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European Green Deal

Carbon border adjustment fee to be introduced in 2026

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Commissioner Gentiloni presented the Carbon Border Adjustment Mechanism (CBAM) today (15 July) aimed at addressing the risk of carbon leakage, which would give other countries with less ambitious environmental targets a price advantage. 

The CBAM is one of thirteen proposals presented yesterday (14 July) aimed at reducing net greenhouse gas emissions by at least 55% by 2030, compared to 1990 levels. Achieving these emissions reductions required by the recently finalized European Climate Law requires fundamental transformations for different sectors and tools to change behaviours of industry and consumers. 

Many EU businesses are already subject to the EU's Emissions Trading System (ETS), but as long as industrial installations outside the EU are not subject to similarly ambitious measures, these efforts can lose their effect. CBAM aims to equalize the price of carbon between domestic products and imported goods for certain energy-intensive sectors.

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Like the ETS, the CBAM will be based on certificates the prices of which correspond to the embedded emissions in imported goods. The Commission hopes that this will incentivise others to ‘green' their production processes and also encourage foreign governments to introduce greener policies for industry.

There will be a transitional period, which will last from 2023-2025, CBAM will apply to the iron and steel, cement, fertilizer, aluminium and electricity sectors. In this phase, importers will only have to report emissions embedded in their goods, without paying a financial adjustment. This will give time to prepare for the final system to be put in place in 2026, when importers will need to buy certificates that can be offset against embedded emissions. This coincides with the phasing out of free allowances under the ETS. 

The Commission has been at pains to describe the new mechanism as an environmental policy tool, not a tariff instrument. It will apply to products, not countries, based on their actual carbon content, independently of their country of origin.

Gentiloni reported that finance ministers and central bankers meeting as the G20 in Venice received the EU proposal positively and with interest. He said that similar carbon pricing measures were under discussion including in the US and Canada.

WTO compatible?

Brazil, South Africa, India, and China have already expressed “grave concern” that CBAM could impose unfair discrimination on the import of their products. Ex-WTO Chief Judge James Bacchus writing in a blog for the World Economic Forum wrote: “To prove that CBAM is entitled to the WTO’s general exceptions, the European Commission would have to establish that it will not be ‘applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail’. And in addition, that it is not ‘a disguised restriction on international trade’.”

In order to reassure non-EU states, Bacchus suggests that it enters into dialogue with all stakeholders, the Commission’s proposal also includes a possibility of financial support in the form of technical assistance to help developing countries adapt to the new obligations.

Own resource?

The EU’s Next Generation EU fund which permits the EU to borrow €750 billion from financial markets will be funded by new own resources. CBAM is listed as one of the new sources of income, however it is estimated to make a very small contribution at only €10bn in revenue by 2030 and only 20% of this will be go to the EU. EU Reporter has asked for clarification on these figures and is still awaiting a response.

Electricity interconnectivity

Commission approves €30.5 billion French scheme to support production of electricity from renewable energy sources

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The European Commission has approved, under EU state aid rules, a French aid scheme to support renewable electricity production. The measure will help France achieve its renewable energy targets without unduly distorting competition and will contribute to the European objective of achieving climate neutrality by 2050.

Executive Vice President Margrethe Vestager, in charge of competition policy, said: “This aid measure will stimulate development of key renewable energy sources, and support a transition to an environmentally sustainable energy supply, in line with the EU Green Deal objectives. The selection of the beneficiaries through a competitive bidding process will ensure the best value for taxpayers' money while maintaining competition in the French energy market.” 

The French scheme

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France notified the Commission of its intention to introduce a new scheme to support electricity produced from renewable energy sources, namely to onshore operators of solar, onshore wind and hydroelectric installations. The scheme grants support to these operators awarded via competitive tenders. In particular, the measure includes seven types of tenders for a total of 34 GW of new renewables capacity that will be organized between 2021 and 2026: (i) solar on the ground, (ii) solar on buildings, (iii) onshore wind, (iv) hydroelectric installations, (v) innovative solar, (vi) self-consumption and (vii) a technology-neutral tender. The support takes the form of a premium on top of the electricity market price. The measure has a provisional total budget of around €30.5 billion. The scheme is open until 2026 and aid can be paid out for a maximum period of 20 years after the new renewable installation is connected to the grid.

