On 14 July 2021, the European Commission adopted the ‘Fit for 55’ package, which includes proposals that will implement the obligations of the European Climate Law: to reduce net greenhouse gas emissions in the EU to at least 55% below the 1990 levels by 2030 and to achieve climate neutrality in the EU by 2050.
As part of the package, the Commission adopted a proposal for a directive of the European Parliament and of the Council amending the Directive of the European Parliament and of the Council establishing a system for greenhouse gas emission allowance trading within the Union and the Decision and Regulation concerning the establishment and operation of a market stability reserve for the Union greenhouse gas emission trading scheme.
The Finnish Parliament’s Commerce Committee has requested Climate Leadership Coalition (CLC) for a written expert statement on the Government’s communication to Parliament on the Commission’s proposal.
CLC finds the Commission’s proposal to amend the Emissions Trading System Directive to expand its scope to cover road transport and heating as well as the proposals for the use of auction revenues from emissions trading good and necessary.
The use of the Emissions Trading System as a key instrument must be expanded so that emissions reductions can also be secured in the heating and road transport sectors. Emissions trading generates effective pricing for CO2 and acts as an incentive to develop clean and climate-friendly solutions on the large scale required. CLC’s views on the topic can be read here.
CLC joins the Finnish Government in welcoming the Commission’s proposal to introduce a separate emissions trading system for road transport and the building sector to accompany the current scheme, as this would prevent disruption in the operations of the current emissions market. It is CLC’s view that it is advisable, in the long term, to aim for a single, joint Emissions Trading System.
Like the Government, we support the inclusion of maritime transport in the EU Emissions Trading System but, in our opinion, it is important to consider its effects on the Finnish maritime cluster and national competitiveness, especially in terms of the challenges to winter seafaring, in the negotiation phase. The impact assessments carried out found out that the price of emission allowances in the Emissions Trading System is relatively low, EUR 48, in relation to the current price and the estimates of future prices. This must be taken into account in the preparatory work.
In addition to emissions trading, several other FF55 initiatives are aimed at aviation, maritime and road transport, as well as at the sectors already covered by the current Emissions Trading System. The preparatory work should take into account the overall picture in order to avoid harmful cross-effects.
It is a good thing that the Member States’ auction revenues from the new Emissions Trading System for road transport and buildings should be used to compensate vulnerable households, micro-enterprises and transport users for the effects of rising fuel prices and heating costs. Households in Finland spend 45% of their consumption on housing and transport; for those on lower incomes, the proportion of money spent on housing is higher, and the proportion of fuel in the transport costs is higher than that of those on higher incomes. However, we find it important that “compensation” also promotes climate transformation by measures such as green home grants.
California, for example, has successfully demonstrated how green transition can be supported financially and in a socially fair way. The revenues from the Cap-and-Trade Program are saved in a separate fund, which supports the reduction of greenhouse gas emissions by making legislatively directed investments in California and develops programmes and projects that also benefit disadvantaged and low-income communities.
We share the Government’s views on increasing the size of the innovation fund and making greater use of the auction revenues in climate action and the green transition as well as in supporting a fair transition process. A larger share of the EU ETS revenues should be earmarked and used to support science, research and the development of new climate solutions and to support the transformation in lower-income groups. We also welcome the extension of the scope of the innovation fund so that it could also be used to finance competitive tendering processes related to Carbon Contracts for Difference in the future.
With regard to maritime transport, we find it important that the revenues from this sector in the Emissions Trading System should be used to support the development of new climate solutions in the sector, as it is a key developer of environmental innovations in Finland. We agree with the Government in that the development of low-emission or zero-emission solutions in the sector would create growth and jobs in Finland.
More information: Jouni Keronen, CEO, Climate Leadership Coalition, firstname.lastname@example.org, p. +358 50 4534881 and Juha Turkki, Development Director, Climate Leadership Coalition, email@example.com, p. +358 45 3461925