Herculean task and huge opportunity: „Fit for 55“ brings together climate protection and industrial policy

• European Commission package creates important stimuli for the energy supply system: Raising expansion targets for renewables, incentives for green hydrogen, emissions trading as market-based key tool
• Package sets the right course – constructive debate needed on details and pace of implementation

The European Commission presented its “Fit for 55” package today. The measures contained aim at aligning climate and energy-policy legislation to the new net reduction target of 55 per cent by 2030 compared to 1990 levels. As the centrepiece of the European Green Deal, it brings together climate and industrial policy challenges. RWE also considers this to be the right approach.

The focus for RWE is on three aspects in particular:

Expansion of renewables

Green electricity is the basis for the transformation towards a climate-neutral Europe. The huge expansion in wind turbines and solar power plants therefore is paramount for the sustainable electrification of society. Thus, raising the EU expansion target to minimum 40 percent by 2030 is a logical step. But for Europe to really become the first climate-neutral continent by 2050, the expansion needs to be even faster. Besides reliable investment conditions in the member states in particular, faster approval processes are needed that will foster and speed up the expansion. The EU framework has long advocated much shorter and leaner procedures.

Incentives for green hydrogen

Green hydrogen is the key to decarbonising industrial production processes. The “Fit for 55” package creates investment incentives that will favour a swift market development. The new goals for the use of renewables in sectors such as transport and industry will also intensify demand for green hydrogen. It is helpful that carbon contracts for difference, aimed at driving hydrogen growth, can be financed via the ETS Innovation Fund.

As soon as possible, more clarity is needed regarding the regulation of hydrogen infrastructure, certification and proof of origin for climate-neutral gases.

The criteria for procuring renewable electricity to create green hydrogen laid out in the Renewables Directive should follow a pragmatic approach in order not to endanger the fast market ramp-up.

Stronger emissions trading and a competitive industry

It is good that the Commission puts further emphasis on the European Emissions Trading Scheme (ETS), thus making it the market-based key tool for EU climate policy for the long term. Minimum prices for CO₂ are not necessary if the ETS is adjusted in a clever way. The positive experiences with the ETS are used to establish a separate emissions trading scheme for transportation and buildings, in order to ensure targets will also be achieved in these sectors.

The wide range of regulations of the “Fit for 55” package presents Europe with a herculean task but offers huge opportunities at the same time. It will be paramount to combine the individual elements in a way that will avoid a “patchwork” effect. Europe needs a solid foundation that will create a climate for investments and innovation to maintain the Union’s leading position in terms of international competitiveness.

Many of the approaches in the package stimulate cross-border collaboration within Europe. With this framework in place, Europe can set standards and an example that others will follow. In global competition, successful international climate diplomacy is therefore preferable to risky isolation measures such as the Carbon Border Adjustment Mechanism (CBAM).

European industry should receive support for the conversion to climate-friendly production respectively CO₂ allowances should continue to be allocated at no cost until a level playing field for carbon costs is achieved.