Commission's assessment

The Commission assessed the measure under EU state aid rules, in particular the 2014 Guidelines on state aid for environmental protection and energy.

The Commission found that the aid is necessary to further develop the renewable energy generation to meet France's environmental goals. It also has an incentive effect, as the projects would otherwise not take place in the absence of public support. Furthermore, the aid is proportionate and limited to the minimum necessary, as the level of aid will be set through competitive tenders. In addition, the Commission found that the positive effects of the measure, in particular, the positive environmental effects outweigh any possible negative effects in terms of distortions to competition. Finally, France also committed to carry out an ex-post evaluation to assess the features and implementation of the renewables scheme.

On this basis, the Commission concluded that the French scheme is in line with EU State aid rules, as it will facilitate the development of renewable electricity production from various technologies in France and reduce greenhouse gas emissions, in line with the European Green Deal and without unduly distorting competition.

Background

The Commission's 2014 Guidelines on State Aid for Environmental Protection and Energy allow member states to support the production of electricity from renewable energy sources, subject to certain conditions. These rules aim to help member states meet the EU's ambitious energy and climate targets at the least possible cost for taxpayers and without undue distortions of competition in the Single Market.

The Renewable Energy Directive of 2018 established an EU-wide binding renewable energy target of 32% by 2030. With the European Green Deal Communication in 2019, the Commission reinforced its climate ambitions, setting an objective of no net emissions of greenhouse gases in 2050. The recently adopted European Climate Law, which enshrines the 2050 climate neutrality objective and introduces the intermediate target of reducing net greenhouse gas emissions by at least 55% by 2030, set the ground for the fit for 55' legislative proposals adopted by the Commission on 14 July 2021. Among these proposals, the Commission has presented an amendment to the Renewable Energy Directive, which sets an increased target to produce 40% of EU energy from renewable sources by 2030.

The non-confidential version of the decision will be made available under the case number SA.50272 in the state aid register on the Commission's competition website once any confidentiality issues have been resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the Competition Weekly e-News.

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European Green Deal

Protecting Europe's seas: Commission launches public consultation on the Marine Strategy Framework Directive

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The European Commission has launched a public consultation seeking the views of citizens, institutions and organizations from the public and private sectors on how to make the EU's Marine Strategy Framework Directive more efficient, effective and relevant to the ambitions set in the European Green Deal. Building on the initiatives announced under the European Green Deal, most notably the Zero Pollution Action Plan and the EU Biodiversity Strategy to 2030, this review seeks to ensure that Europe's marine environment is governed by a robust framework, that keeps it clean and healthy whilst ensuring its sustainable use.

Environment, Oceans and Fisheries Commissioner Virginijus Sinkevičius said: “Healthy seas and oceans are essential to our wellbeing and to achieve our climate and biodiversity goals. However, human activities are negatively affecting life in our seas. Biodiversity loss and pollution continue to threaten marine life and habitats, and climate change poses enormous threats to the oceans and to the whole planet. We need to step up protection and care of our seas and oceans. That is why we need to take a close look at our current rules and, if need be, change them before it is too late. Your views on the marine environment are crucial in this process.”

The Marine Strategy Framework Directive is the EU's main tool to protect the marine environment and aims to maintain healthy, productive and resilient marine ecosystems, while securing a more sustainable use of marine resources for the benefit of current and future generations. The review of the Directive will look in more detail at how it has performed so far, take into account findings by the Commission's Report on the Marine Strategy published in June 2020 and assess its suitability to tackle the cumulative impacts of human activities on the marine environment. The public consultation is open until 21 October. More information is in the news release here.

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Environment

European Green Deal: Commission proposes new strategy to protect and restore EU forests

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Today (16 July), the European Commission adopted the New EU Forest Strategy for 2030, a flagship initiative of the European Green Deal that builds on the EU Biodiversity Strategy for 2030. The strategy contributes to the package of measures proposed to achieve greenhouse gas emission reductions of at least 55% by 2030 and climate neutrality in 2050 in the EU. It also helps the EU deliver on its commitment to enhance carbon removals by natural sinks as per the Climate Law. By addressing the social, economic and environmental aspects all together, the Forest Strategy aims at ensuring the multifunctionality of EU forests and highlights the pivotal role played by foresters.

