In a Nutshell
The Renewable Energy Directive (RED) aims to increase the share of renewable energy sources (RES) within the European Union’s final energy consumption. It establishes a common framework for the development of renewable energy capacity in the European Union and sets a binding target for the share that renewable energy represents within the EU’s final energy consumption.
In its 2021 revision, the Commission proposed increasing the target minimum share of RES in the EU’s final energy consumption to 40% in 2030 (RED III), an increase of 8 percentage points compared to its 2018 recast (RED II), which had established a minimum RES share of 32% of final energy consumption in 2030. Since the 2021 proposal, the binding renewable target has been raised to a 42.5% RES share in 2030 as part of the RePower EU Package (RED IV). RePower EU follows the Russian invasion of Ukraine and an increasing need to reduce dependency on Russian gas.
The Directive is particularly relevant for bioenergy with carbon capture and storage (BECCS), as it regulates the use of biomass and biofuels for energy generation, affecting the feasibility of introducing BECCS in the EU, and its potential scale. RED is also highly relevant to carbon dioxide removal (CDR) methods that rely on a stable supply of renewable and low–emissions energy, such as direct air carbon capture and storage (DACCS).
The RED also impacts biomass-based CDR methods beyond BECCS. Due to the high expected demand and relatively limited supply of eligible types of biomass, competition may arise between actors proposing different potential uses for biomass. Biomass use also affects carbon storage in biogenic carbon sinks. For example, forests can be a biogenic carbon sink, provide timber, and provide residual harvest biomass for bioenergy production.
What's on the Horizon?
- A tentative political agreement on RED IV was reached between the EU Parliament and the EU Council on 30 March 2023. This agreement was due to be formally approved on 17 May, but a last-minute disagreement over the role of low-carbon hydrogen produced using nuclear energy in the EU’s decarbonisation targets led to the process being postponed.
- On 19 June, the EU Council reached an agreement on RED IV. The European Parliament Committee responsible for the file approved the text on 28 June. A plenary vote in the European Parliament took place on 12 September, during which the EP voted in favor of the revision. Now, EU member states need to give the final green light before the law enters into force.
- The energy policy framework for the post-2030 period is under discussion.
Making sense of the Renewable Energy Directive
To help deliver on the EU’s increasing climate ambitions, including the EU-wide 55% emissions reduction target by 2030 and the target to achieve net neutrality by 2050, the targets set by the RED have been repeatedly increased. As a result, the RED has evolved from RED I to its latest version, RED IV. Starting from a target of 20% RES as a share of total final energy consumption by 2020 set in 2009, RED I was revised as part of the “Clean energy for all Europeans” package in 2018 to include a target of a 32% RES share by 2030, thereby becoming RED II.
In July 2021, as part of the “Fit-for-55” package, RED III was proposed and the target was raised to 40% by 2030. Following the Russian aggression against Ukraine, the Commission proposed a first amendment (RED IV) with a target of 45% as part of its “REPowerEU” plan. In November 2022, the Commission proposed a second amendment for a Council regulation to accelerate RES deployment.
In March 2023, the EU Parliament and the Council reached a tentative agreement to raise the target to a 42.5% RES share by 2030. Member states will need to increase their national contributions in their integrated National Energy and Climate Plans (NECP), which are due to be updated in 2023 and 2024, to collectively achieve the target. Achieving the target would bring EU member states’ total renewable energy generation capacity to 1236 GW by 2030.
RES considered within the RED’s scope include wind, solar, hydro, tidal, geothermal, and biomass. The binding target is supported by differentiated targets for a variety of sectors, such as heating and cooling, industry, and transport. The provisional agreement under RePowerEU also aims to remove barriers to the scale-up of renewable energy generation by making permitting processes for renewable energy installations quicker and easier. To this end, member states will define regions (so-called ‘go-to areas’) with limited environmental risks and high renewable energy generation capability, in which the permitting procedure shall be simplified.
The RED and its impacts on biomass use
Biomass is considered a RES within the provisional agreement, provided that its use meets several sustainability criteria. These include requirements that woody biomass used in energy generation follows the cascading principle – ensuring that biomass of higher quality should serve purposes demanding higher-quality biomass first – and that forest biomass may not be harvested from areas with particular significance with regard to carbon stocks or biodiversity. Furthermore, no financial support shall be granted when energy facilities use stumps and roots for energy generation (as they are considered important, for example, to protect soil carbon stocks) or when they use high-quality biomass that should be reserved for other use cases under the cascading principle, such as industrial-grade roundwood, veneer logs, and saw logs.
The provisional agreement sets out a new binding combined target of 5.5% for advanced biofuels, generally derived from non-food-based feedstocks, and renewable fuels of non-biological origin, mostly renewable hydrogen and hydrogen-based synthetic fuels, in the share of renewable energy supplied to the transport sector. The increasing need for advanced biofuels that use biomass as a feedstock may conflict with the demand for the lower-quality biomass upon which several CDR methods rely, such as BECCS and biochar.
