Council to take critical decisions on energy, climate and deforestation legislation

Posted on 24 June 2022
Assai or Jucara palm (Euterpe edulis); Belém, Amazonas, Brazil
© Edward Parker / WWF
National energy and environment ministers will be gathering in Brussels next Monday and Tuesday respectively to decide on their positions on critical laws under the EU’s Fit for 55 climate package (such as the Renewable Energy Directive, the EU Emissions Trading Scheme, the Effort Sharing Regulation, greenhouse gas emissions and removals from land use, land use change and forestry (LULUCF), and the establishment of a Social Climate Fund). They are also expected to agree on their position on the new EU Deforestation law.

Why does this matter?

All of these laws form an integral part of the European Green Deal and are critical for the EU to reach its environmental and climate objectives. Meeting these objectives means the entire legislative framework under the EU Fit for 55 package needs to be as strong as possible. At the same time, the Social Climate Fund is the first EU-wide fund that aims to ensure social and climate goals go hand in hand and it is the only social offer in the Fit for 55 package. After a disappointing outcome in the European Parliament on Wednesday, where MEPs voted for a diluted Emission Trading System (ETS) reform following heavy industry lobbying, the decisions taken next Tuesday by the Environment Council will be crucial to determine the path of EU emission reductions and consequences that will be with us for generations to come.

The EU is responsible for 16% of tropical deforestation linked to international trade through the imports of commodities such as beef, soy, palm oil, rubber, timber, cacao and coffee and their derived products. In order to address the EU footprint, the European Commission presented a legislative proposal on a new EU Deforestation law in November 2021. The position of the EU Member States that is expected to be agreed in Council will be the first critical step in the co-decision process with the European Parliament.. There the proposed legislation is currently also under discussion, with votes expected to be held in the environment committee in mid-July and in plenary in September.

Alex Mason, Head of Climate & Energy at WWF’s European Policy Office, said: “Time is running out to avert climate disaster, but Member States’ top priority during the Fit for 55 negotiations has been to find ways of doing as little as possible, and water down even the Commission’s weak proposals. This is unacceptable - the climate emergency needs strong measures, not more exemptions and loopholes, and the overall package must deliver emissions cuts of 65%, rather than just 55%. Ministers must also ensure that vulnerable citizens and communities are helped to adjust to the transition, by supporting a strong Social Climate Fund, not questioning its necessity.”

Anke Schulmeister – Oldenhove, Senior Forest Policy Officer at WWF’s European Policy Office: “EU Member States need to stand up for forests in the upcoming discussion. To make the new EU Deforestation law effective, we need to step out of our comfort zone and make the sometimes tough decisions to do what is right. This means not providing loopholes for companies to circumvent the law, looking beyond forests and addressing other threatened nature, as well as agreeing on definitions that will support real change on the ground."

What will WWF be looking for?

On the Renewable Energy Directive
Member States, led by Sweden and Finland, have done nothing to address the scandalous EU practice of encouraging the burning of trees and crops for energy - even though the science is clear that this increases emissions dramatically compared to fossil fuels. Instead, there have been attempts at watering down the few minor improvements on cascading use and sustainability criteria that the Commission had proposed. Until Member States start listening to scientists, rather than the forest and farm industry lobbies, EU bioenergy policy will remain a stain on EU climate leadership, and continue directly to undermine EU goals on deforestation and carbon dioxide removal.

On the Emissions Trading Scheme (ETS)
In order to support the 1.5°C goal, the EU ETS emissions reductions target must be increased to 70% by 2030. On Wednesday the European Parliament agreed on a proposal that would reduce emissions by a mere 64%, a step forward but not nearly enough. That is why it is now up to the Council and Member States on June 28 to raise ambition in order for the EU to stick to its own climate goals and the 1.5°C goal in the Paris Agreement. It can ensure a strong EU ETS reform by: 
  • Significantly increasing the ETS overall target. The EU ETS emissions reduction target of 61% compared to 2005 proposed by the European Commission falls far short of what’s needed to hold global temperature increase below dangerous levels.
  • Ending free ETS permits for industrial sectors that will be covered by the Carbon Border Adjustment Mechanism (CBAM) as soon as possible. Ending free ETS permits to pollute in 2035 is too late and will delay industrial decarbonisation. 
  • Committing to spend all ETS revenues on climate action, as per the Commission’s proposal. These revenues must not be used to prolong the life of fossil fuel installations, meaning that the Modernisation Fund must also close its doors to fossil gas investment. Member States must also agree to improve reporting rules to ensure transparency on the use of ETS revenues.
     
