The files have been assigned, positions staked, and lawmakers in the European Parliament and Council of Ministers are ready to embark on a mammoth six months of negotiations and votes on the European Commission’s ‘Fit for 55‘ package of climate and energy legislation.
Most of the package is not proposals for new laws but revisions to existing laws, ramping up their ambition to meet the new 2030 target of reducing EU emissions by 55% from 1990 levels, adopted by national leaders last year. Yet the revisions proposed by the Commission in July and December 2021 are extensive, and are encountering major resistance from some industries and governments, such as Poland. In addition, one major new element, the carbon border adjustment mechanism (CBAM), is facing pushback from international partners like the US and China, who are lobbying national ministers to kill it.
Once the Commission makes a proposal it passes to the European Parliament (MEPs) and the Council of Ministers (member states), the two houses of the EU’s legislature. They can each amend the proposals and vote on their version of the legislation. Representatives from the Council and Parliament then meet in ‘trilogue’ negotiations to agree a compromise to reconcile their two versions, much like the two houses of the US Congress do. The Parliament is represented by the ‘rapporteur’ who was assigned that particular file, while the Council is represented by the country holding the rotating Council presidency, which will be France from January to July 2022.
Each body must then vote on whether to approve that reconciled text. Typically, the Parliament wants to make legislative proposals more ambitious while the Council – embodied by ministers who will actually have to implement them back home – tries to water them down.
Car CO2 limits and CBAM lead the pack
The first two proposals to be presented to the environment committee in the Parliament will be tighter car CO2 limits and the CBAM, a levy on imports from countries with climate legislation less stringent than the EU’s. This is designed to stop companies from relocating production outside the union. The texts from the rapporteurs for those two files, Dutch liberal MEP Jan Huitema and Dutch centre-left MEP Mohammed Chahim, respectively, were already circulated for translation in late December. Proposed amendments can now be submitted by other MEPs on the committee. Negotiations between the different political groups will take place in February and May, with committee votes on both issues foreseen for late April and plenary votes in June.
The 27 EU environment ministers in the Council began discussing the car CO2 proposal in September, but real negotiations will not start until this month, under the leadership of French Environment Minister Barbara Pompili. A first reading position is expected around the same time as the Parliament vote in June. Due to its politically sensitive nature, the CBAM proposal is likely to be bumped up to the level of prime ministers and presidents, with discussions coordinated by Council President Charles Michel.
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Fast-tracking alternative fuels for aviation and shipping
The Commission wants the 'Fit for 55' proposals to be seen as one package and legislators to stick to an ‘all or nothing’ approach. The fear is that if different elements are stripped out and adopted at different times, it could lower ambition and result in a disjointed – and inadequate – legal framework. Nevertheless, there may be some proposals that are lifted out onto their own path.
“ReFuelEU [on increasing alternative fuels in aviation] and maritime fuels are a bit less interconnected and could be separated out,” says one Parliament source. “But the carbon market [Emissions Trading System (ETS)] proposal, the CBAM, the Social Climate Fund and the effort-sharing regulation [which sets national climate targets] are all ensnared in one another.” That said, MEPs on the budget committee have signalled they may need more time to review the Social Climate Fund, which would be fed by a new ETS for buildings and transport, and may want it approved after the other elements.
Working around the EU Taxonomy
At the end of June, France will turn the Council presidency over to the Czech Republic. There is an expectation that France – with greater resources and, in Emmanuel Macron, a president who has placed climate change at the centre of his agenda – will have the greater ability to push through an ambitious Council position.
There is therefore a push to make as much progress as possible before the end of the French presidency, even though any final votes would likely take place after it ends. “We will take any open window of opportunity we have with the French,” says the Parliament source. It is still unclear how the French presidential election in April and legislature election in June will impact the presidency’s work. It could motivate France to take an ambitious approach that frontloads ambitious action, or it could prove a distraction that backloads action until after the election. This is one of the biggest open questions of the French presidency. “If Macron wins re-election I am pretty sure he would be willing to accelerate even more afterwards – the idea is try to match speediness of Parliament,” says the source.
The French presidency may prove particularly important when it comes to the more contentious files such as the CBAM, which is one of its three priorities alongside reigning in Big Tech and introducing minimum wages throughout the EU. However, there is also concern that a proposal that is not part of the 'Fit for 55' package, an EU Taxonomy that labels nuclear and gas as 'green', could pull resources and attention away from the package. The Commission quietly circulated its proposal on this just hours before the end of 2021, and already it has triggered a maelstrom of controversy. Compromise-making in the EU tends to rope together unrelated pieces of legislation. It could be that sacrifices have to be made in 'Fit for 55' because of the ongoing taxonomy debate.
Most of the 'Fit for 55' package was unveiled in July 2021. Because they came out later, the three additional components put forward by the Commission in December – on the energy performance of buildings, methane and gas – will also start the legislative process later. They will be chiefly handled by the parliament’s industry and energy committee, although there is a growing push to have the environment committee co-lead them.