Where does BECCS fit in?
The recognition of biomass as a renewable energy source affects the feasibility and potential scale of BECCS. BECCS can both provide renewable energy and remove carbon dioxide from the atmosphere. The 2021 proposal states that member states should not support electricity production from installations producing only electricity, as opposed to, for example, installations producing both heat and power), unless these installations are located in regions included in the Just Transition Plan, or if the installations used CCS technologies to capture and store the associated (biogenic) CO2 emissions.
Currently, negative emissions stemming from BECCS cannot contribute towards targets set under any of the three main legislative pillars of EU climate action, namely the EU Emissions Trading System (EU ETS), the Effort Sharing Regulation (ESR), and the LULUCF Regulation.
The RED: Are sustainability criteria enough to ensure the sustainable use of biomass?
The role of biomass within the RED is important. While sustainability criteria exist to prevent the misuse of biomass for energy generation, the demand for biomass may increasingly exceed supply. Some communities might be adversely impacted, especially in terms of resource use and food security. It is therefore critical that future revisions of the RED take these concerns into consideration.
Energy for the future: renewable sources of energy, indicative EU target of 12% renewables by 2010.
Directive on electricity production from renewables: national indicative targets
Directive on biofuels and renewable fuels for transport: national targets for biofuels
RED I: EU target of 20% renewables by 2020 and national binding targets
RED II: 32% renewables target for 2030 – This is the piece of legislation that is currently in force
RED III: EU Green Deal: EC proposal to raise target for 2030 to 40%
Council and Parliament reach provisional agreement on the revision
A last-minute objection postponed the adoption of RED IV
The Council reached an agreement on RED IV
The EU Parliament voted to in favor of the revision
Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directive (EU) 2018/2001 of the European Parliament and of the Council, Regulation (EU) 2018/1999 of the European Parliament and of the Council and Directive 98/70/EC of the European Parliament and of the Council as regards the promotion of energy from renewable sources, and repealing Council Directive (EU) 2015/652
In a Nutshell
As part of the European Green Deal, the EU has set out legally binding climate objectives to (1) cut domestic net greenhouse gas (GHG) emissions by at least 55% compared to 1990 levels by 2030 and to (2) reach climate neutrality by 2050. The European Climate Law provides the legal framework to support these objectives. The law also requires the European Commission to propose a 2040 climate target for the EU in the first half of 2024, accompanied by an indicative EU GHG budget for the period 2030-2050.
The Commission is at the early stages of this process and has opened a public consultation to guide its assessment of a suitable 2040 climate target, inform the analysis of the sectoral transformations needed to meet this target, and provide input on the possible evolution of climate policy instruments beyond 2030. It will also lay out preferences between establishing separate or joint targets for emissions reductions and carbon removal – the two central components of net zero.
Carbon Gap advocates for the EU to set an explicit 2040 net emission reduction target of 95% compared to 1990, in line with advice by the European Scientific Advisory Board on Climate Change. This target will be the key milestone that the Union commits to reaching on the path to climate neutrality by or before 2050.
Deadline to submit feedback to the call for evidence for an impact assessment, which will inform the new Communication on the EU climate target for 2040
Planned Commission adoption of the Communication, which will lay the foundation for a draft law setting the 2040 target
- Call for evidence for an impact assessment on the new EU climate target for 2040
- Letter from academics and climate experts urging European legislators to adopt separate targets for carbon removals
- 2023 — the Year of Shaping EU’s 2040 Climate Target, by Eve Tamme
- Scientific advice for the determination of an EU-wide 2040 climate target and a greenhouse gas budget for 2030–2050
- Carbon removal: the key to getting the 2040 climate target right
Key Institutional Stakeholders
European CommissionDG Climate Action (CLIMA), Unit A.2: Foresight, Economic Analysis & Modelling DG Climate Action (CLIMA), Unit A.1: Strategic Coordination, Legal & Institutional DG Energy (ENER), Unit A.4: Chief Economist Team DG Energy (ENER), Unit A.1: Interinstitutional, policy coordination and planning
Additional StakeholdersThe European Scientific Advisory Board on Climate Change will inform the Commission’s assessment of a suitable 2040 climate target
In a Nutshell
The Net Zero Industry Act (NZIA) is a legislative proposal from the European Commission from March 2023 that aims to provide a stable and simplified regulatory environment to support the scale-up of net zero technologies. The NZIA aims to reach a goal of at least 40% manufacturing capacity of strategic net zero technologies in the EU according to annual deployment needs.
