The situation on the Russian-Ukrainian border continues to escalate. After the first meeting in two years of the NATO-Russia Council in Brussels failed on Wednesday, the situation threatens to escalate. The Kremlin is sticking to its demand that NATO deny Ukraine’s membership, which the West firmly rejects. Meanwhile, the tone on both sides is getting harsher.
Moscow continues to insist on its demands, and as Russia deploys more troops on the border, warnings about an armed conflict are growing. Polish Foreign Minister and new OSCE Chairman Zbigniew Rau said Thursday that the threat of war for Europe is higher than it has been in the past 30 years.
Meanwhile, EU foreign and defense ministers met yesterday in Brest, France. EU High Representative Josep Borell announced on the sidelines of the meeting that the developments in Ukraine would also have an impact on the Nord Stream 2 Baltic Sea pipeline. After all, it would be hard to imagine that sanctions against Russia would be considered on the one hand and that approval for the project would be granted on the other. In contrast, Germany’s Defense Minister Christine Lambrecht called for the gas pipeline “not to be dragged into the conflict,” while Foreign Minister Annalena Baerbock (Greens) tirelessly pleaded for a united stance and a common course for the EU.
Such a course in climate protection is also completely out of the question at the moment. The EU has set itself the goal of finishing the majority of the Fit For 55 climate package by the end of the year, and the dossiers are visibly picking up speed. However, this has also led to disputes and, in some cases, deep divides.
The key element of the measures is the reform of the European emissions trading system. Interest in the EU Parliament’s draft report, whose details we briefly presented yesterday, is correspondingly high. There was a lot of criticism and praise, as Lukas Scheid analyzes. The draft text by rapporteur Peter Liese (EPP) stays close to the Commission’s course. One of the changes: A reserve for emission allowances. This should guarantee protection against carbon leakage even if the co2 border adjustment mechanism does not work as intended.
Susanne Droege generally considers the latter to be overrated. The economist is a climate policy expert at the German Institute for International and Security Affairs. In an interview, she explains why border adjustment is only a small piece of the mosaic, where she believes the intra-European tensions on climate protection stem from, and why she remains optimistic nonetheless.
It has a lot of positive things in it, says Michael Bloss (Greens/EFA) about the draft report on the ETS reform of his colleague in the ENVI Committee of the EU Parliament. Bloss’s task as shadow rapporteur for the Greens will be to analyze Peter Liese’s report in detail and submit amendments by February 16, 2022.
It is a matter of detail for many points: Including shipping in the ETS as quickly as possible is entirely in Bloss’s interests. Around 90 percent of global trade is carried out by sea, and one-third of global shipping movements have their destination or port of departure in the EU. In 2018, this caused a total of 140 million tons of CO2.
Starting in 2025, and thus one year earlier than the EU Commission had envisaged, Liese plans to include the maritime sector in the ETS in order to reduce ship emissions. However, Liese’s proposal only relates to CO2 and methane. He calls for a corresponding assessment by the Commission by the end of 2026 with regard to climate impact for the other greenhouse gasses caused by maritime shipping. The Green shadow rapporteur does not consider it to be necessary: The data is already there, the impact of other greenhouse gas emissions is known and should be included in the ETS without delay.
The Greens would also have welcomed that emissions of ships traveling between the EU and third countries be fully priced. The Commission proposes to include only half of the way in the ETS. Liese’s approach, on the other hand, is to sign bilateral agreements between the EU and its trading partners on greenhouse gas reductions. For example, the US and EU would agree on a fixed CO2 price on the New York-Rotterdam route. The revenue from this could then either be split 50/50 or flow into joint climate protection projects, explains Liese in an interview with Europe.Table.
Bloss’ biggest gripe is that Liese has stayed too close to the Commission’s proposal. Bloss and the Greens are calling for a fixed minimum price per ton of CO2 of 60 euros. This would be necessary to drive the coal phase-out. Bloss also wants to increase the annual reduction quantity (Linear Reduction Factor/LRF). The Commission had proposed an LRF of 4.2 percent for the existing ETS and 5.15 percent for the new ETS 2 for buildings and road transport. Liese supports this level.
Bloss’ other key demand: to cancel 400 million emissions allowances in one fell swoop to get rid of unused certificates on the market, which keeps the CO2 price low. Liese rejects this as well and justifies it with the European climate law. The amount of allowances is measured against the reduction target of 55 percent, explains the CDU MEP. Removing certificates would mean going beyond this and would mean a higher burden for people and industry than necessary.
