In her monthly column, Angeli Mehta reports on the Commission’s ambitious ‘fit for 55’ package, the UK’s roadmap to decarbonise transport, and the G20 ministerial meeting

The EU stepped into uncharted territory in July, unveiling a far-reaching package of measures to help Europe cut emissions by at least 55% by 2030.  The Commission’s executive vice president, and the man in charge of the EU Green Deal, Frans Timmermans, wanted no one to be in any doubt about the price of failure: our children and grandchildren, he said, would “be fighting wars over water and food”.

Timmermans said the bloc needs to do two things: put a price on carbon and a premium on decarbonising. Its policy package sets out to do both, ranging from renewed push on energy efficiency to spending on electric vehicle infrastructure to social support for poorer households.

New cars and vans that produce carbon emissions will be outlawed from 2035; while the Commission wants to see 40% of the bloc’s energy mix coming from renewables by 2030 – almost double what it was before the pandemic. 

A carbon border adjustment mechanism will apply to the iron and steel, aluminium, cement, fertiliser and electricity sectors

Today, bioenergy provides 60% of renewables, and while there’s a proposed strengthening of the criteria for forest biomass use, it will still be permitted, despite warnings from the Commission’s own scientists. (see NGOs call for biomass to be removed from EU sustainable investment rules)

The centrepiece of the package involves proposals for an extension of carbon trading to transport and buildings (in a parallel system with no free allowances), and a carbon border adjustment mechanism (CBAM) that will apply to the iron and steel, aluminium, cement, fertiliser and electricity sectors. Aviation and maritime sectors will also for the first time be included in its emissions trading scheme.

Reaction to the package from environment campaigners and industry has been mixed, but all eyes will be on the outcome of negotiations in the European Parliament, and with member states, that will decide its fitness to meet climate goals.

A sign in Stuttgart alerting about fine particulates on a busy road. (Credit: Michael Dalder/Reuters)

The economy commissioner, Paolo Gentiloni, described the CBAM as an environmental policy tool, not a tax or tariff.  The aim is to equalise the cost of imported goods, so EU products won’t be displaced by cheaper goods with higher embedded emissions carbon-intensive goods, and to avoid European production moving to jurisdictions with less ambitious climate targets.

Gentiloni said that while the mechanism is designed to encourage other countries to decarbonise, it is targeted at companies, not countries. Importers would pay for embedded carbon by buying emissions trading certificates based on carbon prices in the EU ETS.

It will be a delicate task to fairly take account of climate measures that its trading partners are taking.

The intention is to phase in the CBAM over three years from 2023, while free allowances for affected EU industries would be phased out gradually over 10 years. This has provoked howls of protest: Aegis Europe, a grouping of 20 manufacturing associations) says the loss of free allowances will hurt exporters. Others are concerned it could impact on trade or create disputes at the World Trade Organization.  

CBAM is a necessary interim measure, in order to correct for the near-term carbon pricing asymmetries emerging around the world

G20 finance ministers have talked of a need for closer coordination on carbon pricing mechanisms, but Gentiloni said the EU couldn’t wait for a global system – “this discussion will take years and years”. The U.S. wants to consult with China and others about whether to introduce such a mechanism, while the Canadian government will soon begin discussions with industry.

Alasdair Graham, head of industrial decarbonisation initiatives at the Energy Transitions Commission, points out that CBAM will not be a long-term policy.  “It’s a necessary interim measure, in order to correct for the near-term carbon pricing asymmetries that are emerging around the world. In the longer run, things like regulation and, frankly, moratoriums to essentially regulate particular technologies or products with certain carbon intensities out of the market is probably a more viable, long-term multilateral solution."

To protect the poorest European households from increased energy and transport costs, a €72bn fund (new ETS revenues and matched by member-states)  will be dedicated to a social fund that will start paying out in 2025.

Heavy emitters like Poland are already worried their citizens and economy will be hit hard. Indeed, a study for the European Climate Foundation (published before the EU announced its package) concluded that an ETS wouldn’t substantially impact emissions from transport and heating, but would hit those on low incomes as well as renters, who can’t influence how their homes are heated.

In its briefing on the EU proposals, thinktank E3G urges the Commission take its citizens on the journey, too. By “making central and eastern Europe a priority for technical assistance to develop bankable projects and scale up existing ones”, the Commission could help accelerate the shift.

UK's transition to electric

July was certainly a bumper month for policy, with COP26 host UK also unveiling its long-awaited plan to decarbonise transport.