The Act sets out enabling conditions, streamlined permitting processes, and one-stop shops for net zero technology manufacturing projects. It differentiates between ‘net zero technologies’ (at least TRL 8) and ‘innovative net zero technologies’ (lower TRL, and can benefit from regulatory sandboxes to foster innovation). It proposes a list of eight strategic net zero technologies that would benefit from even faster permitting process within what are defined as “net zero strategic projects”:
- Solar photovoltaic and solar thermal technologies,
- Onshore wind and offshore renewables,
- Heat pumps and geothermal energy,
- Electrolysers and fuel cells,
- Sustainable biogas/biomethane technologies,
- Carbon capture and storage (CCS),
- Grid technologies.
The Act establishes an annual EU CO2 injection capacity goal of 50 million tonnes. This goal will be adjusted when the regulation is incorporated into the EEA Agreement to account for additional capacity in Norway and Iceland and is expected to grow post-2030; according to the Commission’s estimates, the EU could need to capture up to 550 million tonnes of CO2 annually by 2050 to meet the net zero objective, including for carbon removals.
In one of the world’s firsts, oil and gas producers are subject to an individual contribution to this target, making them directly responsible for building and operating the newly mandated CO2 injection capacity. The contributions will be calculated based on a “pro-rata” basis, accounting for their share of oil and gas production within the EU during 2020-2023.
The Act also aims to facilitate access to markets through public procurement, auctions, and support for private demand. It focuses on ensuring the availability of skilled workforce and foresees net zero industrial partnerships with third countries.
What's on the Horizon?
The NZIA proposal by the European Commission has entered ordinary legislative procedure to reach a formal adoption by the European Parliament and the Council. The European Parliament Environment Committee (ENVI) will vote its opinion on the file in September, followed by the Industry Committee’s (ITRE) deliberation on its position in October. The Council is due to agree on its negotiating position (general approach) by early December. Soon after, trialogues negotiations between the EU co-legislators are expected to kick off.
To provide dedicated funding support to scale up clean technologies, the Commission was set to propose a European Sovereignty Fund by Summer 2023 within the context of the multi-annual financial framework (MFF). On 20 June, the Commission proposed, instead, to establish a ‘Strategic Technologies for Europe Platform’ (STEP), to provide an immediately available tool to member states. The STEP proposal will need to be approved by the European Parliament and Council.
As one pillar of a larger Green Deal Industrial Plan, the NZIA is meant to strengthen and support the EU’s capacity to reach its climate goals. It ensures Europe seizes the potential to be a world leader in the global net zero industry in the context of strong support for net zero technologies coming from different parts of the world, such as the United States’ IRA.
(Strategic) net zero technologies
The NZIA proposes key developments for net zero technologies. Two main aspects of the definition are particularly relevant: (1) the definition is not technology-neutral, it identifies key areas to be addressed, and further lists a family of eight strategic net-zero technologies, which benefit from even faster permitting, priority status, and in some circumstance of overriding public interest, and (2) net zero technologies must be at least Technology Readiness Level (TRL) 8. CDR is not explicitly listed as a strategic net zero technology, and the TRL 8 requirement would exclude most CDR methods. However, if based on TRL only, some could fall under the definition of ‘innovative net zero technologies’, e.g., some forms of direct air capture are considered TRL 7. This flaw of the proposal could be addressed by co-legislators by adding carbon removal in the definition of net zero technologies and in the related annex.
CO2 injection capacity target to incentivise CO2 storage infrastructure
The NZIA proposes a 50 million tonnes per year of CO2 injection capacity in the EU by 2030. The act rightly identifies the lack of storage capacity as one of the largest bottlenecks for CO2 capture investments. One of the key aspects of the act is the transparency of CO2 storage capacity, including the obligation for member states to make publicly available data on sites that can be permitted on their territory, as well as reporting on CO2 capture projects in progress, and their needs for injection and storage capacity. The NZIA clarifies that CO2 injection capacity will also be available to accommodate CDR, but provisions are not proposed to ensure the shared CO2 infrastructure can efficiently be used to accommodate both CCS and CDR methods. A comprehensive and coordinated approach to carbon management that considers both CCS and CDR is needed to ensure that limited CO2 storage capacity is used effectively to reach the EU’s climate neutrality targets. The target will need to be continuously reassessed to meet the storage needs in the EU, especially beyond 2030. Furthermore, separate provisions to ensure adequate transport infrastructure should be foreseen. The European Commission estimates that about 550 million tonnes of CO2 may need to be captured annually by 2050 to meet the net zero objective.
Oil and gas producers’ responsibility to develop the EU CO2 injection capacity has the potential to be a world-leading initiative
The NZIA Article 18 introduces an innovative obligation on oil and gas producers to take responsibility for building EU CO2 storage infrastructure subject to the EU’s injection capacity target. This obligation could introduce an element of producer responsibility for fossil fuel producers in a similar way as producers of packaging, car tires, and other products are required by law to take responsibility for the environmental footprint of end-of-life disposal. If confirmed, this provision would also allow the development of open carbon storage sources by mapping and hosting transparent, open data on carbon storage resources, much of which is held today by private companies. Critical details of this obligation, such as how different sources of CO2 for storage are prioritised or barred, which entities, beyond oil and gas producers, are required to build the CO2 infrastructure, and the procedures to determine their location remain open and need further attention.
