Comparing the EU’s ‘Fit for 55’ roadmap and the IEA’s net-zero scenario

(EurActiv, 12 Nov 2021) While the International Energy Agency (IEA) advocates an aggressive implementation of carbon pricing mechanisms across the globe, it focuses less on affordability and social implications than the European Commission’s ‘Fit for 55’ climate roadmap, writes Ivan Pavlovic.

Ivan Pavlovic is senior energy specialist with Natixis CIB Research, where he covers green and sustainable finance.

Since the European Commission (EC) agreed on more ambitious greenhouse gas (GHG) emissions targets last December, the “Fit for 55” package has been eagerly awaited by many as the next step in the battle against climate change.

The package, presented on 14 July, provides a detailed analysis of the European Union’s carbon output, and identifies the region’s more challenging sectors and corresponding plans to decarbonise. Buildings, industry and mobility are identified as the key problem areas in terms of the EU’s CO2 emissions, together comprising almost 50% of the total.

The proposals – which could enter into force as soon as 2023 – lay out four distinct areas of action: carbon pricing, sectoral targets and rules and support measures. A proposed strengthening of carbon pricing within the EU includes extending the Emissions Trading Scheme (ETS) to include maritime transport, buildings and road transport, and the introduction of a new Carbon Border Adjustment Mechanism (CBAM) for selected sectors, subject to the pre-existing ETS. For the time being, the CBAM would only apply to “direct” (scope 1) CO2 emissions, and it will later be decided whether it should extend to cover “indirect” (scope 2) emissions that come further down the value chain. For industries with mostly “indirect” emissions, such as aluminium production, the proposals will therefore likely have a limited immediate impact.

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EurActiv, 12 Nov 2021: Comparing the EU’s ‘Fit for 55’ roadmap and the IEA’s net-zero scenario