The plan provides a roadmap for the transition to electric vehicles, the development of charging infrastructure and recycling of batteries. The government says its own fleet will be zero emissions by 2027; while small diesel trucks will be banned by 2035 – heavier trucks by 2040. It particularly wants to reform last-mile deliveries to reduce vehicle traffic as well as emissions

Domestic transport emissions amounted to 122m tonnes CO2e in 2019, with more than half of it coming from cars and taxis – forcing the government to review its national roadbuilding strategy. The Climate Change Committee points out that transport emissions have barely moved over the previous decade and yet they need to fall by 90% by 2050, to meet the UK’s net-zero target.

Manoeuvring ahead of COP26

Just as COP26 president-elect Alok Sharma was in Italy pressing G20 ministers on support for the long promised $100bn climate fund for the developing world, his fellow MPs chose not to reverse cuts to the overseas aid budget – a decision certain to haunt his efforts all the way to Glasgow.

Stopping off in London on his hectic climate diplomacy schedule, U.S. climate envoy John Kerry promised the U.S. would make good on its commitments. He acknowledged that an announcement would have to come well before COP26, or the dynamics of the make-or-break summit would be affected.  

That support cannot come fast enough for the climate-vulnerable nations (V20), who also held a summit in July. Ministers of the group, led by Bangladesh, want to see the developed world come up with a concrete delivery plan for finance. Their nations already suffer annual levels of loss and damage more costly than the sums promised.

Bangladesh is leading the V20 group of climate-vulnerable nations. (Credit: Mohammad Ponir Hossain/Reuters)

James Fletcher, a former sustainable development minister of St Lucia, told a webinar organised by UK parliamentarians that despite contributing less than 0.2% of emissions “We’re at ground zero” of the climate crisis. “No sooner do we recover than another storm comes along.”

They will not have been cheered by the failure of G20 energy and environment ministers to agree a commitment on the phase-out of coal power. Another sticking point was on whether to push harder than the Paris Agreement to cap average temperature rise at 1.5C. This is despite many of them now experiencing first-hand the impact of the warming that is already baked in.

Bright spots in Asia

A report from BloombergNEF finds G20 nations’ support for fossil fuels is still incompatible with their climate commitments. Between 2015 and 2019 they provided $3.3tn in subsidies,  a sum that could fund enough solar installation to power the U.S. electricity grid more than three times over.

On the plus side, Japan’s government has announced ambitious plans to almost halve the share of fossil fuels in its energy mix by 2030.

Meanwhile China, the largest supporter of coal, did not fund any coal projects through its Belt and Road Initiative in the first half of 2021. It also got its emissions trading system off the ground this month, although observers say allowances are currently too generous to have a meaningful impact.

Another of the G20, Brazil, is experiencing some of the worst drought in 100 years, attributed in part to deforestation. Indeed, parts of the Brazilian rainforest are now emitting more carbon than they take up, according to a nine-year study by scientists in Brazil, underlining concerns that the country is on an environmentally unsustainable path.

While governments and NGOs invest in satellite monitoring of forests, including the Amazon, the communities that rely on forests don’t get a say in forest governance.

Indigenous communities could act upon satellite monitoring data to reduce deforestation. (Credit: Ueslei Marcelino/Reuters)

However, a study in the Peruvian Amazon highlighted that indigenous communities could act upon satellite monitoring data to reduce deforestation. The running costs were just $5 a hectare over the two years of the programme – surely a bargain given estimated sequestration rates of up to 10 tonnes of carbon per hectare.  Gregorio Diaz, general coordinator of COICA (the coordinating body for indigenous organisation in the Amazon Basin) said the Paris Agreement is not providing territorial solutions to deforestation, whereas this technology could.

With fewer than 100 days to COP26, such breakthroughs are urgently needed. For globetrotting John Kerry, the priority is to build momentum towards reaching a successful agreement in November by creating coalitions of the willing, encouraging coordination of financial mechanisms and creating demand.

In London, he presaged a “First Movers” Coalition to deliver coordinated supply chains. He is encouraged that major oil and gas producing countries – Russia and Saudi Arabia – are showing signs of being willing to act, although there are no firm commitments (as the G20 showed). He also stressed the extent of meetings with Chinese officials. For all the two nations’ differences, he said cooperation “is the only way to break free from the world’s current mutual suicide pact”.

See also:

Brand Watch 1: One step forward, three back in fashion industry's sustainability 'journey'

Brand Watch 2: FSC slowness to drop Korindo shows need for brands to pull up their socks

ESG Watch: 11 funds join UK campaign for greener pensions

Main picture: EU executive vice president, Frans Timmermans. (Credit: Johanna Geron/Reuters)


EU Green Deal  CBAM  bio-energy  EU ETS  G20  E3G  OP26  transport transition  John Kerry  V20  Belt and Road Initiative  deforestation  indigenous communities 

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