EU's Fit for 55 legislative climate package seeks to tighten renewable energy and energy-efficiency targets

The European Commission's extensive legislative package (Fit for 55), published on 14 July 2021, aims for a 55% reduction in greenhouse gas emissions in the EU from 1990 levels by 2030. The newly proposed legislative package provides the means to upgrade the current EU reduction target of 40% to the level proposed by the Commission in September 2020.

The package also includes changes to all key EU climate regulations. These include regulations on emissions trading, obligations for the non-emissions trading (effort sharing) sectors, land use and sinks, energy efficiency and renewable energy, and, as one of the new proposals, a carbon border adjustment mechanism (CBAM).

 “In order to achieve the upgraded EU targets, the climate package must be adapted into an effective framework that takes into account the huge investments needed in low-carbon solutions and technologies. Industry and the energy sectors require large capital and the investment are long-term. To secure such funding, a predictable regulatory environment and technology-neutral funding are essential. The public must also be kept on board, and the changes must be perceived as fair,” says Mika Lintilä, Minister of Economic Affairs. 

“The climate package addresses all the key climate regulations. This includes the directives on energy efficiency and renewable energy, which have only recently been implemented by the Member States. It is now important to carefully assess the impact of the proposal as a whole and to ensure, through further negotiations, that the reform supports rather than prohibits cost-effective emission reductions," Minister Lintilä points out.

Renewable energy and energy-efficiency requirements to be further upgraded

The legislative package also includes a key reform of the EU’s energy legislation. The proposal includes upgrades for the renewable energy targets. The Commission has proposed extensive amendments to the Renewable Energy Directive, with the exception of certain articles. 

The Commission is also planning to extend the scope of the Directive regarding the industrial use of renewable energy and hydrogen, system integration, power purchase agreements (PPAs), and offshore wind power. For Finland, the crucial themes in the reform concern the heating and transport sectors, as well as the use of forest biomass in energy production (including sustainability criteria). 

“We support the upgrading of renewable energy targets, but we also emphasise the importance of securing investments and the predictability of policy measures. Therefore, it would have been pertinent to limit the reform of the Renewable Energy Directive to a minimum number of articles that do not include targets,” Lintilä says.

Energy-efficiency targets will be upgraded by significantly limiting current energy consumption by 2030 and by almost doubling the annual saving target. In future, public sector buildings will have to be renovated to nearly-zero energy levels, and the current rate of renovation must be almost doubled.

According to preliminary draft calculations, Finland would need to limit final energy consumption to approximately 255 terawatt hours by 2030. In 2019, the consumption of final energy in Finland was 298 TWh, meaning that, upon its entrance into force in 2024, the requirement would necessitate an annual reduction in energy consumption of nearly 2% until 2030. This target goes against the measures to reduce emissions through electrification.

“Industry and society at large are undergoing an electrification process, and this will require a massive increase in the production of zero-emission, renewable, and reliable energy. Limiting energy use may even prove to be counter-productive to meeting the climate targets," Lintilä adds. 

The Commission is also proposing a new climate policy tool, the carbon border adjustment mechanism (CBAM), with the aim of preventing carbon leakage from the EU to countries with less restrictive climate policies. The CBAM would be applied to certain products, such as steel and electricity, entering the EU from third countries. The CBAM rate would be determined on the basis of the allowance price. The inclusion of electricity in the CBAM raises specific issues for Finland.

Processing of the legislative proposals is expected to take approximately two years in the European Parliament and the Council. In Finland, due to the stricter obligations, the Commission's proposals will affect the preparation of, for example, the Climate and Energy Strategy. 

Further information online:
European Commission press release on the climate package, 14 July 2021: 
https://ec.europa.eu/commission/presscorner/detail/en/ip_21_3541

Enquiries:
Pia Kotro, Senior Specialist, Ministry of Economic Affairs and Employment, tel. + 358 (0)50 526 6310 (energy efficiency)
Pekka Grönlund, Senior Ministerial Adviser, tel. +358 (0)50 526 6310 (renewable energy)
Teppo Säkkinen, Special Adviser to the Minister of Economic Affairs, tel. +358 (0)50 516 2868