Concerning the expansion of emissions trading to include the buildings and road transport sectors, Liese is also largely staying the Commission’s course. There is to be a second ETS parallel to the existing one. However, Liese wants to bring the introduction forward to 2025 thus one year earlier, but also give member states the option of joining two years later if they still achieve their CO2 reduction targets in both sectors. This is to be understood as a compromise proposal to convince the opponents of ETS 2.
The Greens are not fundamentally opposed, says Bloss. But they still have some unanswered questions, as they are not yet sure whether a second ETS would have a positive effect on the climate. Bloss, therefore, favors stricter CO2 fleet limits for road transport as an instrument to reduce emissions in road traffic.
The underlying reason is also that the population in some countries could face problems in affording heating and mobility if CO2 prices rise. Fuel prices vary widely across member states, so an EU-wide CO2 price would hit countries differently. Germany is one of the strongest proponents of ETS 2.
For German consumers, the earlier introduction of ETS 2 would not make any difference, explains Thomas Bobinger, EU Internal Market Officer at the Federation of German Consumer Organisations (VZBV): “The expected price in ETS 2 is €50 per ton. In the German Fuel Emissions Act, a price of €55 per ton is set for 2025.” With a transfer of the German Fuel Emissions Trading Act into the ETS 2 private customers could possibly even save money, according to Bobinger. In addition, the VZBV demands that revenues from ETS 2 flow back to consumers in full “to help them financially in the transition to CO2-neutral behavior.”
Bobinger, on the other hand, is more critical of the fact that the free allocations for the industry will remain in place until 2035, even under Liese’s proposal. It is unacceptable that the poorest consumers, who heat their homes minimally, pay a CO2 price for every kilowatt-hour, but large companies continue to receive free allowances, Bobinger said. “These free allowances should be abolished.”
Liese sticks to the Commission’s proposal to reduce free allocations in the sectors affected by the CBAM by ten percent annually over ten years while phasing in the CBAM by the same factor. The Swedish shadow rapporteur Emma Wiesner (Renew) would like to accelerate this phase-in and fully introduce the CBAM after only five years. The Greens of Michael Bloss even want to replace free allocations with the CBAM already by 2025.
BDI CEO Joachim Lang was fundamentally critical of the CBAM at the association’s annual kick-off press conference: “We warn against replacing an existing working system with one whose effects we do not know yet,” he said with regard to the planned replacement of free allocation by the CBAM. The reduction in free emissions allowances must also be seen against this backdrop, Lang said. “You have to do everything you can to prevent carbon leakage.”
In doing so, Liese’s draft report provides for additional protection against carbon leakage. For the time being, he wants to place the free allowances that would be eliminated by the introduction of the CBAM in a reserve. If the CBAM is not sufficient as protection against carbon leakage, these reserve allowances could be allocated to the affected industries retroactively. Anne Glaeser of the environmental organization Germanwatch, however, believes this is too much of a concession to industry. “We need an effective CBAM and not more free allowances. The risk is that the industry will sit back thinking it will continue to get free allowances.”
However, she sees the concept of the reserve as fundamentally positive. Free allocations would just have to fall much faster, Glaeser says, so that some allowances would go into the reserve and then be released again. “It makes sense that way, but not with the consistently low reduction rate of ten percent.”
Liese wants to hand out even greater financial gifts to industrial plants that are particularly exemplary in decarbonization through a bonus-malus system. Plants whose greenhouse gas emissions are below the average of ten percent of the most efficient plants in a sector would receive additional allowances. Companies whose emissions are above the average would face cuts in free allocations. According to Liese, plants that no longer generate any emissions at all and would therefore drop out of the ETS would receive another five years of free allowances as a reward.
The rapporteur proposes that all participants in the ETS submit climate neutrality plans so that performance on decarbonization can be measured against these plans. However, Wolfgang Große Entrup, chief executive of the German Chemical Industry Association, warns against such a requirement: “In practice, this could lead to a significant reduction in free allowances, as it is not yet clear in many areas which technologies will ultimately prevail.” Mandatory climate neutrality plans are not necessary anyway, Entrup says because the market already sets a CO2 price that companies will automatically translate into their climate protection strategy.
