Green Europlan – Kommersant

The Council of the EU has adopted several laws as part of the climate program “Fit for 55 in 2030”, which provides for a significant reduction in greenhouse gas emissions by 2030. In order to implement the plan, as well as to achieve carbon neutrality in the future, the EU is going to reduce the sale of CO2 emission certificates for products imported into the EU, and for its own enterprises – to consistently cancel free emission quotas. As follows from the published documents, the EU came to the conclusion that, given the severity of the “climate” threat, both “preferential” mechanisms will have to be curtailed over the next ten years. The acceleration in the implementation of the green plan is partly due to the consequences of the Russian military operation in Ukraine – in particular, the energy crisis of 2022, which is believed to make an accelerated green energy transition virtually uncontested for the EU.

On Tuesday, April 25, the EU Council approved a series of changes that are being made to two key EU climate programs: the Emissions Trading System (ETS) and the Cross-Border Carbon Adjustment Mechanism (CBAM). The new rules are built into the “Fit for 55 in 2030” program (which assumes a 55% reduction in CO2 emissions by 2030 compared to 1990 levels) and is aligned with the European climate law, which obliges the region to achieve “full climate neutrality” by 2050 .

Part of the council-approved “climate” laws concerns the adjustment of operating rules and the expansion of the application of the ETS system.

Let us remind you that it is a tool for regulating greenhouse gas emissions: the authorities set the maximum amount of CO2 emissions for industrial facilities of certain industries, and companies operating in the relevant sectors buy (or receive free of charge) “permits” for emissions – quotas. In terms of emission control, the system has so far worked, according to regulators, effectively, but it could not interest companies in investing in more environmentally friendly production (in fact, offering an alternative to this). The reforms approved by the council suggest that the sectors of the economy that participate in the system should reduce emissions by 62% by 2030 compared to 2005. To achieve this goal, the EU countries will simultaneously reduce emission quotas: by 90 million tons of CO2 equivalent by 2024 and by another 27 million tons by 2026. It is assumed that the annual reduction in quotas in 2024-2027 should be 4.3%, in 2028-2030 – 4.4% (in the rules applied so far, the goal was more modest – a reduction in quotas by 2.2% per year) .

The reforms also provide for a phased (for 2026-2034) abolition of free quotas for companies: by 2026 their number should be reduced by 2.5%, and by 2034 they are planned to be completely abandoned. The European authorities provide financial compensation for the “costs of emissions” to the most vulnerable, in their opinion, industries, that is, those in whose industries electricity bills are higher than in others (we are talking, for example, about ferrous metallurgy and metalworking). The new laws also provide for the expansion of the ETS program for emissions from road transport and home heating by 2027 (in some EU countries, such as Germany, this system is already in place for both sectors).

However, if energy prices remain “extremely high”, the deployment of the system, the EU Council explains, can be postponed – however, only until 2028.

Some of the other approved changes relate to the adjustment of the CBAM mechanism, the purpose of which is to stimulate the use of “clean” technologies in countries that export their products (steel, cement, aluminum, fertilizers, hydrogen and electricity) to the EU, as well as to prevent the removal of those who do not want to be involved in achieving common goals of European production outside the EU. The cross-border mechanism for adjusting carbon emissions involves a system for countries to buy CO2 emission certificates – in fact, this is the collection of fees in accordance with the scale of the damage done to the environment. In 2026-2034, the sale of such certificates is planned to be consistently reduced, and eventually abandoned, that is, in fact, to stop allowing products manufactured without the use of “clean” technologies to their markets.

Laws must now be approved by the Council of the EU and the European Parliament and published in the Official Journal of the European Union. They will take effect 20 days after publication.

It should be noted that since February 2022, the European Union has already quite seriously changed the trajectory of the energy transition and the development of alternative energy directly related to it (the fact that it will not be possible to achieve the stated goals without changes was widely discussed in the expert community – see “Kommersant” dated March 31). For example, earlier the EU authorities revised another program related to achieving carbon neutrality – the directive on renewable energy sources. By 2030, the European Union expects to increase their share in total energy consumption to at least 42.5%.

Due to the energy crisis provoked by the military operation of the Russian Federation in Ukraine, analysts feared a slowdown in the European energy transition (experts were alarmed, in particular, by the slowdown in the refusal to subsidize the extraction of fossil fuels, including coal,— see “Kommersant” dated April 22, 2022). Contrary to fears, the transition did not slow down, and electricity generation from renewable energy sources in Europe in 2022 turned out to be more than gas and nuclear for the first time. In addition, the European Union exceeded the plan to reduce gas consumption – according to the latest data from Eurostat, for the period from August 2022 to March 2023, it decreased by 17.7% (the EU Council set a goal of reducing by 15%) compared to for the same periods of 2017-2022.

However, a warm winter helped to partially reduce gas consumption (see “Kommersant” dated March 31). Since sanctions against the Russian Federation, which restrict energy imports, are clearly considered by the EU as being in force at least until 2030, it is easy to assume that any of the subsequent cold winters is able to realize the scenario of an energy collapse in the EU, which was avoided, despite panic expectations, in winter 2022–2023. However, with the exact implementation of the European plan, the risks each next winter will be less than the previous one, but the risks of purely economic, mainly industry-related, problems associated with CBAM, on the contrary, will consistently increase by 2030 and will not go anywhere in five years.

A key question in evaluating the EU’s move remains the future competitiveness of the European economy against that of the US in 2030.

It is this part of the EU’s “green plan” that reduces it in the medium term, especially in comparison with the also partly “green” US act “On reducing inflation” – a program to subsidize the transfer of production to the US, including special support for green investments. The EU can respond to “green protectionism” in several ways: by expanding its own subsidies, trade barriers, expanding trade with China and Southeast Asia, and entering into a new trade alliance with the United States. The adoption of the “Fit for 55 in 2030” plan increases the likelihood of a protectionist solution – it clearly fits worse into other versions.

Kristina Borovikova, Dmitry Butrin