The European Commission presented on Wednesday one of the most ambitious legislative packages in decades. A true revolution in the energy, transport or construction sector to help the EU achieve climate neutrality (zero net CO2 emissions) by 2050.
The flying goal will be to reduce CO2 emissions by at least 55% by 2030 The 13 initiatives approved today by the Community Executive under the title “Fit for 55” represent the demanding path to tie that objective.
“Europe was the first continent that said it wanted to be climate neutral in 2050,” recalled the president of the European Commission, Ursula von der Leyen on Wednesday. “We are now the first continent to present a complete architecture to achieve our climate objective,” he told reporters after the adoption of the initiatives at the commissars’ college.
The drastic reduction of emissions will force the EU to a massive transformation of its industrial and transport sectors. It will affect businesses and households. And it will place you at the forefront of the ‘green’ revolution, although you also run the risk of paying the bill for those who innovate first, just as you are already trying to cut back on lost ground vis-à-vis China and the US in the recovery or transformation of their economies.
The main tools to cut polluting gases, and achieve the goals of the Paris Agreement, will be the expansion of the European emissions market, to put a price on CO2 also for road transport and housing. Shipping will also be included.
In addition, the energy directive will be revised to penalize fossil fuels . The Commission also wants no polluting new vehicles to be sold from 2035.
Similarly, Europe proposes to create a new mechanism to tax imports responsible for large emissions (steel, aluminum, fertilizers and cement), so that European producers are not at a disadvantage with the new ‘green’ requirements. Finally, it will set up a new social fund of up to 70,000 million euros for the next seven years, financed with the resources of the new emissions market, to facilitate this demanding transition for groups with fewer resources.
One of the initiatives that will have the most impact will be the revision of the energy tax directive. The European Commission explains that it is necessary to align the 2003 standard with the objectives of the European Green Pact to decarbonise European activity.
A senior EU official points out that the current review will eliminate exemptions that reduced fuel taxes to practically zero in countries like Belgium for farmers. In addition, the base used for the taxation of volumes will be transferred to the energy content (expressed gigajoules), since the Commission considers that the existing model favored fossil fuels, including diesel.
Lastly, the rates will be changed to fossil fuels, as the Commission believes that the minimum rates established have become outdated. However, the changes will be made in some cases over ten years, to avoid shocks in the pockets of families and workers. In addition, they will be indexed with changes in inflation, something that did not happen today.
The Commissioner for the Economy and head of tax affairs, Paolo Gentiloni, pointed out at the press conference that the directive in its current form “still offers subsidies for fossil fuels, and it is something that we have to eliminate.” And he added that the objective is to reinforce the objective of “putting a price on carbon emissions”, as pursued by the community package presented this Wednesday, encouraging innovations that reduce the carbon footprint.
The magnitude of the changes is obvious when attending to the new minimums that the revision of the directive will introduce. In the case of diesel, it will go from 330 euros per 1,000 liters to 482 euros per 1,000 liters when the transition period ends in 2033. It represents an increase that is close to 50%. Currently, excise duties on diesel in Spain stand at 379 euros.
In the case of gasoline, the soil will go from 359 euros per 1000 liters to 443 euros per 1000 liters in 2033.
The changes will also affect the diesel used to heat homes, which will go from 21 euros per 1000 liters to 40 euros per 1000 liters.
Luck will be different for electricity. The tax rate for the megawatt-hour will go from being 1 euro (for homes) and 0.5 euros (for companies) to a single minimum of 0.67 euros per megawatt / hour.
The directive will include a series of guarantees to protect the most vulnerable groups. For example, Member States will be able to exclude households with fewer resources from taxes on heating oil and electricity. In addition, the Commission yesterday presented a new Social Climate Action Facility to support low-income families.
The revision of the energy tax directive, and the rest of the mega-package presented this Wednesday, now faces a complicated legislative process, subject to pressure from lobbyists and companies, and also from third countries affected by the new mechanism to tax energy imports.
It must be negotiated and agreed between the European Parliament and the Council (which brings together the Member States), which could take at least a couple of years. In the case of the directive on energy taxes, the agreement will also have the additional difficulty of requiring the unanimity of the 27 countries, since tax matters need the consensus of all partners.