The EU Parliament could nevertheless decide in favor of such mandatory climate neutrality plans for companies because, in addition to Liese, Renew rapporteur Emma Wiesner also supports the plans.
Ms. Droege, what is your climate policy assessment for 2021? Do you feel more optimistic about what has been achieved, or more skeptical about what lies ahead?
On the positive side, the USA is again proactively involved. From a global perspective, this window of opportunity has been seized. But clearly, too little has happened in terms of implementing climate protection and climate financing. I am more optimistic for Europe.
Why is that?
The Fit for 55 package was created using the European climate targets. It is amazing that the proven process of European legislation is progressing so well despite the pandemic. But clearly, not everything is in the bag yet and there are some challenges in the EU’s internal relationship.
One is the reform of emissions trading (ETS). As soon as energy prices soared last year, protests from member states against the EU’s climate policy grew accordingly. Some countries attacked the ETS heavily in particular. Why is European climate policy still such a thorn in the side of some member states?
This also has historical reasons. During the EU’s eastward expansion in 2004, when Poland, Hungary, and the Czech Republic, among others, joined the EU, the entire climate policy only began to gain momentum. It was not yet as dominant in the treaties. All these countries were eager to become members, and they probably didn’t realize what they were signing up to. Then came the teenage years, so to speak; they went through puberty and began to say “no.” For a long time, being against something was part of the Eastern European self-image. Now they are adults and want to assert their own interests. In this situation, it’s no wonder that the debate about climate policy is coming up again in light of energy and CO2 prices.
Do you think the concerns, for example, in Poland are justified?
Yes, of course. The situation is not only causing problems for the Poles. Prices that are rising at this rate are something that many countries first have to come to terms with. The question is: How will this be used politically? Calling for more regulation of the ETS is a natural reflex. But Poland has had exemptions at every stage of the ETS, for example, to continue to allocate emission rights to the energy sector free of charge. It is simply part of the negotiation process that they demand more consideration for their interests. That’s also a tradition.
And could this prove successful from a Polish perspective?
In the past, the Polish government has often been successful with this. It has been lured with money in the past, now there is the “Just Transition Fund” for the coal phase-out and possibly a social climate fund for the ETS expansion. Demands are naturally increasing as prices soar, and the EU has to keep coming up with new ways to please its member states.
What might an agreement on ETS reform look like that both the governments in Poland, Hungary and the Czech Republic can live with as well as Frans Timmermans, who does not want to lower the ambitions of the Fit for 55 package at any cost?
There could again be special rules for some countries. Either through different allocation rules for their companies or through more allowances from the market stability reserve, which could dampen the price.
The ETS for buildings and transport could become one of the sticking points in the negotiations of the Fit for 55 package. The list of opponents of the project is longer than that of supporters. France is among the opponents, but now suddenly has to lead the debate in the Council. What do you expect from the French Council Presidency in this regard?
France has a problem due to the election campaign. Emmanuel Macron is not allowed to make an appearance shortly before the elections in April, the French are very strict about that. This will not be as strong a presidency as it could otherwise be, even when it comes to advancing European climate policy. I thus expect that there will be setbacks in the negotiations and perhaps also in the trilogue. Parliament wants to finish all the dossiers in the package by April and move seamlessly into the trilogue. It cannot be ruled out that this timetable will not be met because the negotiations are stalling.
How dramatic would that be?
This would not be a catastrophe – reforms can also be implemented retroactively in the ETS. But for other dossiers, it would simply be the wrong signal. The CO2 border adjustment is to start at the beginning of 2023, which is already rather unrealistic. If it is to come sometime in 2023, it would be better if the trilogue stayed on schedule. France can, of course, finalize those projects that are advanced in the next few weeks, but other parts of the package need Germany’s support.
Then there is Olaf Scholz’s idea of so-called climate clubs. They have the same goal as the CBAM: to prevent carbon leakage and drive industrial decarbonization in other EU countries. How do the two approaches differ at all?
The climate club aims to form an exclusive group of countries with the same ideas. The CBAM is a club property that guarantees each other advantages in this exclusive round that automatically become disadvantages for non-members. It is tailor-made for the European ETS to deal with carbon leakage and the planned elimination of free allocations. One is not a substitute for the other.
So why the climate clubs at all?
