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Vulcan Insight | “Fit for 55” aims to radically transform Europe’s transportation

Earlier this year, the European Union legally committed itself to reducing its carbon emissions by 55%, compared to 1990, by 2030 and become carbon neutral by 2050. The Commission’s new “Fit for 55” package has now proposed far-reaching legislation to radically transform Europe’s transport system. 

Among the many initiatives put forward by the European Commission, its proposed phasing out of the internal combustion engine by 2035 is surely Commission President von der Leyen’s landmark proposal. While not legally banning combustion engines themselves, its proposal foresees reducing the legal level of CO2 car emissions by 55% by 2030 and 100 percent by 2035 – effectively banning all but zero-emissions vehicles.

Although both expected and highly criticised by industry and some politicians, the Commission’s move further accelerates the deep transformative moves that are already gripping the industry. Whereas the targets give further backing to the car makers that have already committed to the fossil fuel phase out, it also puts considerable time pressure on the broader industry to transform or face significant fines.

Meanwhile, to tackle anxieties about perceived limitations in range and technology neutrality, Transport Commissioner Adina Valean also proposed a reform of the EU’s Alternative Fuel Infrastructure rules to mandate that countries must install charging stations for electric cars every 60km and hydrogen refuelling stages every 150km along major highways. In an important, yet technical move, the Commission also proposed to upgrade the rules from a Directive to a Regulation to ensure a harmonised approach across all Member States and that they will actually build the infrastructure.

Controversially, European Commission First Executive Vice-President and clime czar, Frans Timmermans, also presented a new Emissions Trading System (ETS) on transport and buildings. The new ETS seeks to put a carbon price on transport and heating fuels with the aim of creating a price incentive for consumers to switch to zero-emissions mobility and cleaner heating systems. Upon its announcement, NGOs, some Member States and MEPs criticised the proposal for pushing the costs of the environmental transformation onto the poorest citizens, a concern the Commission pushed back on through the creation of a new Climate Social Fund. The chair of the Parliament’s Environment committee, Pascal Canfin, even called it “political suicide,” worrying that it could lead to a repeat of the 2018 Gilet Jaunes movement.

Besides that, the Commission’s “Fit for 55” package also foresees far-reaching measures to radically decarbonise both, the aviation and shipping industry in the coming decades. For the shipping industry, widely seen as one of the largest carbon emitters, this includes extending the EU’s ETS to the industry gradually from 2023 onwards for a period of three years. In addition to sailings made within the EU, the scope also foresees to cover 50% of all emissions from international shipping starting and ending from EU ports.

Separately, the Commission also put forward a proposal to mandate the use of sustainable and more environmentally friendly fuels via its “FuelEU Maritime” initiative. In all, if passed, it would see a gradual reduction in ships’ energy use by 2% in 2025 and 6% in 2030. By 2050, the Commission aims for a total reduction of 75% compared to 2020 emissions.

Policymakers’ key target, however, is the aviation industry, which is set to lose its long-standing and coveted tax exemption for kerosene. According to the proposals, aviation fuels would then be taxed in line with other transport fuels following a phased introduction for a 10-year period.

At the same time, in a twin initiative to the maritime sector, “ReFuelEU Aviation” seeks to set highly ambitious targets to mandate the use of sustainable aviation fuels derived from sustainable feedstock. The initiative aims to introduce a mandate for airports to offer, and airlines to use a blended minimum of at least 2% of sustainable aviation fuel (SAF) into their kerosene from 2025 onwards. Those mandated would then gradually increase every 5 years, rising to 20% in 2035 and 63% in 2050.

Compliments of Vulcan Consulting – a member of the EACCNY.