The European Green Deal took a major step forward when the Commission published its “Fit for 55” climate initiatives on 14 July. The 12 legislative proposals presented concrete steps for Europe towards the 55% emission reduction target by 2030.
Finnish industries support EU’s ambitious climate policy and recognize the benefits of the comprehensive package but sees also some worrying elements. For instance, the expansion of emissions trading to maritime and road transport, as well as the introduction of carbon tariffs, will bring more costs to companies. At the same time, substantial additional investment will be needed in new technologies.
The upgraded target for 2030 demands an unprecedented effort from the business community, comments Finnish Industries’ Director General Jyri Häkämies:
“Achieving the emission reduction target requires companies to make massive investments in innovation, technology and low-emission production and services. As companies are key drivers of climate policy, Fit for 55 legislation must be business- and investment-friendly. Finland, as well as all other EU member states, must be seen as an attractive investment environment.”
Chief Policy Adviser Kati Ruohomäki lists the main advantages of the legislative package:
- We support the EU’s way of grouping several legislative initiatives together. It helps to preserve coherence. In addition, the additional efforts to achieve tighter climate target are rightly shared to all sectors and member states.
- The strengthening role of the EU Emissions Trading is welcomed. As well as the continuity of free allocation and electricity price compensation to prevent a risk of carbon leakage. It is also important that the EU Emissions Trading System would consider new climate technologies, such as carbon capture and reuse.
- Carbon tariffs are linked tightly to EU Emissions Trading System, and the payment will be made through CO2-allowances using same price as in the EU ETS.
- Concerning national energy saving obligation, the Commission allows use of voluntary energy efficiency agreements. In Finland, more than 60% of energy use is included in such agreements, covering companies, real estate agents and municipalities.
What needs to be changed in the package:
- EU Emissions Trading System: To prevent risk of carbon leakage, free allocation of emission allowances should be continued until carbon tariffs prove to be a viable solution. In the EU ETS emissions reduction realized outside Europe should be accepted.
- Maritime Emissions Trading: Increased fuel consumption must be compensated for ice-strengthened vessels, as they are widely in use for import to and export from Finland.
- Emissions trading for road transport: The need for this proposal should be still considered carefully because it overlaps with fuel taxes, bio-mandate, and vehicle emissions regulation. Finland specifically has high road traffic taxation and bio-mandate in place and long transport distances which increase costs.
- Carbon tariffs: The advantages and disadvantages of the proposal needs to be carefully considered to avoid retaliation by trading partners.
- Energy efficiency: The Commission’s proposal to double national energy savings obligations is not reasonable. Energy efficiency measures have been realized systematically in Finland since the 1990s, but there is indeed a limit to those measures.
Member states and EU parliament started immediately processing the Fit for 55 climate proposals. The legislative initiatives are expected to be finalized by Spring 2023.
More detailed views on the Fit for 55 legislation package by Finnish Industries (based on preliminary info):
EU Emissions Trading System
The risk of carbon leakage (the relocation of production to third countries) must be minimized in the EU Emissions Trading System as long as third countries take equal measures in use. Until then, adequate free allocation of emissions allowances and national compensation for electricity costs should continue. Emissions trading should also encourage the use of new technologies.
Emissions trading system for shipping sector
Measures to reduce emissions from shipping should be taken at the global level to ensure a level playing field for all players in the maritime sector. When an emissions trading system is proposed to shipping sector, it must acknowledge and compensate for the extra costs that winter conditions cause to the Finnish shipowners.
Carbon border tariffs CBAM
The EU needs effective means to prevent carbon leakage and to ensure a level playing field. CBAM should not be the primary means for that. Carbon leakage should be tackled first and foremost by the EU Emissions Trading System. There are also significant risks linked to the planned CBAM as it may have an impact on global trade relations.
Flexible legislation is the key to improving energy efficiency. Member states as well as companies must be allowed a wide range of energy efficiency measures. In Finland it is important to be able to continue the use of voluntary energy efficiency agreements.
The Energy Tax Directive must be updated to reflect the EU’s revised energy and climate policy. As energy taxation has a significant economic impact, the competitiveness of companies however must be ensured.
Country-specific emission reduction targets
Cost-effectiveness should be the guiding principle, when country-specific emission reduction targets are set outside the emissions trading sector. It is important to allow maximum flexibility in implementation, both within the EU and internationally.
The Renewable Energy Directive should promote Europe’s electrification by market-based energy system reform. In addition, sectoral integration and the hydrogen economy will bring new ways of consuming and producing energy, which must be promoted by supporting the creation of new infrastructures. Sustainably produced biomass is also needed to replace fossil fuels in energy production, industry, and transport.