Behind this is the desire to inject new momentum into international climate policy. A club of industrialized countries already exists in the form of the G7, for example, and it would offer the opportunity to move in the same direction in climate policy and accelerate international processes. Moreover, the CBAM is only a small piece of the mosaic and is unfortunately overrated. It only applies to five sectors, will not be fully implemented for 14 years, and must be WTO-compliant. Therefore, implementation takes time and there is a risk of trade law conflicts. More than a commitment to joint action against carbon leakage is therefore not to be expected from the G7 club. The US, for example, is eyeing carbon offsetting but does not have a national carbon price, which is the prerequisite for it – at least from a WTO perspective. The CBAM is the wrong focus for the G7 in 2022; this is not where things are happening.
Not even if the scope of the CBAM is expanded, as most recently proposed in rapporteur Mohammed Chahim’s draft report? Chemicals, hydrogen and polymers could be added.
The idea was to use a few sectors first as a test to see whether the CBAM could be effective against carbon leakage. Any expansion of the CBAM to include CO2-intensive products will have an impact on climate protection. However, whether this will be significant or whether there will also be evasive maneuvers is an open question. This is why the CBAM should be given a test phase as well as regular evaluations of its effectiveness.
Chahim has also proposed making the CBAM work faster and eliminating free allocations sooner. Instead of 14 years, it would fully replace free allocations in 7 years.
The extension of the implementation by the Commission is, after all, due to the lobbying of the industry and the member states for a prolonged free allocation. The EU Parliament has also so far rejected an earlier phase-out. So Chahim is again petitioning the EP to abolish it sooner. Moreover, the Commission has no way of knowing whether the CBAM will work well against carbon leakage. I think this makes it a poker for a compromise in the EP to shorten the parallel phase (CBAM plus free allowances).
And where do you think things are happening?
The short-term issues are: Do we get the big consumer countries to implement their CO2 reduction pledges and actually shut down coal? And do the G7 leaders actually manage to come up with good financing offers so that decarbonization can move forward? If the interest between donor and recipient countries is the same with regard to industrial sectors, decarbonization can move faster without going through climate club formations or lengthy legislative processes like the CBAM. Things are happening in the implementation and financing of immediate climate change projects.
“2022 will be a key year for the European Green Deal,” says someone who should know. As host of the Transition Écologique podcast, he discusses new models of prosperity and the transition to a more sustainable world with guests such as Emmanuel Faber, ex-managing director of the Danone group, and Adélaide Charlier, co-founder of the Youth for Climate movement. As a politician, he wants to build a credible government ecology that takes the Paris Agreement and CO2 neutrality by 2050 seriously: Pascal Canfin, chairman of the European Parliament’s Committee on Environment, is Macron’s man when it comes to advancing the Green Deal – and France’s interests.
His strategy is to initiate a pragmatic environmental policy by changing the rules of the game for economic actors – without “green dogmatism”. But Canfin has not represented this position for all that long. An economics journalist by training, he once climbed the political ladder with France’s Green Party, Europe Écologie – Les Verts (EE-LV). Today, he is a staunch Macronist.
He was offered a post in the Ministry of the Environment several times. But Canfin always turned it down. The last time was in August 2018, when former Environment Minister Nicolas Hulot quit with the words, “I don’t want to lie anymore”. The reason: ecology was not Emmanuel Macron’s priority. Pascal Canfin, at the time the Director-General of WWF France, topped it off: “No environmentalist with ecological convictions will go into this government unless there’s a big bang.”
A year later, he entered the European Parliament. No longer as a Green, but in second place on the “Renaissance” list, which was dominated by the president’s party La République en Marche (LREM).
Explaining this change of heart, the parliamentarian draws a comparison to Germany’s current traffic light government and criticizes his former party’s failure to cooperate with social democrats and centrists: “Basically, as an environmentalist, I would like EE-LV to look like the German Greens, but that’s not the case at all! They wallow in ecology that changes nothing because they don’t accept the complex reality.”
For the future, Canfin is counting on a climate policy that unites instead of divides, that transforms without fracturing. To achieve this, and avoid renewed protests by the yellow vests, his to-do list for 2022 is likely to include major strategic tasks: set the course for Europe’s ecological transition, defend the reforms and environmental records of Macron’s five-year term, and pave the way for the next mandate. Giorgia Grimaldi
The situation on the Russian-Ukrainian border continues to escalate. After the first meeting in two years of the NATO-Russia Council in Brussels failed on Wednesday, the situation threatens to escalate. The Kremlin is sticking to its demand that NATO deny Ukraine’s membership, which the West firmly rejects. Meanwhile, the tone on both sides is getting harsher.
