Buckle up: the impact of the Fit for 55 package for industry

This digital event unpacked the Fit for 55 package. The European Commission released a flurry of legislative measures to make Europe fit for the 55% emissions reduction target by 2030, which have dramatic consequences on businesses across most sectors.

GC experts Tom White, Director; Ermenegilda Boccabella, Adviser on energy and climate; and Giorgio Corbetta, Senior Associate, broke down the package and analysed implications for energy, manufacturing and transport industries.

Highlights from the discussion:

• As most of us expected, the commission presented 12 legislative proposals, plus a Social Climate Fund. The package is organised around three pillars: emissions reduction, transport, and energy. The review of the EU Emission Trading System (EU ETS) and its extension to maritime transport, road transport and buildings is the fulcrum of the package. The commission is also targeting transport as the only sector where emissions have been rising since 1990. In this space, the main proposal by the commission is to phase out the sale of new internal combustion engine vehicles by 2035. Finally, Fit for 55 has also introduced higher targets for renewable energy and energy efficiency.
   
• For business, and in particular manufacturing, the single most important challenge the package will introduce is the reduction of EU ETS allowances and the phase-out of free allowances. The latter is a necessary measure to ensure the Carbon Border Adjustment Mechanism, one of the other key measures the commission proposing is WTO-compliant. Both measures will raise operational costs and force companies to drastically reduce emissions over the next eight and half years. Industrial member states are expected to push back hard and demand longer implementation lead times and more generous funding to support transitioning to cleaner industrial processes.
   
• The introduction of the Social Climate Fund reflects the commission’s awareness of the challenges that emissions reduction across the board will pose to businesses and citizens. The fund is an explicit offer to member states to support citizens in purchasing electric vehicles, invest in cleaner heating and cooling systems, and reduce their energy consumption. However, the resources of the fund and its specific scope will be challenged by members of the European Parliament. It is expected that negotiations will revolve around key thematic areas across measures in the package, which will possibly facilitate the commission brokering an agreement with its co-legislators.