Forests are an essential ally in the fight against climate change and biodiversity loss. They function as carbon sinks and help us reduce the impacts of climate change, for example by cooling down cities, protecting us from heavy flooding, and reducing drought impact. Unfortunately, Europe's forests suffer from many different pressures, including climate change.

Protection, restoration and sustainable management of forests

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The Forest Strategy sets a vision and concrete actions for increasing the quantity and quality of forests in the EU and strengthening their protection, restoration and resilience. The proposed actions will increase carbon sequestration through enhanced sinks and stocks thus contributing to climate change mitigation. The Strategy commits to strictly protecting primary and old-growth forests, restoring degraded forests, and ensuring they are managed sustainably – in a way that preserves the vital ecosystem services that forests provide and on which society depends.

The Strategy promotes the most climate and biodiversity friendly forest management practices, emphasises the need to keep the use of woody biomass within sustainability boundaries, and encourages resource-efficient wood use in line with the cascade principle.

Ensuring the multifunctionality of EU forests

The Strategy also foresees the development of payment schemes to forest owners and managers for providing alternative ecosystems services, e.g. through keeping parts of their forests intact. The new Common Agricultural Policy (CAP), amongst others, will be an opportunity for more targeted support to foresters and to the sustainable development of forests. The new governance structure for forests will create a more inclusive space for Member States, forest owners and managers, industry, academia and civil society to discuss about the future of forests in the EU and help maintain these valuable assets for the generations to come.

Finally, the Forest Strategy announces a legal proposal to step up forest monitoring, reporting and data collection in the EU. Harmonised EU data collection, combined with strategic planning at Members States' level, will provide a comprehensive picture of the state, the evolution and the envisaged future developments of forests in the EU. This is paramount to making sure that forests can deliver on their multiple functions for climate, biodiversity and economy.

The strategy is accompanied by a road map for planting three billion additional trees across Europe by 2030 in full respect of ecological principles – the right tree in the right place for the right purpose.

Executive Vice President for the European Green Deal Frans Timmermans said: “Forests provide a home to most of the biodiversity we find on Earth. For our water to be clean, and our soils to be rich, we need healthy forests. Europe's forests are at risk. That is why we will work to protect and restore them, to improve forest management, and to support foresters and forest caretakers. In the end, we are all part of nature. What we do to fight the climate and biodiversity crisis, we do for our own health and future.”

Agriculture Commissioner Janusz Wojciechowski said: “Forests are the lungs of our earth: they are vital for our climate, biodiversity, soil, and air quality. Forests are also the lungs of our society and economy: they secure livelihoods in rural areas, provide essential products for our citizens, and hold a deep social value through their nature. The new Forest Strategy recognises this multifunctionality and shows how environmental ambition can go hand-in-hand with economic prosperity. Through this Strategy, and with support from the new common agricultural policy, our forests and our foresters will breathe life into a sustainable, prosperous, and climate neutral Europe.”

Environment, Oceans and Fisheries Commissioner Virginijus Sinkevičius said: “European forests are a valuable natural heritage that cannot be taken for granted. Protecting, restoring and building up the resilience of European forests is not only essential to fight the climate and biodiversity crises, but also to preserve the socio-economic functions of forests. The huge involvement in public consultations shows that Europeans care about the future of our forests, so we must change the way we protect, manage and grow our forests that it would bring real benefits for all.”

Background

Forests are an essential ally in the fight against climate change and biodiversity loss thanks to their function as carbon sinks as well as their ability to reduce the impacts of climate change, for example by cooling down cities, protecting us from heavy flooding, and reducing drought impact. They are also valuable ecosystems, home to a major part of Europe's biodiversity. Their ecosystem services contribute to our health and well-being through water regulation, food, medicines and materials provision, disaster risk reduction and control, soil stabilisation and erosion control, air and water purification. Forests are a place for recreation, relaxation and learning, as well as part of livelihoods.

More information

New EU Forest Strategy for 2030

Questions and Answers on the New EU Forest Strategy for 2030

Nature and Forests Factsheet

Factsheet – 3 billion additional trees

3 billion trees website

European Green Deal: Commission proposes transformation of EU economy and society to meet climate ambitions

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