Moscow continues to insist on its demands, and as Russia deploys more troops on the border, warnings about an armed conflict are growing. Polish Foreign Minister and new OSCE Chairman Zbigniew Rau said Thursday that the threat of war for Europe is higher than it has been in the past 30 years.
Meanwhile, EU foreign and defense ministers met yesterday in Brest, France. EU High Representative Josep Borell announced on the sidelines of the meeting that the developments in Ukraine would also have an impact on the Nord Stream 2 Baltic Sea pipeline. After all, it would be hard to imagine that sanctions against Russia would be considered on the one hand and that approval for the project would be granted on the other. In contrast, Germany’s Defense Minister Christine Lambrecht called for the gas pipeline “not to be dragged into the conflict,” while Foreign Minister Annalena Baerbock (Greens) tirelessly pleaded for a united stance and a common course for the EU.
Such a course in climate protection is also completely out of the question at the moment. The EU has set itself the goal of finishing the majority of the Fit For 55 climate package by the end of the year, and the dossiers are visibly picking up speed. However, this has also led to disputes and, in some cases, deep divides.
The key element of the measures is the reform of the European emissions trading system. Interest in the EU Parliament’s draft report, whose details we briefly presented yesterday, is correspondingly high. There was a lot of criticism and praise, as Lukas Scheid analyzes. The draft text by rapporteur Peter Liese (EPP) stays close to the Commission’s course. One of the changes: A reserve for emission allowances. This should guarantee protection against carbon leakage even if the co2 border adjustment mechanism does not work as intended.
Susanne Droege generally considers the latter to be overrated. The economist is a climate policy expert at the German Institute for International and Security Affairs. In an interview, she explains why border adjustment is only a small piece of the mosaic, where she believes the intra-European tensions on climate protection stem from, and why she remains optimistic nonetheless.
It has a lot of positive things in it, says Michael Bloss (Greens/EFA) about the draft report on the ETS reform of his colleague in the ENVI Committee of the EU Parliament. Bloss’s task as shadow rapporteur for the Greens will be to analyze Peter Liese’s report in detail and submit amendments by February 16, 2022.
It is a matter of detail for many points: Including shipping in the ETS as quickly as possible is entirely in Bloss’s interests. Around 90 percent of global trade is carried out by sea, and one-third of global shipping movements have their destination or port of departure in the EU. In 2018, this caused a total of 140 million tons of CO2.
Starting in 2025, and thus one year earlier than the EU Commission had envisaged, Liese plans to include the maritime sector in the ETS in order to reduce ship emissions. However, Liese’s proposal only relates to CO2 and methane. He calls for a corresponding assessment by the Commission by the end of 2026 with regard to climate impact for the other greenhouse gasses caused by maritime shipping. The Green shadow rapporteur does not consider it to be necessary: The data is already there, the impact of other greenhouse gas emissions is known and should be included in the ETS without delay.
The Greens would also have welcomed that emissions of ships traveling between the EU and third countries be fully priced. The Commission proposes to include only half of the way in the ETS. Liese’s approach, on the other hand, is to sign bilateral agreements between the EU and its trading partners on greenhouse gas reductions. For example, the US and EU would agree on a fixed CO2 price on the New York-Rotterdam route. The revenue from this could then either be split 50/50 or flow into joint climate protection projects, explains Liese in an interview with Europe.Table.
Bloss’ biggest gripe is that Liese has stayed too close to the Commission’s proposal. Bloss and the Greens are calling for a fixed minimum price per ton of CO2 of 60 euros. This would be necessary to drive the coal phase-out. Bloss also wants to increase the annual reduction quantity (Linear Reduction Factor/LRF). The Commission had proposed an LRF of 4.2 percent for the existing ETS and 5.15 percent for the new ETS 2 for buildings and road transport. Liese supports this level.
Bloss’ other key demand: to cancel 400 million emissions allowances in one fell swoop to get rid of unused certificates on the market, which keeps the CO2 price low. Liese rejects this as well and justifies it with the European climate law. The amount of allowances is measured against the reduction target of 55 percent, explains the CDU MEP. Removing certificates would mean going beyond this and would mean a higher burden for people and industry than necessary.
