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The European Union’s executive branch, the European Commission, last week unveiled its ‘Fit for 55’ climate plan: an ambitious set of policy and regulatory proposals aimed at lowering the bloc’s net emissions by “at least” 55% by 2030 compared to 1990 levels. Below, we’ve put together an overview of the plan’s principal components.

Carbon Pricing

The Commission proposes strengthening and expanding the EU’s Emission Trading System (ETS) by: 

• Lowering emission caps for industries covered by the revised EU ETS (e.g., the power sector, production of metals, papers, etc.) to reduce their emissions 61% compared to 2005 levels;

• extending the ETS to cover fuels used by buildings and road transport, starting in 2026;

• extending the ETS to cover fuels used by the maritime sector, starting in 2023; and

• phasing out free emission allowances currently given to the aviation industry, and implementing the International Civil Aviation Organization’s Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA).

The Commission also proposes:

• Revising the Energy Taxation Directive to (a) align tax rates for heating and transport fuels with the EU’s climate goals, and (b) remove exemptions for aviation, maritime, and other industries; and

• Implementing a carbon border adjustment mechanism (CBAM) to adjust the price of a limited number of high pollution imported goods based on their carbon content. The CBAM will take into account (and benefit) imports from countries where a comparable carbon price is already applied.

Renewable Energy

The Commission proposes:

• Updating the Renewable Energy Directive to (a) mandate that 40% of the EU’s energy mix come from renewables, and (b) foster renewables-based electrification in sectors where it is currently difficult; and

• Tightening bioenergy criteria, including with respect to sourcing (bioenergy currently accounts for “around 60%” of EU renewable energy production).

Electric Vehicles

The Commission proposes:

• Strengthening vehicle emission standards; and

• Revising the Alternative Fuels Infrastructure Regulation to ensure adequate deployment of user-friendly charging and clean fuel refueling stations across the EU, including in rural and remote areas.

Natural Carbon Sinks

To increase carbon sequestration by natural formations - such as forests and wetlands - the Commission proposes updating the Land Use Land Use Change and Forestry Regulation (LULUCF) to set a sectoral 2030 carbon removal target of 310 million tons of CO2. The Commission will also look to incentivize regenerative farming. 

Ensuring a Just Transition

The Commission proposes creating a Social Climate Fund, funded in part by proceeds from the ETS, to support economically-vulnerable Europeans through the transition to a green economy by:

• Potentially providing direct income support to low and middle-income households;

• Supporting investments to increase building retrofits and renewable energy deployment that will lower energy-related costs for vulnerable households and small businesses; and

• Financing citizen access to zero and low-emission mobility.

The Commission calls on EU member states to use ETS allowance auction proceeds to provide further economic support for low and middle-income citizens who may struggle with increased costs resulting from more stringent climate-related regulations. 

Through the European Skills Agenda, the Commission also intends to help facilitate citizen access to educational resources and retraining programs that will ensure their ability to successfully navigate the green and digital economic transitions.