European Union unveiled new legislation to help meet its goal of reducing net greenhouse gas emissions by at least 55% by 2030, including a controversial plan to tax foreign companies for the pollution they cause.

“Our current fossil fuel economy has reached its limit,” the president of the European Commission, Ursula von der Leyen, said at a news conference in Brussels.

Achieving the aim of significantly reducing emissions in the next decade is crucial to Europe becoming the world’s first climate-neutral continent by 2050 and making the European Green Deal a reality. The Commission presented the legislative tools to deliver on the targets agreed in the European Climate Law and fundamentally transform the economy and society for a fair, green and prosperous future.

The Paris climate agreement, signed 5 years ago by world leaders, aimed to keep global temperatures from increasing more than 2 degrees Celsius by the end of the century. Scientists say this goal will be missed by a wide margin unless drastic steps are taken to reduce emissions. Therefore, the new plan unveiled by the EU is of paramount importance.

The proposed plan, if accepted, will:

  • Increased the use of renewable energy
  • Lead to greater energy efficiency
  • Increase in the roll-out of low emission transport modes, the infrastructure and fuels to support them
  • Alignment taxation policies with the European Green Deal objectives
  • Roll-out measures to prevent carbon leakage
  • Deliver tools to preserve and grow natural carbon sinks

Ursula von der Leyen

Most of the proposal is build on existing laws that were designed to meet the EU’s old goal of a 40% cut in greenhouse gas emissions by 2030 compared to 1990 levels — and must be endorsed by the 27 member countries and EU lawmakers.

”The principle is simple: emission of CO2 must have a price, a price on CO2 that incentivizes consumers, producers and innovators to choose the clean technologies, to go toward the clean and sustainable products,” European Commission President Ursula von der Leyen said.

Frans Timmermans

European Commission Executive Vice-President Frans Timmermans said that by failing to act now, “we would fail our children and grandchildren, who in my view, if we don’t fix this, will be fighting wars over water and food.”

Among the legislation’s most controversial elements is a plan for a “Carbon Border Adjustment Mechanism”, which will impose duties on foreign companies – with less stringent climate-protection rules-, increasing the price of certain goods. The aim of this element is to ease pressure on European producers that cut emissions but struggle to compete with importers that don’t have the same environmental restrictions. However, there are geopolitical implications that need to be considered. The cross-border carbon tax proposal could have the greatest impact on goods from Russia and Turkey, mainly iron, steel and aluminium, according to data analyzed by the Centre for European Reform. Contrastingly, the impact on U.S. exports to Europe would be far smaller, according to the analysis.

One of the main questions surrounding this plan is how the EU will ensure that the carbon tax complies with the World Trade Organization’s rules and not be perceived as a protectionist measure.

Additionally, another concern is the need to help those likely to be hit by rising energy prices. To address this concern, the commission is proposing the creation of a “social climate fund” to provide dedicated funding to Member States to help citizens finance investments in energy efficiency, new heating and cooling systems, and cleaner mobility. 

The detailed proposals from the European Union and all the proposed laws- which can be found here – mark only the start of what promises to be a difficult and bruising two-year negotiation among industry, 27 countries and the European Parliament on how to reach the ideal 55 percent reduction.

First published here.