Concerning the expansion of emissions trading to include the buildings and road transport sectors, Liese is also largely staying the Commission’s course. There is to be a second ETS parallel to the existing one. However, Liese wants to bring the introduction forward to 2025 thus one year earlier, but also give member states the option of joining two years later if they still achieve their CO2 reduction targets in both sectors. This is to be understood as a compromise proposal to convince the opponents of ETS 2.
The Greens are not fundamentally opposed, says Bloss. But they still have some unanswered questions, as they are not yet sure whether a second ETS would have a positive effect on the climate. Bloss, therefore, favors stricter CO2 fleet limits for road transport as an instrument to reduce emissions in road traffic.
The underlying reason is also that the population in some countries could face problems in affording heating and mobility if CO2 prices rise. Fuel prices vary widely across member states, so an EU-wide CO2 price would hit countries differently. Germany is one of the strongest proponents of ETS 2.
For German consumers, the earlier introduction of ETS 2 would not make any difference, explains Thomas Bobinger, EU Internal Market Officer at the Federation of German Consumer Organisations (VZBV): “The expected price in ETS 2 is €50 per ton. In the German Fuel Emissions Act, a price of €55 per ton is set for 2025.” With a transfer of the German Fuel Emissions Trading Act into the ETS 2 private customers could possibly even save money, according to Bobinger. In addition, the VZBV demands that revenues from ETS 2 flow back to consumers in full “to help them financially in the transition to CO2-neutral behavior.”
Bobinger, on the other hand, is more critical of the fact that the free allocations for the industry will remain in place until 2035, even under Liese’s proposal. It is unacceptable that the poorest consumers, who heat their homes minimally, pay a CO2 price for every kilowatt-hour, but large companies continue to receive free allowances, Bobinger said. “These free allowances should be abolished.”
Liese sticks to the Commission’s proposal to reduce free allocations in the sectors affected by the CBAM by ten percent annually over ten years while phasing in the CBAM by the same factor. The Swedish shadow rapporteur Emma Wiesner (Renew) would like to accelerate this phase-in and fully introduce the CBAM after only five years. The Greens of Michael Bloss even want to replace free allocations with the CBAM already by 2025.
BDI CEO Joachim Lang was fundamentally critical of the CBAM at the association’s annual kick-off press conference: “We warn against replacing an existing working system with one whose effects we do not know yet,” he said with regard to the planned replacement of free allocation by the CBAM. The reduction in free emissions allowances must also be seen against this backdrop, Lang said. “You have to do everything you can to prevent carbon leakage.”
In doing so, Liese’s draft report provides for additional protection against carbon leakage. For the time being, he wants to place the free allowances that would be eliminated by the introduction of the CBAM in a reserve. If the CBAM is not sufficient as protection against carbon leakage, these reserve allowances could be allocated to the affected industries retroactively. Anne Glaeser of the environmental organization Germanwatch, however, believes this is too much of a concession to industry. “We need an effective CBAM and not more free allowances. The risk is that the industry will sit back thinking it will continue to get free allowances.”
However, she sees the concept of the reserve as fundamentally positive. Free allocations would just have to fall much faster, Glaeser says, so that some allowances would go into the reserve and then be released again. “It makes sense that way, but not with the consistently low reduction rate of ten percent.”
Liese wants to hand out even greater financial gifts to industrial plants that are particularly exemplary in decarbonization through a bonus-malus system. Plants whose greenhouse gas emissions are below the average of ten percent of the most efficient plants in a sector would receive additional allowances. Companies whose emissions are above the average would face cuts in free allocations. According to Liese, plants that no longer generate any emissions at all and would therefore drop out of the ETS would receive another five years of free allowances as a reward.
The rapporteur proposes that all participants in the ETS submit climate neutrality plans so that performance on decarbonization can be measured against these plans. However, Wolfgang Große Entrup, chief executive of the German Chemical Industry Association, warns against such a requirement: “In practice, this could lead to a significant reduction in free allowances, as it is not yet clear in many areas which technologies will ultimately prevail.” Mandatory climate neutrality plans are not necessary anyway, Entrup says because the market already sets a CO2 price that companies will automatically translate into their climate protection strategy.
