Posted on July, 14 2021

However, it still falls far short of what’s needed for a science-based and socially fair shift to climate neutrality, and completely fails to fix the EU’s appalling bioenergy policies. 

Bright spots include a requirement for all Emissions Trading System (ETS) revenues to be spent by Member States on climate action - up from the 50% spending recommendation in place today. This is crucial to ensure that the climate - and therefore, EU citizens - benefit from these revenues. Another positive point is the move to bring international shipping under the ETS, which would finally help tackle the sector’s carbon pollution. 

But these glimmers of progress are largely overshadowed by significant flaws and missing elements from the proposals.

Most notably, the overall targets remain far too low. WWF and many others have long pointed out that the 55% net emissions reductions target needs to be more like 65% gross reductions to contribute to keeping temperature rise to 1.5°C and avoid out of control climate change. The package does not tackle this gap, proposing for renewable energy just a 40% target, for example, while 50% by 2030 would do far more to protect the climate and build a sustainable future economy.

Imke Lübbeke, head of climate and energy at WWF European Policy Office said:
“The Commission’s answer to the climate emergency is like trying to climb a mountain without a rope. The package will help the EU meet its goals, but it’s far from what the science requires: all the targets - from the Emissions Trading System to the Land Use sector - must be increased.

“What’s more, some key provisions are missing from the package, some are not right and some will actually do more bad than good. The EU must stop spending money on free pollution, we must ensure that poorer households do not lose out, we must stop the scandalous practice of subsidising the burning of trees and crops for energy", added Lübbeke.

A 61% cut of emissions under the ETS is not enough to fix the system, and its most glaring hole is not patched up. Free pollution - awarded to heavy industries in the form of emissions allowances - is only addressed through the proposal to make free allocation conditional on investments in techniques to increase energy efficiency. However, if a company does not comply, it will still receive as much as 75% of its previously allocated free allowances. WWF wants to see free allocation end as of 2023, and allocations to be auctioned instead. The Carbon Border Adjustment Mechanism, which will put a levy on imports of certain goods from regions with less strict rules on climate, must be designed only as a complement to the ending of free allocation of allowances under the ETS, not on top of free allocation. However, the Commission proposes to introduce a simplified CBAM for three years (2023-2026) and fully phase out free allowances only in 2035. Revenues from the ETS should help finance the transition to climate neutrality. 

The Commission also proposes measures, via the ‘Social Facility’ and the ETS, to ensure its package does not unfairly impact some people or regions more than others - and this is positive. However, to be effective these measures must be properly resourced, underpinned by comprehensive analysis and planned inclusively. The extension of the ETS to transport and buildings is concerning because it could penalise the least well off. Another alarming element is the loopholes which would allow Member States to avoid using revenues to support the most vulnerable, for example they can report generally on money spent on climate and social measures, without it having to be ‘new’ or additional revenues from the ETS.  

Perhaps the worst thing in the package is the Commission's disgraceful failure to tighten the rules on bioenergy in a meaningful way. Burning trees and crops for energy increases emissions compared to fossil fuels, either in general or over the timeframe we have available to stop climate change. Yet despite this, and with some trivial exceptions, these practices will still be considered ‘renewable’ and so eligible for public subsidies. This approach flies in the face of science, and risks undermining much of EU climate action. 

What’s more, with its changes to the LULUCF Regulation the Commission has failed to make the most of nature as a climate solution and bring in measures that would also benefit biodiversity. The target for net carbon dioxide removals is only half what it should be and the Commission is planning to encourage the use of offsetting in the land use sector to avoid 
emission cuts elsewhere. 

More information per file and quote from WWF experts:

ETS revision

The ETS target level falls far below what is required to hold global temperature increase below dangerous levels. The Commission proposed a 61% target by 2030 whereas a target of 70% is necessary. More positively, the Commission wants to increase the amount of allowances to be removed from the market each year, with an increased Linear Reduction Factor of 4.2%, from 2024. Plus, it also says there should be a one-off cut to the maximum amount of allowances permitted (the ‘cap’). WWF wants to see 350 million allowances removed from the market to avoid there being too many available allowances in the 2020s. Another positive point is that the Commission proposes to keep the amount of surplus allowances being temporarily taken off the market (into the ‘Market Stability Reserve’) at 24% until 2030. We need a combination of this higher intake rate, lower thresholds, and a continuous cancellation mechanism for surplus allowances to tighten the market and boost the carbon price.