Fresh funding is needed
The proposal establishes new initiatives, such as the “Net Zero Europe Platform”, that will discuss the financial needs of the net zero strategic projects and could be key in advising how the financing of these projects can be achieved. Beyond this, the NZIA is anchored in already existing funding mechanisms such as Innovation Fund, InvestEU, Horizon Europe, Important Projects of Common European Interest (IPCEI), the Recovery and Resilience Facility, and Cohesion Policy programmes. Clarity on new and additional funding will be key, as bigger goals will require bigger means that can support the variety of CDR methods at different TRL stages.
The Green Deal Industrial Plan Communication
European Commission legislative proposal on the Net Zero Industry Act (NZIA)
Publication of Draft Report by MEP Christian Ehler
Deadline for submission of amendments – ENVI Committee
Deadline for submission of amendments – ITRE Committee
Deadline to provide feedback to the Commission on the NZIA proposal
ENVI vote on Committee’s Opinion
ITRE Committee vote
Council to adopt its general approach
- The Green Deal Industrial Plan, European Commission
- Investment needs assessment and funding availabilities to strengthen EU’s net zero technology manufacturing capacity, Commission Staff Document
- Making good on the “net” in net zero: Carbon Gap reaction to the Net-Zero Industry Act, 2023
- European Commission Staff Working Document on the Net-Zero Industry Act
- Carbon Gap’s feedback to NZIA Consultation
Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on establishing a framework of measures for strengthening Europe’s net-zero technology products manufacturing ecosystem (Net Zero Industry Act)
Key Institutional Stakeholders
European CommissionDG Internal Market, Industry, Entrepreneurship and SMEs (GROW)
European ParliamentCommittee responsible: ITRE Rapporteur: Christian Ehler (EPP, DE) Shadow rapporteur: Tsvetelina Penkova (S&D, BG) Shadow rapporteur: Christophe Grudler (Renew, FR) Shadow rapporteur: Damien Carême (Greens/EFA, FR) Shadow rapporteur: Marc Botenga (GUE/NGL, BE) Shadow rapporteur: Paolo Borchia (Identity& Democracy Group, IT) Shadow rapporteur: Evžen Tošenovský (European Conservatives and Reformists Group, CZ)
Council of the European UnionCouncil configuration: COMPET
In a Nutshell
The proposal for a Soil Monitoring Law introduces a monitoring framework for all soils across the European Union. The proposed directive establishes a definition of what constitutes healthy soil. The law aims to present the information necessary to monitor European soils’ health and provide incentives for sustainable soil management.
In the proposal, soil health is defined as ‘the physical, chemical and biological condition of the soil determining its capacity to function as a vital living system and to provide ecosystem services’. Healthy soils have the potential to draw significant amounts of CO2 from the atmosphere. However, EU soils are losing their ability to retain carbon and are actually emitting CO2, exacerbating climate change. Peatland drainage and soil erosion linked to agriculture and human settlements are just some of the reasons behind this carbon loss and associated emissions. In turn, the declining quality of EU soils might impact future food production.
The proposal’s most important feature is the introduction of a harmonised methodology and rules for soil health monitoring across the EU. Although some room is left for member states to decide how to implement the directive, it establishes common Union-wide criteria to assess whether a soil body is ‘healthy’ or ‘unhealthy’. The framework would create a common database integrating data from EU-level, member state and private sources. Member states will be required to regularly and accurately measure soil health using the framework.
The law significantly lacks a legally binding objective to achieve soil health across EU territory by 2050. If monitoring shows that EU soils are unhealthy, there is no obligation for member states to restore soil health. Thus, this law does nothing to ensure that soil health is achieved.
What's on the Horizon?
The EU Commission published its legislative proposal on 5 July 2023.
The proposal will be subject to interinstitutional negotiations in European Parliament and Council.
A public feedback period on the European Commission’s proposal is open until 3 November 2023, which is likely to be extended.
A study to support the impact assessment of the Proposal is expected to be finalised in September 2023.
Context of the law
In 2021, the European Parliament requested that the Commission develop an EU-wide common legal framework for the protection and sustainable use of soil. The 2023 Framework proposal followed up on this request. Soil health also plays a key role in delivering existing EU strategies and targets, including the EU Biodiversity Strategy for 2030, the EU Soil Strategy for 2030 and the 8th Environment Action Programme.