The EU Parliament could nevertheless decide in favor of such mandatory climate neutrality plans for companies because, in addition to Liese, Renew rapporteur Emma Wiesner also supports the plans.
Ms. Droege, what is your climate policy assessment for 2021? Do you feel more optimistic about what has been achieved, or more skeptical about what lies ahead?
On the positive side, the USA is again proactively involved. From a global perspective, this window of opportunity has been seized. But clearly, too little has happened in terms of implementing climate protection and climate financing. I am more optimistic for Europe.
Why is that?
The Fit for 55 package was created using the European climate targets. It is amazing that the proven process of European legislation is progressing so well despite the pandemic. But clearly, not everything is in the bag yet and there are some challenges in the EU’s internal relationship.
One is the reform of emissions trading (ETS). As soon as energy prices soared last year, protests from member states against the EU’s climate policy grew accordingly. Some countries attacked the ETS heavily in particular. Why is European climate policy still such a thorn in the side of some member states?
This also has historical reasons. During the EU’s eastward expansion in 2004, when Poland, Hungary, and the Czech Republic, among others, joined the EU, the entire climate policy only began to gain momentum. It was not yet as dominant in the treaties. All these countries were eager to become members, and they probably didn’t realize what they were signing up to. Then came the teenage years, so to speak; they went through puberty and began to say “no.” For a long time, being against something was part of the Eastern European self-image. Now they are adults and want to assert their own interests. In this situation, it’s no wonder that the debate about climate policy is coming up again in light of energy and CO2 prices.
Do you think the concerns, for example, in Poland are justified?
Yes, of course. The situation is not only causing problems for the Poles. Prices that are rising at this rate are something that many countries first have to come to terms with. The question is: How will this be used politically? Calling for more regulation of the ETS is a natural reflex. But Poland has had exemptions at every stage of the ETS, for example, to continue to allocate emission rights to the energy sector free of charge. It is simply part of the negotiation process that they demand more consideration for their interests. That’s also a tradition.
And could this prove successful from a Polish perspective?
In the past, the Polish government has often been successful with this. It has been lured with money in the past, now there is the “Just Transition Fund” for the coal phase-out and possibly a social climate fund for the ETS expansion. Demands are naturally increasing as prices soar, and the EU has to keep coming up with new ways to please its member states.
What might an agreement on ETS reform look like that both the governments in Poland, Hungary and the Czech Republic can live with as well as Frans Timmermans, who does not want to lower the ambitions of the Fit for 55 package at any cost?
There could again be special rules for some countries. Either through different allocation rules for their companies or through more allowances from the market stability reserve, which could dampen the price.
The ETS for buildings and transport could become one of the sticking points in the negotiations of the Fit for 55 package. The list of opponents of the project is longer than that of supporters. France is among the opponents, but now suddenly has to lead the debate in the Council. What do you expect from the French Council Presidency in this regard?
France has a problem due to the election campaign. Emmanuel Macron is not allowed to make an appearance shortly before the elections in April, the French are very strict about that. This will not be as strong a presidency as it could otherwise be, even when it comes to advancing European climate policy. I thus expect that there will be setbacks in the negotiations and perhaps also in the trilogue. Parliament wants to finish all the dossiers in the package by April and move seamlessly into the trilogue. It cannot be ruled out that this timetable will not be met because the negotiations are stalling.
How dramatic would that be?
This would not be a catastrophe – reforms can also be implemented retroactively in the ETS. But for other dossiers, it would simply be the wrong signal. The CO2 border adjustment is to start at the beginning of 2023, which is already rather unrealistic. If it is to come sometime in 2023, it would be better if the trilogue stayed on schedule. France can, of course, finalize those projects that are advanced in the next few weeks, but other parts of the package need Germany’s support.
Then there is Olaf Scholz’s idea of so-called climate clubs. They have the same goal as the CBAM: to prevent carbon leakage and drive industrial decarbonization in other EU countries. How do the two approaches differ at all?
The climate club aims to form an exclusive group of countries with the same ideas. The CBAM is a club property that guarantees each other advantages in this exclusive round that automatically become disadvantages for non-members. It is tailor-made for the European ETS to deal with carbon leakage and the planned elimination of free allocations. One is not a substitute for the other.
So why the climate clubs at all?