On the Emissions Trading System for Buildings and Road Transport and the Social Climate Fund
The introduction of a second ETS for buildings and road transport (ETS2) needs meaningful social and environmental safeguards. These should include a price corridor which increases over time and a large and transformative Social Climate Fund, and 100% of ETS2 revenues should be spent on social climate action for buildings and transport.

The SCF is an essential part of the ‘Fit for 55’ package and should start well-before any ETS2 impacts households. It must proactively drive synergies between social and climate goals. To do this, it needs to be big enough, uphold the Partnership Principle in the development of Social Climate Plans, exclude fossil fuels from the scope, and be open only to member states with a climate neutrality target in law.

In the Council, we will be looking for an SCF that:
  • Has a minimum budget that corresponds to at least 25% of the ETS2 revenues and which increases if carbon prices go up;
  • Excludes SMEs from the scope. SMEs make up 99% of EU businesses and would quickly drain a fund meant to help vulnerable households;
  • Finances only additional measures built into binding and comprehensive Social Climate Plans that include a balanced mix between financial compensation and investment support for the most vulnerable households, and that exclude fossil fuels;
On LULUCF
Alongside cutting emissions we urgently need to increase the amount of carbon that is removed from the atmosphere. And the best way to do this is to protect and restore forests, peatlands, and other natural ecosystems, and promote changes to forestry and farming practices that are a win-win for climate and nature. That’s why the LULUCF Regulation is so important. But so far Member States have shown little interest in improving the Commission’s weak proposals, and indeed have spent the last few months trying to find ways to water them down. If they were serious about tackling the climate emergency they would:
  • Set a much higher 2030 target than the 310 million tonnes proposed by the Commission (WWF has called for nearly double this level, to be met by major changes to forestry and farming practices );
  • Scrap the use of land use offsets in sectors covered by the Effort Sharing Regulation. Carbon removals by forests and soils are uncertain and cannot be treated as directly equivalent to fossil fuel emissions - or used to avoid having to cut them.
On the plus side, the Council looks set to reject the Commission’s dangerous plan to merge agriculture and LULUCF after 2030, and is likely to support the move to a much simpler accounting system based on real emissions and removals from 2026 onwards.

On the EU Deforestation law
1.2 million people have called a strong, new EU law to preserve the world’s forests and other ecosystems and those depending on them. The EC proposal published last November included strong elements, but also some loopholes. In order to make sure the EU Deforestation law can make a real change - in line with citizens’ demands -, it needs to:
  • Include definitions that protect forests. As defined now, “forest degradation” refers only to the conversion of primary forests (i.e. old, untouched by human activity) into plantation forests and other wooded land. But forests are destroyed in a variety of ways that lead to biodiversity loss or reduce their capacity to fight climate change; 
  • Focus on other ecosystems too. In order to stop deforestation, it needs to focus on more than just forests so that the deforestation pressure is not just shifted from forests to other unique places, such as savannahs and peatlands, already under threat through EU consumption;
  • Level the playfield. No exceptions for companies sourcing from “low risk countries” and an adequate number of minimum checks, so that companies cannot find a way around the law.
People across Europe have also started again to write to MEPs to stand for a strong EU Deforestation law, and a YouGov poll to be released on 27 June is expected to demonstrate strong public support for action on deforestation. 
Assai or Jucara palm (Euterpe edulis); Belém, Amazonas, Brazil
© Edward Parker / WWF Enlarge