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EU climate package in danger of fragmentation

13.7.2021 9.24

The European Commission will meet on 14 July to decide a record-breaking climate and energy legislation package. Known as Fit for 55, this package seeks to cut EU greenhouse gas emissions by 55 per cent of 1990 levels by the year 2030. The biggest challenge is to make the package a functional whole that allows for the huge investments required and for quality of regulation.

Increasingly strict and fragmented regulation

In a nutshell, all climate-relevant EU legislation is now up for amendment. This includes emissi Riku Huttunen ons trading, effort sharing sector, land use, energy efficiency and renewable energy. A carbon border tax proposal is also expected.

Thousands of pages of impact assessment and other text have accumulated. Key aspects include an enlargement of emissions trading to include other industries besides manufacturing and energy, and a tightening of emission targets in the energy sector.

Stricter obligations in the effort sharing sector will be particularly challenging for Finland. Their practical impact will mean even larger-than-planned cuts in emissions from transport, agriculture and housing - affecting every one of us. The recent yellow-vest protests in France demonstrate the difficulties inherent in such measures.

Duplicated guidance may become costly

With statutes under preparation in various Commission departments, the overall package may be lacking in harmony. There are early indications of this in preliminary information from Brussels, with some major questions already evident in the big picture. The transport sector is a good example of this, falling within both the effort sharing sector and – to a lesser extent – emissions trading, with specific obligations under such instruments as the Renewable Energy Directive.

This not only leads to regulatory overlap, but above all to inefficiency and inconsistencies. The best approach would be to focus on essential regulatory needs and market-based guidance instruments.

The problem arises because the proposals seek to achieve much more than reducing emissions sustainably. One strong foretaste of this is the EU’s sustainable finance taxonomy, which treats even emission-free energy forms in a manner that is quite arbitrary instead of taking a technology-neutral approach.

The Commission proposals should focus on emission reductions that are cost-effective and substantial. In short, emissions must be reduced in a flexible manner where this is most cost-effective. Unfortunately, this does not seem to be happening. Extra costs will erode growth and business competitiveness, retarding climate measures and achievement of the target.

Sprawling regulation is also an administrative burden in itself. Instead of implementing and monitoring Directives, it should be possible to focus efforts on promoting new technologies and increasing the positive carbon footprint.

As Director-General of the Energy Department at the Ministry of Economic Affairs and Employment, Riku Huttunen closely monitors the preparation of EU legislation.

The column was published for the first time on the opinion pages of Helsingin Sanomat on 12 July 2021


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