Behind this is the desire to inject new momentum into international climate policy. A club of industrialized countries already exists in the form of the G7, for example, and it would offer the opportunity to move in the same direction in climate policy and accelerate international processes. Moreover, the CBAM is only a small piece of the mosaic and is unfortunately overrated. It only applies to five sectors, will not be fully implemented for 14 years, and must be WTO-compliant. Therefore, implementation takes time and there is a risk of trade law conflicts. More than a commitment to joint action against carbon leakage is therefore not to be expected from the G7 club. The US, for example, is eyeing carbon offsetting but does not have a national carbon price, which is the prerequisite for it – at least from a WTO perspective. The CBAM is the wrong focus for the G7 in 2022; this is not where things are happening.
Not even if the scope of the CBAM is expanded, as most recently proposed in rapporteur Mohammed Chahim’s draft report? Chemicals, hydrogen and polymers could be added.
The idea was to use a few sectors first as a test to see whether the CBAM could be effective against carbon leakage. Any expansion of the CBAM to include CO2-intensive products will have an impact on climate protection. However, whether this will be significant or whether there will also be evasive maneuvers is an open question. This is why the CBAM should be given a test phase as well as regular evaluations of its effectiveness.
Chahim has also proposed making the CBAM work faster and eliminating free allocations sooner. Instead of 14 years, it would fully replace free allocations in 7 years.
The extension of the implementation by the Commission is, after all, due to the lobbying of the industry and the member states for a prolonged free allocation. The EU Parliament has also so far rejected an earlier phase-out. So Chahim is again petitioning the EP to abolish it sooner. Moreover, the Commission has no way of knowing whether the CBAM will work well against carbon leakage. I think this makes it a poker for a compromise in the EP to shorten the parallel phase (CBAM plus free allowances).
And where do you think things are happening?
The short-term issues are: Do we get the big consumer countries to implement their CO2 reduction pledges and actually shut down coal? And do the G7 leaders actually manage to come up with good financing offers so that decarbonization can move forward? If the interest between donor and recipient countries is the same with regard to industrial sectors, decarbonization can move faster without going through climate club formations or lengthy legislative processes like the CBAM. Things are happening in the implementation and financing of immediate climate change projects.
“2022 will be a key year for the European Green Deal,” says someone who should know. As host of the Transition Écologique podcast, he discusses new models of prosperity and the transition to a more sustainable world with guests such as Emmanuel Faber, ex-managing director of the Danone group, and Adélaide Charlier, co-founder of the Youth for Climate movement. As a politician, he wants to build a credible government ecology that takes the Paris Agreement and CO2 neutrality by 2050 seriously: Pascal Canfin, chairman of the European Parliament’s Committee on Environment, is Macron’s man when it comes to advancing the Green Deal – and France’s interests.
His strategy is to initiate a pragmatic environmental policy by changing the rules of the game for economic actors – without “green dogmatism”. But Canfin has not represented this position for all that long. An economics journalist by training, he once climbed the political ladder with France’s Green Party, Europe Écologie – Les Verts (EE-LV). Today, he is a staunch Macronist.
He was offered a post in the Ministry of the Environment several times. But Canfin always turned it down. The last time was in August 2018, when former Environment Minister Nicolas Hulot quit with the words, “I don’t want to lie anymore”. The reason: ecology was not Emmanuel Macron’s priority. Pascal Canfin, at the time the Director-General of WWF France, topped it off: “No environmentalist with ecological convictions will go into this government unless there’s a big bang.”
A year later, he entered the European Parliament. No longer as a Green, but in second place on the “Renaissance” list, which was dominated by the president’s party La République en Marche (LREM).
Explaining this change of heart, the parliamentarian draws a comparison to Germany’s current traffic light government and criticizes his former party’s failure to cooperate with social democrats and centrists: “Basically, as an environmentalist, I would like EE-LV to look like the German Greens, but that’s not the case at all! They wallow in ecology that changes nothing because they don’t accept the complex reality.”
For the future, Canfin is counting on a climate policy that unites instead of divides, that transforms without fracturing. To achieve this, and avoid renewed protests by the yellow vests, his to-do list for 2022 is likely to include major strategic tasks: set the course for Europe’s ecological transition, defend the reforms and environmental records of Macron’s five-year term, and pave the way for the next mandate. Giorgia Grimaldi