Reaching the new climate objectives set under the European Green Deal, as well as ensuring a stable food supply, relies on healthy soils. In the proposal, the Commission reports that an estimated 61% to 73% of agricultural soils in the EU are affected by erosion, loss of organic carbon, nutrient exceedances, compaction or secondary salinisation, or a combination of these threats, which not only impacts soil carbon sequestration but also food production capacities. For example, crop yields can be reduced by 2.5-15% by soil compaction. It is estimated that around 75 billion tonnes of organic carbon are stored in EU soil. As a point of reference, the EU’s total CO2 emissions were about 4.5 billion tonnes in 2017.
What does it look like in practice?
The proposal for a directive applies to all soils in the territory of member states. Under the Framework, member states are required to delineate their territories in ‘soil districts’, which is a newly defined governable unit introduced in the directive. Some loosely defined parameters to determine soil districts are laid out in the proposal. A competent authority designated by each member state will be assigned for each soil district. Member states are then required to establish a monitoring framework based on a set of criteria laid out in the directive, ensuring comparability of measurement across soil districts and member states. Most importantly, the European Union now has a measurable definition of soil health. Using this framework, member states are required to accurately and regularly measure soil health. The Directive lays out methodologies to do so and an obligation to measure soils at least every five years.
Under this proposed directive, member states would also be required to set up a mechanism for voluntary soil health certification, viewed as a way to incentivise the uptake of sustainable soil management practices by land owners. As per the current proposal, this certification would be complementary to the Carbon Removal Certification Framework (CRCF). This linkage is still unclear and needs to be further clarified by the Commission.
Room for improvement
The Commission’s plan to create a strong soil health monitoring framework is a positive move for Europe. It will help foster healthier soils, potentially leading to greater quantities of carbon being absorbed. Carbon Gap especially welcomes the establishment of measurable common thresholds for soil health across a wide range of variables, minimum criteria for determining sampling points, an EU-wide soil health assessment and reporting system, and a digital portal to make soil data publicly accessible as important steps towards boosting Europe’s soils through a harmonised framework.
However, it is important to recognise that monitoring soil health does not necessarily mean that soil health will be improved. The proposed directive would better serve its purpose if it included a legally-binding target for soil health by 2050 holding member states accountable for their stated goal. Another concern is that the proposed frequency of measurement and the timelines for reporting cycles is insufficient. Effectively, if the law enters into force as it stands today, the first soil measurements would only be required within four years. New soil measurements would then be required every five years, meaning that it would take close to a decade before a clear view is established of whether EU soils are recovering, protected or enhanced.
While the Commission’s desire to incentivise sustainable soil management principles is welcome, its proposed mechanism of soil health certification for land owners and managers raises concerns. The suggested link to the CRCF warrants scrutiny as soil health and soil carbon are not interchangeable, soil carbon fluxes are difficult to measure accurately at scale, and the durability of soil carbon storage is low. Therefore, soil health certificates should not be sold as carbon credits or used to contribute toward net-zero targets. Rather, these certificates might be supported by entities wanting to make contribution claims or do good for the environment and society.
Directive Of The European Parliament And Of The Council on Soil Monitoring and Resilience (Soil Monitoring Law)
Soil Monitoring Law
Key Institutional Stakeholders
European CommissionDG Environment (ENV) Unit D.1: Land Use & Management
European ParliamentCommittee Responsible: ENVI Rapporteur: Martin Hosjík (Renew, SK) Shadow Rapporteur: Beatrice Covassi (S&D, IT) Shadow Rapporteur: Ljudmila Novak (EPP, SI)
In a Nutshell
The European Commission has proposed a voluntary regulatory framework for the certification of carbon removals (CRCF), which will be the first of its kind in width of covered CDR methods, pending adoption by co-legislators. The stated goal is to foster and accelerate the scale-up of sustainable carbon removals, which includes a wide variety of CDR methods to be applied by land managers, industries, and others to capture and store atmospheric or biogenic CO2, as well as fight greenwashing, and harmonise carbon removal market conditions.
The proposal includes and distinguishes 3 types of carbon removal categories: carbon farming (such as reforestation and soil carbon management), permanent carbon storage (such as BECCS and DACCS), and carbon storage in products (such as wood-based construction materials). In order to ensure the quality of carbon removals certified under the framework, removals need to meet several quality criteria (so-called “QU.A.L.ITY” criteria), covering the aspects of quantification, additionality, long-term storage, and sustainability.
Under the framework, the European Commission, assisted by an expert group, will develop methodologies for the certification of a range of carbon removal methods and recognise certification schemes. The certification schemes will have the obligation of listing certified removals in interoperable public registries, while certification bodies, supervised by Member States, will carry out certification audits and the issuing of certificates.
In its current state, the proposal does not align with scientifically widely accepted definitions of carbon removal as the definition also covers emissions reductions. It also does not outline any rules for how the carbon removal certificates generated under the framework could or should be used. The certificates could be used in corporate reporting, in contracts in supply chains, in voluntary markets, or to receive public support for carbon removal activities.
