAF producers to invest in additional production capacity, secure in the knowledge that the demand will rise, with two-thirds of aviation fuel coming from more sustainable sources in 30 years.
Neste is already modifying its existing renewables production capacity in Rotterdam, the Netherlands, to enable the option to produce up to 500,000 tons of SAF annually. Currently the refinery produces mainly Neste MY Renewable Diesel™.
The Fit for 55 proposals also include measures designed to ensure that demand for biofuels such as SAF does not impinge on land better suited for food production. Neste’s SAF, for example, is produced 100% from renewable waste and residue raw materials.
But even then there are worries about what types of raw materials should be allowed – algae and used cooking oil are fine – but restrictions to the use of some categories of animal fats may be introduced.
The devil is in the detail, with above mentioned administrative distinctions potentially having a significant effect on overall availability of renewable fuels. “We use a lot of animal fat waste that is not suited for human consumption. We can turn this waste into a variety of high-quality renewable products to reduce and directly replace the use of crude oil-based alternatives,” says Maubanc.
“If these raw materials are not allowed to be used in Europe because of the new Renewable Energy Directive (RED) proposal, they will certainly be exported and used to decarbonise transport in other parts of the world. I don’t think that’s a good choice.”
Will the poorest pay the price?
To balance out the higher prices resulting e.g. from higher production costs of some of the lower-emission products, the Fit for 55 package includes a new Social Climate Fund.
It will take a proportion of the revenue from the revised Emissions Trading System or ETS, which will be expanded to cover shipping, buildings and road transport, to allow member states to support vulnerable people, small businesses and transport users to transition to more energy-efficient buildings, more sustainable heating fuels for their homes, and low-emission mobility.
The idea is to counter the regressive effects of higher fuel bills (which disproportionately affect poorer people), but it is unclear how different nations will use this money.
“This is a new kind of instrument,” says Bulgarian member of the European Parliament Iskra Mihaylova. “If we can manage it well enough it should be directed towards people with fewer opportunities. This is the idea - but how it will happen, I don’t know. It depends on national governments and local authorities.”
The revised ETS could end up watered down, or even scrapped. As Mihaylova puts it: “If it is very cheap, it doesn’t work well. If the price jumps, it is very expensive for companies and the public, and we are again nervous.”
As Maubanc stresses, “Considering that over 70% of the European vehicle fleet in 2030 will be internal combustion engines (ICE) running on fuels, ramping up the use and availability of renewable fuels has to be a core part of the EU strategy. Balance between wide availability of the different lower-emission solutions and affordability will be critical.”
The world watches
Another controversial part of Fit for 55 - and one which will have profound effects on companies outside Europe - is the Carbon Border Adjustment Mechanism (CBAM), which seeks to ensure businesses in the EU are not undone by cheaper, more polluting, offerings from outside the bloc.
The EU is not alone in raising its targets. President Joe Biden essentially doubled the US’s targets in April, pledging to cut carbon emissions by 50-52% below 2005 levels by the year 2030. And Britain has its own commitment: a 68% reduction in emissions by 2030 and a 78% cut by 2035.
China and India, two of the world's biggest emitters, though, made no new promises. As the biggest GHG emitter in the world, responsible for a quarter of emissions, China will come under intense pressure from other countries at the United Nations climate change conference (COP26) this November in Glasgow.
But Brussels is likely to face a tough time too from world leaders concerned that the commission’s unilateral proposals to tackle ‘carbon leakage’ or the transfer of production to countries with looser climate policies will hurt businesses back home.
Mihaylova is not a fan of CBAM. “I think it will be extremely difficult,” she says. “It will affect China, it will affect Russia. The effect on South America is another big question mark.”
Even the US, where Biden has indicated his readiness to work for climate security, could retaliate if American companies suffer, she believes. “It needs diplomacy - it needs much more effort.”
Getting the public on board
Amid all this uncertainty, getting the message across to the people of Europe will be crucial.
EU citizens will only tolerate paying more to drive their cars or heat their homes if the environmental benefits are made substantial and their impact on our safety and wellbeing are made clear. They also need to be offered a fair range of environmentally-friendly options, from which they can freely pick the most suitable.
Some might say Brussels was off to a poor start when it named the whole package Fit for 55 - which sounds more like a gym plan for baby boomers than one of the most comprehensive environmental policies the world has even seen.
“We are in a climate emergency, yes,” concludes Mihaylova. “Floods and forest fires can affect everyone.”
“These measures to combat climate change are to prevent environmental and social disasters in the future. If we are going to succeed, we must bring the people with us."