Presented in 2019 by Ursula von der Leyen, the European Commission’s president, the European Green Deal has three goals:
- To cut carbon emissions in Europe - with a strong focus on energy, making up more than 75% of Europe GHG,
- To achieve economic growth while decoupling with natural resources,
- To ensure no one is left behind.
Two years later and a COVID-19 pandemic, the European landscape has radically changed: the GDP of the European Union declined by 6.6% in 2020 (Eurostat, 2021). The Green Deal is to play an important role in Europe’s recovery: not only in ensuring this recovery in the short term but also in addressing long-term climate change threats.
Frans Timmermans, European Commission vice president in charge of the Green Deal: “This is the make-or-break decade in the fight against the climate and biodiversity crises” (The Guardian, 2021).
Last week, on the 14th of July, while huge wildfires raged in Siberia and Death Valley, in California, recorded what could be the highest recorded temperature on Earth, the European Commission presented its “Fit for 55” package, a set of 55 proposals to achieve the climate target plan of 55% of emission reductions by 2030 compared with the levels of 1990.
The European Commission presented an ambitious plan that will deeply transform our economy and our lifestyle. The urgency of the situation is undeniable and business as usual is over. Therefore, we wanted to give you an understanding of the magnitude of these transformations and the impacts they will eventually have on businesses. Although the quantification of carbon emissions is a first step into grasping companies’ impacts on climate change, the real work starts when developing strategies and climate actions to decrease these emissions and reach set targets. While the Green Deal is setting the stage for increased climate actions, Cozero is supporting companies into this, more than required, transformation.
(European Commission, 2020)
Here is what the deal looks like:
The Fit for 55 Package
As a reminder, the Green Deal includes eight policy areas: biodiversity, sustainable food systems, sustainable agriculture, clean energy, sustainable industry, building and renovating, sustainable mobility, eliminating pollution and climate action. It represents an unprecedented effort to review more than 50 European laws and redesign public policies.
The “Fit for 55” package includes new policies and regulations and, while several years of negotiation are expected before the planned legislation to be implemented, there are major changes going on for citizens and businesses.
Emissions Trading System:
The EU Emissions Trading System is the first large GHG emissions trading scheme in the world. The principle is easy: a maximum of GHG emissions is set on the total amount of GHG that can be emitted by all participating companies. Allowances (or carbon credits) for emissions are auctioned off or allocated for free, and can subsequently be traded. The goal is to gradually decrease the authorized amount of emissions on the market and compel companies to decarbonize their operations.
The plan is to quicken the pace at which emission caps shrink every year in order to force industries to speed up their carbon strategy. The scheme will be extended to other sectors which will end up affecting everything from the price of flights to the cost of energy. For instance, the transport industry will finally be included in the scheme: shipping and aviation, despite their high emissions level, have been exempt for too long from strict environmental regulations. A direct consequence on citizens could be the higher cost of plane tickets for low-cost airlines. With this proposal, the Commission is hoping to create a boost in the sustainable-fuel industry.
Carbon Border Adjustment Mechanism:
The EU plans to introduce a carbon tax on import of polluting products such as steel, aluminium and fertiliser to avoid European companies losing competitiveness against foreign companies with lower environmental standards. This mechanism is an effort to address the risk of weakened competitiveness and has global ramifications, potentially pushing other countries to step up their own climate policies. However, such protectionist measures could create diplomatic disputes under the World Trade Organization.
Car Emission Standards:
Passenger cars account for roughly 12% of total carbon emissions: the EU is proposing that emissions from new cars fall by 55% by 2030 and drop to zero from 2035. This regulation should increase demand for electric cars and infrastructure (e.g. charging points).
Renewable Energy Targets:
To have a chance to meet its carbon target, Europe needs to increase the share of energy from renewable sources (target of 40% of the energy mix from renewable sources by the end of the decade).
The Commission is proposing to renovate buildings to waste less energy and to promote energy efficiency across different sectors of the economy. Indeed, the EU only achieved its 2020 energy efficiency target because of the pandemic. Current national targets are not ambitious enough. The Green Deal is expected to define new targets for the EU energy mix by 2030 and make the directive legally binding to achieve 32.5%energy savings by 2030.
Land Use and Forestry:
The plan is to increase the amount of carbon sequestration in forests and grasslands (310 million tons a year by 2030 - currently it is 270 million tons). The Commission is also working on a system of carbon-removal certificates which would allow farmers to offset their pollution.
Financing the Green Deal
The European Commission has forecasted a need for 1 trillion euros of investments to support the development and implementation of the Green Deal. Half of this investment would come from the EU budget and the EU Emission Trading Scheme the other half from Invest EU: a fund to support sustainable investments from public and private sectors.
To push forward climate action, the European Commission recently presented the Sustainable Finance Strategy, to channel private financial flows into relevant sustainable economic activities, and the European Green Bond Standard, to encourage large-scale investments while meeting strict sustainability requirements.
The Just Transition Mechanism will support an inclusive transition to leave no one behind by providing between 65€ and 75€ billion over 2021-2027 (e.g. help citizens to pay for green transport and upgrade the energy efficiency of their homes).
What has been done so far?
- The European Climate Law: to make the EU’s climate target legally binding for member states.
- The EU Renovation Wave: to increase environmental performance and cost savings for 220 million buildings by 2050.
- The EU Code of Conduct for Responsible Food Business and Marketing Practices: to increase the availability and affordability of healthy and sustainable food options.
- The EU Action plan Toward Zero Pollution for Air, Water and Soil: among other, to reduce premature deaths due to air pollution (55%), plastic pollution in the sea (50%) and residual municipal waste (50%)
- The EU strategy on Adaptation and Climate Change: to reinforce EU’s resilience to climate change
What needs to be done?
Becoming the world’s first climate-neutral continent requires a change in government policies, business strategy and consumer behavior.
The focus of the coming year must be on translating the Green Deal into concrete initiatives. Therefore, businesses can leverage that and become agents of change for the european sustainable transition: develop concrete plans and promote sustainable best practices in their respective industries. Companies should also use their soft power to influence consumer behavior and offer more sustainable goods and services. They should also leverage their influence to work more closely with governing bodies and share best practices within their sectors. Finally, carbon reduction is going to change industries durably and sustainably, and for that we need leaders and managers to show the way into this transformation by sharing their knowledge and the tools they use.