What's on the Horizon?
2023: In the next steps, the European Parliament rapporteur on the file (MEP Lidia Pereira, EPP, PT) will prepare her initial report, and discussions in the Parliament and Council will continue.
- The draft report is expected to be voted on in the Parliament’s Environment committee in September 2023 and then in its October plenary session.
- In the Council, a general approach on the text among EU Member States is expected in Autumn 2023.
2023: The expert group on carbon removals kicked off their work in March 2023. Among other tasks, the group will be providing technical advice to the Commission on the development of the methodologies under the CRCF.
2023: In parallel to the legislative process, work will be ongoing on detailed methodologies for different carbon removal activities that will be set out in Commission delegated acts.
Within one year of the implementation of CRCF, the Commission will have to assess the potential inclusion of carbon storage in products in scope of the LULUCF Regulation.
By 2026, the Commission will have to assess the potential inclusion of carbon removals with permanent storage in the EU ETS.
Aim of the file
The CRCF will be the EU’s first certification framework that focuses exclusively on carbon removals. The stated goal of the file is a certification framework which creates trust in the quality and reliability of certified carbon removals among carbon removal providers, certificate buyers, and the public. The proposed framework also aims to increase transparency in the field of carbon removal certification, by creating public registries and methodologies for a wide variety of carbon removal methods, while also outlining requirements for monitoring, reporting and verification. As a result, interest and willingness to fund carbon removal activities and purchase certificates are expected to increase, leading to an expansion of carbon removal activities by current and potential operators. If adopted by co-legislators, the framework will form the basis of recognising and rewarding land managers, industry, and other carbon removal activity operators for high-quality carbon removals and their contribution to reaching the EU’s climate change mitigation goals.
Meaning for climate goals
By establishing this framework, the European Union works towards reaching its goal of climate neutrality in 2050 and net-negative emissions thereafter, both of which will rely heavily on significantly upscaling carbon removal. As the first legislative file focusing primarily on carbon removals, it also contains a definition of which, in the current proposal, also includes emissions reductions. Furthermore, the proposal does not provide any rules around the potential uses of certificates. Potential uses envisioned by the Commission range from the use of certificates to access funding from policies, such as the CAP, to the use on voluntary carbon markets.
Room for improvement
- Eliminate ambiguity as to what is and is not a removal
The current definition of carbon removals in the proposal also includes emissions reductions from biogenic carbon pools, and is not aligned with broad scientific consensus (see e.g., IPCC definition). In order to avoid conflation of emissions reductions and removals, and to allow the CRCF to become a global model for carbon removal certification, emissions reductions need to be excluded from the definition.
- Ensure a strict separation between higher-durability and lower-durability removals
The currently proposed storage categories do not clearly differentiate CDR methods based on their carbon storage durability nor separate biological from geochemical storage media. Separation of these storage media is essential as the need and difficulty of MRV vary significantly between CDR methods based on their storage media.
- Equip the framework to track how carbon removal is used so inappropriate claims can be policed
The CRCF requires provisions determining permitted uses of carbon removal certificates and certified units, to prevent mitigation deterrence, greenwashing and the erosion of public trust, especially regarding compensation claims for fossil fuel emissions based on lower-durability removal certificates. The current proposal lacks guardrails as to which claims can be made based on the characteristics of generated certificates and the CDR methods used to generate them.
Communication on Sustainable Carbon Cycles by the European Commission announcing the development of the framework
Proposal for the certification framework adopted by the European Commission
First meeting of European Commission expert group on carbon removals
The AGRI Committee (committee for opinion) adopted its opinion on the file
ENVI Committee vote on the adoption of the ENVI report
General approach expected to be reached by Member States in the Council
Development of methodologies for certification of different carbon removal activities
Trilogues between EU institutions and provisional agreement expected
Expected entry into force of the CRCF
Commission report expected on the potential inclusion of carbon storage in products in scope of the LULUCF Regulation
Commission will have to assess the potential inclusion of carbon removals with permanent storage in the EU ETS
- Communication on Sustainable Carbon Cycles, European Commission
- Impact assessment accompanying the CRCF proposal, European Commission
- A Union certification framework for carbon removals, European Parliament briefing, 2023
- Carbon Gap White Paper: A Guide to Certifying Carbon Removal, 2022
- Carbon Gap reaction to the European Commission proposal on carbon removal certification, 2022
Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL establishing a Union certification framework for carbon removals
Key Institutional Stakeholders
European CommissionDG Climate Action (CLIMA), Unit CLIMA C.3: Low Carbon Solutions (III): Land economy and carbon removals
European ParliamentCommittee responsible: ENVI Rapporteur: Lídia Pereira (EPP, PT) Shadow rapporteur: Tiemo Wölken (S&D, DE) Shadow rapporteur: Emma Wiesner (Renew, SE) Shadow rapporteur: Ville Niinistö (Greens/EFA, FI) Shadow rapporteur: Anna Zalewska (ECR, PL) Shadow rapporteur: Mick Wallace (GUE/NGL, IE)
Council of the European UnionCouncil configuration: ENV
In a Nutshell
The Directive for the substantiation of explicit environmental claims (Green Claims Directive) is a legislative proposal that aims to address and reduce greenwashing in consumer-facing commercial practices. It establishes minimum requirements on the substantiation and communication of voluntary environmental claims and labels that are not otherwise banned under the Directive on Empowering Consumers.
