Due to sustainability regulations emerging on multiple fronts and with increased frequency, recent years have seen a rapidly growing number of initiatives to reduce greenhouse gas emissions.

The European Commission’s Fit for 55 package is the latest ambitious set of measures proposed which is expected to impact the transport sector significantly. Announced in July 2021, the Fit for 55 package aims to cut greenhouse gas emissions by at least 55% by 2030 compared to 1990 and have net-zero greenhouse gas (GHG) emissions (climate neutrality) by 2050.

Nearly a year after the Fit for 55 Package was introduced, discussions between the European Parliament and the Council on the legislative proposals to accelerate decarbonisation in the EU are advanced. The Fit of 55 package includes more than ten legislative proposals, four of which immediately impact the transport sectors.

On the 8th of June 2022, MEPs approved three climate proposals related to the upcoming EU carbon market reform. This includes a ban on new petrol and diesel cars by 2035; a new law on land use, land-use change and forestry (LULUCF); and stricter rules for member states’ GHG emissions.

Yesterday, 27th of June, the Council started the negotiation on the renewable energy directive and the energy efficiency directive. Regarding the transport sector, the Council proposed a target of 13% greenhouse gas reduction by 2030 and the use of at least 29% of renewable energy (such as advanced biofuels and hydrogen) within the sector by 2030.

Although the initiatives in the package are not expressly directed at the heavy freight sector, they can help the EU meet its 2030 goals. The transport and construction sectors are to be included in the Emission Trading System (ETS 2) from 2025. Initially, it will only apply to commercial transport, and from 2029, it will be extended to cover passenger transportation, as well.

The next implementation phase will also include emissions from ships operating within the EU and those outside European territorial waters.

The maritime sectors, with 99% of their energy coming from fossil fuels, need to reduce that figure by 30% by 2035. The aviation industry will have to reduce the use of fossil fuels from 0.1% today to 0.7% in 2030, rising to 5% by 2035.

The Fit for 55 package’s ReFuelEU aviation and FuelEU maritime programmes should encourage the use of sustainable alternative fuels in both air and sea transportation.

Even though the direction to follow seems clear, the potential for emission reduction is mainly untapped due to the infrastructure limitation, fragmented funding for the development of the industry, budgets cut on research, and overall apprehensive actions by the parties involved.

While carbon pricing and targets on carbon intensity or activity promote improvements in energy efficiency, they are not yet equipped to affect a significant shift toward renewable and low-carbon fuels in the short and medium-term.

As a result, now is the time for companies to analyse their supply and value chains, get a clear view of the related carbon footprint (direct and indirect), and investigate options available to reduce the footprint. Doing all this on time should mitigate as much additional taxation that will inevitably follow from the measures included in the Fit for 55 Package.

At the current time of writing, part of the Fit For 55 package is on hold pending political agreement, and further plenary votes are envisioned for autumn 2022.

After the European Parliament and the EU Council approve the text, the amended Directives will enter into force. Nevertheless, different legislative proposals for the Fit for 55 package have different timelines, and the package is expected to be enacted by the 1st of January 2023.

Regarding the package’s regulations relating to transportation, the Council has deliberated, and the legislation will be put to the vote by Parliament later in 2022.

Source: Transport Intelligence, 28th of June 2022

Author: Marta Chiriatti

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