Preparing to be Fit for 55: Implications for Companies

On 14 July 2021, the European Commission presented a legislation package called ‘Fit for 55’. The legislation included in the Fit for 55 package is drafted to support the European Union’s (EU) commitment to reduce net greenhouse gas emissions by at least 55 per cent by 2030, and to become net-zero by 2055. Since 1990, the EU’s legislative efforts with regard to climate change law have reduced greenhouse gas emissions by 24%. However, to meet its commitments for 2030 and 2055, a more stringent regime is needed.

What is included in the EU’s ‘Fit for 55’ package?

The Fit for 55 legislative package is a series of interconnective proposals which intend to turn the EU’s climate goals into concrete action. In some of the proposals, the EU Commission is indicating that the legislative package is in part also a response to findings of the Intergovernmental Panel on Climate Change (IPCC) Special Report.

The following revisions, amendments, and new proposals are included in the Fit for 55 package:

Revisions

• Revision to the EU Emission Trading Scheme – intended to decrease the emissions cap for economic sectors, to decrease emission allowances for aviation, and to include the shipping industry.

• Revision to the Effort Sharing Regulation – introduces more stringent targets on Member States with regard to a variety of sectors.

• Revision to the Regulation on Land Use, Land Use Change and Forestry – provides more incentives for EU Member States to grow and improve their natural carbon sinks.

• Amendment of the Renewable Energy Directive – increases of energy from renewable sources to 40% rather than 32% by 2030.

• Amendment of the Energy Efficiency Directive -  targets more energy use reduction, with a specific focus on the public sector.

• Amendment of Regulation (EU) 2019/631 (as regards strengthening the CO2 emission performance standards for new passenger cars and new light commercial vehicles in line with the Union’s increased climate ambition) – requires for newly built cars, on average, to decrease their emissions by 55% before 2030 and to become net-zero by 2035.

• Revision to the Alternative Fuels Infrastructure Directive – to include increased requirements for aviation and shipping to have clean energy supplies.

• Revision of the Energy Taxation Directive – for increased taxation in accordance with existing climate policies.

New initiatives

• An EU Forest Strategy – for forests and the forest-based strategy.

• The Carbon Border Adjustment Mechansim – proposed a levy on certain products, preventing the risk of carbon leakage.

• A Social Climate Fund – aims to assist EU citizens (specifically: vulnerable householders) with financing measures and investments that reduce emissions.

• The ReFuelEU Aviation Initiative – to boost supply and demand for aviation fuels that are sustainable, within the EU.

• The FuelEU Maritime Initiative – to increase the use of sustainable alternative fuels in European shipping and ports.

What is next?

The Fit for 55 package will now be subject to extensive discussion by the European Parliament and the Council of the EU. First, the EU ministers will discuss the proposals and will try to reach a consensus, which will then form the basis upon which the Council will negotiate further with the European Parliament.

It is expected that by the end of 2021, further proposals and amendments are to be introduced and added to the Fit for 55 package.  

Implications for Corporates

Although the Fit for 55 package is set to undergo multiple revisions and negotiations during the upcoming months, there may be some early implications that we can identify.

Industries that will be heavily impacted are that of technology, infrastructure, transport, building, and energy. Especially companies in these industries, but also those in others, can start today by getting a clear picture of how their company and its operations are having an adverse impact on the climate. Moreover, it may be considered how certain changes necessary due to the Fit for 55 package may pose other risks to the company.

Right now is the perfect time to create an open dialogue with your stakeholders to see which steps to take and to jointly put together an action plan that will have the greatest climate-positive impact, but the least to none financial impact on the company. Communication lines with your stakeholders must remain open, as they are key to your sustainability strategy in many different ways.

Do you have any questions? Feel free to contact us.