The EU Green Deal Lays the Groundwork for Net Zero

The European Commission last week unveiled a package of climate policy proposals it dubbed “Fit for 55,” a nod to the European Union’s goal of cutting greenhouse gas emissions by 55 percent relative to 1990 levels by 2030. While those proposals have now grabbed the spotlight, they are still subject to negotiation and potentially significant changes during the lengthy legislative process they will now undergo before becoming law. 

With that in mind, it’s worth taking a looking at the legal framework from which those policy proposals emerged: a new climate law approved by the European Parliament and the European Council at the end of June. In addition to establishing the EU’s 2030 emissions reduction target, the law also commits the bloc to collectively reach “net zero” emissions—meaning a balance between the release of greenhouse gases into the atmosphere and their removal from it, for example by planting trees—by 2050. The law had been long in the making; its key features had already been agreed back in April.  

The net zero component of the law is significant, as a global balance between carbon emissions and removal has to be reached by the middle of the century in order to meet the temperature objectives of the Paris Agreement on climate change. A growing number of countries and companies have set themselves net zero targets. According to a recent survey, almost two-thirds of global emissions and a slightly higher share of global GDP are subject to such a target. However, the EU is one of only a few jurisdictions, and the largest emitter so far, to put this commitment formally into law. 

Perhaps surprisingly, the most vocal opposition to the law in the European Parliament came not from industry, but from green groups, over concerns that the short-term target for 2030 was not bold enough. However, the 55 percent target for 2030 is a minimum ambition, and it represents the average across the union. Some member states will have to decarbonize much faster to create headroom for more carbon-dependent countries, such as Bulgaria—which abstained in the final European Council vote—and Poland. 

However, the slower start commits the EU to a very rapid decarbonization pace in the 2030s and 2040s to reach net zero. For example, the United Kingdom, which has also put its net zero target into law, aims to reach that goal by 2050 via a 78 percent emissions drop by 2035

Although the right 2030 target is critical, the squabble about it misses a broader point. Climate change laws are important not just because they set statutory targets; they also establish new processes, create institutional structures and outline financial flows. In doing so, they provide the legislative basis from which future climate policy will be formulated—and, if necessary, strengthened. 

The most successful laws are passed with bipartisan support, and as such, they engender and strengthen political consensus around a shared climate objective.  Where this consensus is missing, climate laws often fail—as they did in Australia in the 2010s—or else they don’t get off the ground, as in the United States during Barack Obama’s presidency.  

The EU climate law was passed by 442 votes to 203, with 51 abstentions. While that is not an overwhelmingly bipartisan tally, it suggests solid support, especially when considering that many of those who voted against the law were hoping for a more stringent text.

The law shares a number of features with the climate change frameworks of countries like Sweden, New Zealand and the U.K., which have come to define good practice in climate change legislation. 

How quickly the EU agrees on its new climate package, and how the changes are subsequently
implemented, will be a big sign of its commitment to climate

The first of these is the interplay between long-term and short-term emissions targets, both of which are statutory. The long-term target, now usually a commitment to net zero emissions by mid-century, defines the direction of travel. 

The short-term targets define an emissions pathway for the time horizon over which corporate and policy decisions are typically made. They are reviewed periodically to make sure the emissions trajectory remains cost-effective and on track to meet the long-term objective.

A second feature is the establishment of independent advisory bodies. Composed of technocrats, these bodies act as advisers, watchdogs and knowledge-brokers. They also provide a long-term perspective that helps counterbalance the short-termism of democratic politics. Although only advisory, at their most powerful, these bodies are not unlike a Federal Reserve Board for carbon.

The EU law also sets up a European Scientific Advisory Board on Climate Change consisting of high-profile experts. However, it remains to be seen what role the board can play within the EU’s complex governance structure. 

A recent review by the World Bank highlights several other elements in successful framework laws. They include clear provisions on finance, stakeholder engagement, long-term planning and measurement, reporting, and verification. All but the first are included in the new EU law. Many climate frameworks, including the new EU law, also contain provisions on adaptation, or measures to deal with the physical risks of climate change that can no longer be avoided. 

Several prominent climate laws established flagship policies that became the core of subsequent climate action. For example, California’s Global Warming Solutions Act of 2006 created the basis for the state’s emissions trading—or Cap and Trade—program. The French Energy Act of 2015 substantially strengthened the country’s carbon tax, including a hike in gas and diesel taxes for motorists that brought the Yellow Vest protesters onto the streets.

By contrast, the EU framework law is predominantly about targets, processes and institutions. There can be good structural reasons for enacting policies separately. Policymakers can respond flexibly to subsequent developments without having to reopen the overall framework. The disadvantage, as the U.K. has experienced with its 2008 Climate Change Act, is that it makes climate policy less predictable and therefore riskier for investors. 

In the case of the EU, there are also practical reasons for the focus on targets and processes: Most policy levers are already in place. Even before it passed its framework law, the EU had been one of the most prolific legislators on climate change. Climate Change Laws of the World, a global database of climate legislation, contains no fewer than 51 EU laws that are relevant to climate change, more than for any other jurisdiction. 

The challenge for the EU now is to adjust this complex body of interventions to the new 55 percent target for 2030. This is the purpose of the “Fit for 55” package, which the commission unveiled on July 14. It contains no fewer than 12 legislative proposals to reform key climate policies, including the EU emissions trading system, the renewable energy directive and the energy efficiency directive, as well as the rules on land use, land use change and forestry. One of the most contentious proposals is for a new carbon border adjustment mechanism, which would protect Europe’s industry against competition from countries with less stringent carbon targets. 

Getting this package agreed and approved could take several years. How quickly this is done, and how the changes are subsequently implemented, will be a big sign of the EU’s commitment to climate action. In the meantime, the targets it has set itself in the new climate law represent a significant step in that direction.

Sam Fankhauser is professor of climate economics and policy at the University of Oxford and research director of Oxford Net Zero.

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