The Commission did propose improvements to the legislation, by including maritime shipping in the scope of the ETS and by calling for all ETS revenues to be spent on climate action. Unfortunately, a sword of Damocles is hanging above the climate action part, since the Commission is proposing to give itself the right through a delegated act to grab ETS revenues - it does not say yet what amount - and transfer them into the Union budget. 

The broad picture is one of surrender to industry lobbies. Those sectors which did not meaningfully reduce emissions in the last years - like energy-intensive industries or aviation - get to keep free allocation for longer, even though this does not lead to reductions in emissions. Alarmingly, the Commission wants citizens and other sectors to foot some of the bill for industrial decarbonisation, through the transfer of revenues from the power, road transport or buildings sectors to the Modernisation and Innovation funds. 

Camille Maury, policy officer at WWF European Policy Office, said:
“The Commission is proposing essentially to increase EU citizens’ fuel and heating bills while maintaining steel, cement, chemical industries’ free permits to pollute. All emission allowances should be auctioned instead as of 2023, or at the very least, any free allowances need to be tied up tightly with green strings to ensure they are used wisely.”

Romain Laugier, climate and energy policy officer at WWF European Policy Office, said:
“The Commission’s proposal that Member States should only be allowed to spend their ETS revenue on climate action is a welcomed step, but what constitutes ‘climate action’ is still ill-defined, and allows for fossil fuels investments. Member States and MEPs must close this loophole and ensure that ETS revenues do no harm to the environment”.

Renewable energy directive

The Commission has proposed a 2030 target for renewable energy of 40%, which is a welcome improvement on the current 32% target but still far short of the 50% that WWF and other NGOs have been calling for. It has also proposed higher and more binding targets for renewable energy in heatings, transport and industry. But, crucially, no significant changes have been made to the criteria on bioenergy, just a few minor tweaks that will have no real impact. This means that there will be even more incentive to burn trees and crops for energy, despite that being something that will increase emissions compared to fossil fuels and accelerate the pace of climate change.

Alex Mason, senior policy officer at WWF European Policy Office, said: 
“The Commission’s proposals on bioenergy are shameful and must be changed. The Commission claims it has tightened the rules, but it’s really just rearranging the deckchairs on the Titanic. With a higher renewable energy target and no meaningful restrictions on incentives for burning trees and crops, this proposal represents a very serious climate threat.”

LULUCF

Under the current LULUCF Regulation the EU’s net carbon sink can decline to as little as 225 million tonnes in 2030, due partly to the weak accounting rules that allow Member States to harvest more forest and that bake-in past bad practices. In this new proposal the Commission has proposed increasing the target to 310 million tonnes, which is a step in the right direction but very far from the 600 million tonnes that NGOs are calling for in light of the climate emergency. Worryingly, the Commission is also proposing to facilitate the use of offsetting in the land use sector to compensate for emissions elsewhere. This is not only scientifically unsound - net removals in the land use sector cannot be considered directly equivalent to fossil fuel emissions - but it directly undermines climate action. We need to increase carbon dioxide removal in addition to cutting emissions, not instead of it.

Alex Mason, senior policy officer at WWF European Policy Office, said: 
“310 million tonnes is only half what we need to tackle the climate emergency. And letting Member States and companies use offsetting in the land use sector to avoid cutting emissions elsewhere is a serious mistake”.

Climate Action Social Facility

This last minute proposal is a welcome, but insufficient, attempt to address the risk of widespread negative impact of EU carbon pricing in the transport and buildings sectors on the poorest in European society. Extending the ETS to transport and buildings should not replace well-resourced and fully-implemented regulation to decarbonise these sectors, such as energy efficiency policies at EU and Member State level. Moreover, all revenues generated from carbon pricing in these sectors must be used to help those least well-off keep up with the transition and avoid falling into energy poverty. However, it is not clear this will be delivered by the proposals and we are concerned there is no unequivocal exclusion of fossil fuel investments from the new Facility. Likewise, the revenues from a carbon border levy must be used in ways that enable the transition in developing countries.

Katie Treadwell, policy officer at WWF European Policy Office said: 
“The Commission has recognised the need to address the social impacts of climate policy. This is welcome and very much needed, but to really leave no one behind, the new climate action social facility must be properly resourced and must include a complete exclusion of fossil fuel investments, while the plans underpinning it must be developed inclusively and transparently.”

Contact:
Sarah Azau
Media and communications manager, WWF European Policy Office
sazau@wwf.eu
Tel: +32 473 573 137