Review of the EU ETS: 'Fit for 55' package

Briefing 21-02-2023

As part of the 'Fit for 55' package, the European Commission presented a legislative proposal to review the EU Emissions Trading System (ETS). The aim of the review is to align the EU ETS Directive with the EU target set out in the European Climate Law to reduce net greenhouse gas (GHG) emissions by 55 % by 2030, compared to 1990 levels. To this end, the amount of emission allowances would be reduced, fewer allowances would be allocated for free, and the ETS would be extended to maritime transport. This would reduce emissions in the ETS sectors by 61 % by 2030, compared to 2005. A separate new emissions trading system would be established for fuel distribution for road transport and buildings. The Innovation Fund and the Modernisation Fund would be enlarged, and Member States would be obliged to spend all of their ETS revenues on climate action. In the European Parliament, the proposal was referred to the Committee on Environment, Public Health and Food Safety (ENVI), with Peter Liese (EPP, Germany) as rapporteur. The Parliament and the Council adopted their respective positions in June 2022 and reached a provisional trilogue agreement on 18 December 2022, which needs now to be formally adopted. Fourth edition. The 'EU Legislation in Progress' briefings are updated at key stages throughout the legislative procedure.