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Legal obligations for industrial companies to plan their transformation

Panel: 3. Drivers to change

Author:
Erwin Cornelis, Belgium

Abstract

To achieve a net-zero industry, each individual company should develop a decarbonisation roadmap, not only for the corporate as a whole, but also each of its production sites. This contribution focuses on the legal obligations for companies to plan their transition towards climate-neutrality.

At EU level, the Fit for 55 Package resulted in two new legal provisions obliges companies to plan this transition.

The Industrial Emissions Directive, that was revised in 2023, includes a new article 27d obliging operators to a transformation plan in their environmental management system by mid-2030. The transformation plan shall contain information on how the installations will transform themselves during the 2030-2050 period to contribute to the emergence of a sustainable, clean, circular, resource efficient and climate-neutral economy by 2050.

The revision of the EU ETS Directive resulted in the introduction of climate-neutrality plans for those ETS installations whose greenhouse gas emission levels are higher than the 80th percentile of emission levels for the relevant product benchmarks, as a condition to receive free allowances. The climate-neutrality plans include a taxonomy of measures to reduce the companies' climate impact (transformation to other technologies, energy efficiency, fuel switch, resource efficiency and carbon capture and storage), which will be very instrumental in understanding in which carbonisation lever the companies will be investing in the most. Moreover, the companies need to set targets and milestones for every 5 years.

Also at national level, governments are including obligations for companies to plan their transitions. Countries, operating a voluntary agreement scheme on industrial energy efficiency, are gradually expanding the scope of this policy instrument. One example is the Energy Policy Agreements of Flanders, Belgium. When the agreement for the ETS-companies was renewed (2023-2026), an obligation was added to develop a climate roadmap within two years, in which the companies need to explore pathways to achieve climate neutrality by 2050. Rather than developing a roadmap, the companies need to explore different scenarios on how the achieve climate-neutrality. They also need to analyse the current barriers and needs to achieve climate-neutrality.

The obliged companies need to submit their climate-neutrality plans (EU ETS Directive) and climate roadmaps (Flemish Energy Policy Agreements) in the course of 2024. This will allow to learn from drafting such plans at installation level and will give useful input to the Delegated Acts in which the content of the transformation plans (Industrial Emissions Directive) will be set.

Finally, companies should not regard the drafting of these plans as obligation, but rather as an opportunity to open a discussion with the European and national authorities on how companies can be made climate-neutral in the most cost effective way.

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