To make green claims (including climate-related claims) about the environmental footprint of their products, services, and operations, companies will need to comprehensively demonstrate environmental impact and performance by submitting recognised scientific evidence and the latest technical knowledge. The Directive establishes specific requirements for distinguishing claims on environmental performance from common practice, legal obligations, and from other traders or products.
Environmental claims and labelling schemes will be verified by independent accredited bodies before being put on the market. Member states will nominate a competent national authority to supervise this process, monitor and verify the claims and substantiations on a regular basis. This monitoring will help the Commission to evaluate where more specific requirements are needed and to implement delegated acts accordingly.
Climate-related claims such as net zero or carbon neutrality claims based on offsetting or carbon removal fall under the remit of this Directive. To substantiate such claims companies must report offsetting and emissions data separately, specify whether offsetting relates to emissions reductions or carbon removals, and explain accurately the accounting methodology applied. Once approved and when communicating to consumers, climate-related claims must be accompanied by additional information detailing the extent of reliance on offsetting and whether it is based on emissions reductions or removals.
What's on the Horizon?
The Green Claims proposal by the European Commission will now enter ordinary legislative procedure with the goal of reaching a formal adoption by the European Parliament and the Council.
2023-2024: The European Parliament and the Council will develop their positions separately.
- The Council adopted its negotiating mandate regarding the Directive on Empowering Consumers for the Green Transition on 3 May. The mandate outlines the Council’s position on this Directive which would lay the foundation for the Green Claims Directive.
- The European Parliament on 11 May adopted its position which sets stricter conditions than the Commission proposal and adds a definition of carbon offsetting.
- Negotiations between the Parliament and member states to find a middle ground are expected to start shortly. Complementing the Directive on Empowering Consumers, the Green Claims Directive will provide further guidance on the conditions to make substantiated environmental claims.
2024: Following trilogues between EU institutions, the Directive is expected to pass into EU law.
The Green Claims Directive complements the Empowering Consumers Directive published by the European Commission on 30 March 2022 within the EU Together, they aim to improve the circularity of the EU’s economy and achieve climate neutrality. They respectively set requirements to substantiate environmental claims made to consumers and and other commercial practices.
Apart from the French ministerial decree n°2022-538, the Green Claims Directive is a first of its kind in the specificity with which it regulates environmental claims and addresses climate-neutrality claims. The French decree regulates advertising claims based on emission compensation projects. It has different requirements surrounding emissions reporting, compensation data, and net zero plans.
The Green Claims Directive proposal addresses the issue of greenwashing, increasingly prevalent in recent years. It seeks to standardise environmental claims and labels to improve transparency and credibility for consumers. The proposal aims to use delegated and implementing acts in the future to address substantiation methodologies for specific product groups and evolving commercial practices.
The preamble of the proposal states that climate-related claims are prone to being unclear and misleading, as they are often based on offsetting greenhouse gas (GHG) emissions through carbon credits of low environmental integrity and credibility, generated outside the company’s value chain and calculated based on methodologies that vary widely in transparency, accuracy, and consistency. Offsetting can also deter traders from reducing emissions in their own operations and value chains.
However, credible net zero claims have the potential to incentivise and drive the development of safe, just and sustainable carbon removals to transition towards real climate neutrality. Claims based on offsetting must be regulated through a robust and science-based system to prevent greenwashing.
Room for improvement
Unfortunately, the Green Claims Directive as it currently stands does not establish the necessary measures to do so:
- The Directive does not align with scientific consensus as it allows offsetting through emissions reductions and avoidance to substantiate carbon neutrality claims. The IPCC’s definition of net zero is clear: balancing emissions with physical removals. Accordingly, offsetting projects that avoid emissions, but do not physically remove and store carbon, must be barred from use in substantiating claims about net climate impacts.
- The proposal rightly requires companies to report GHG emissions separately from offsetting data, to disclose the share of their total emissions that are addressed through offsetting and whether these come from emission reductions or removals. This isn’t enough to monitor whether the claimed climate impacts are real There is a need for more extensive disclosure on the types of carbon credits companies are purchasing (avoidance, reduction, removals), which emissions they are claiming compensation for, and the methodologies used to ensure integrity and correct accounting.
- The proposal allows all types of offsetting without any clear criteria for which emissions they can compensate for, nor which climate claims they can substantiate. However, not all carbon storage is equal in terms of capacity, duration or reversal risk. This means that long-lived fossil fuel emissions otherwise impossible to abate can only be balanced by removals with high-durability storage in the geosphere where the carbon came from. Lower-durability removal and storage of carbon into the biosphere must be accelerated for its own sake, to halt and reverse the loss of ecosystems and natural carbon stocks but cannot be eligible to compensate for fossil fuel emissions. Failing to enshrine this non-fungibility principle in EU law would allow companies to continue offsetting their long-lived emissions through shorter-term carbon storage with higher risks of reversal.
- Although the Directive encourages companies to use offsetting only for residual emissions, it provides no robust definition for what constitutes these residual or ‘hard-to-abate’ emissions. Without a sector-specific and measurable definition, companies can weaken emission cutting efforts by manipulating the boundary between ‘emissions that must be reduced’ and ‘emissions that physical removals can offset’. The EU will need to establish a transparent process for classifying emissions as difficult-to-decarbonise.
- The proposal excludes from its scope environmental claims and labels substantiated by rules in the Carbon Removal Certification Framework (CRCF). However, the proposal for the CRCF has no rules for claim substantiation. Instead, the Green Claims Directive could establish guardrails for legitimate net zero claims, which could be substantiated through the purchase of high-quality carbon removal credits certified under the CRCF.
The EU Circular Economy Action Plan sets out the plan to support the EU’s transition to a circular economy, including by protecting consumers
Impact assessment and public consultation on substantiating green claims
European Parliament resolution ‘Towards a more sustainable single market for business and consumers’
European Commission proposal for a Directive on Empowering Consumers for the Green Transition
European Commission proposal for Green Claims Directive
European Parliament adopts its position on the Directive on Empowering Consumers for the Green Transition
Deadline to provide feedback to the Commission on the Green Claims legislative proposal
- The EU Circular Economy Action Plan, European Commission
- Annual ‘sweep’: Screening of websites for ‘greenwashing’, European Commission
- Impact Assessment Report on Empowering Consumers, European Commission
- Recommendation on the use of the Environmental Footprint method, European Commission
- Strengthening climate-related claims: Carbon Gap response to the Green Claims proposal
- Corporate Climate Responsibility Monitor 2022, NewClimate Institute and Carbon Market Watch
- Greenwashing Factsheet, BEUC
- Sustainable consumption briefing, EPRS
Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on substantiation and communication of explicit environmental claims (Green Claims Directive)
Key Institutional Stakeholders
European CommissionDG Environment (ENV), Unit B.1: Circular Economy, Sustainable Production & Consumption
European ParliamentCommittee co-responsible: IMCO Co-Rapporteur: Andrus Ansip (Renew, EE) Shadow Rapporteur: Arba Kokalari (EPP, SE) Shadow Rapporteur: Laura Ballarín Cereza (S&D, ES) Shadow Rapporteur: Kim van Sparrentak (Greens, NL) Shadow Rapporteur: Carlo Fidanza (ECR, IT) Shadow Rapporteur: Anne-Sophie Pelletier (GUE/NGL, FR) Committee co-responsible: ENVI Co-Rapporteur: Cyrus Engerer (S&D, Malta) Shadow Rapporteur: Pernille Weiss (EPP, Denmark) Shadow Rapporteur: Emma Wiesner (Renew, SE) Shadow Rapporteur: Annalisa Tardino (ID, Italy Shadow Rapporteur: Petros Kokkalis (GUE/NGL, GR)
Council of the European UnionCouncil formation: ENV
In a Nutshell
Nature Restoration Targets is a legislative proposal from the European Commission that would set legally binding targets for nature restoration in Europe. The aim is to mitigate biodiversity loss, ecosystem degradation and climate change, and to boost human and animal health by complementing the EU’s existing framework for protecting ecosystems. If adopted, the regulation would be the first continent-wide, comprehensive law of its kind.
By 2030, the targets would ensure restoration of at least 20% of degraded EU land and sea areas, and the remaining ones by 2050. The proposed legislation covers a broad range of ecosystems with specific targets, from forests and agricultural land to urban areas, rivers and marine habitats, with emphasis on restoring those with the highest potential for carbon removal and storage, and for prevention and reduction of natural disasters. Member States would be required to develop Nature Restoration Plans, to be assessed by the Commission, and to report on their progress toward meeting domestic targets.
Many aspects of the law would promote carbon removal. The draft law prioritises the restoration of damaged terrestrial and aquatic ecosystems that have significant potential for carbon removal. This includes ecosystems such as peatlands, forests, grasslands, marshlands, heathland and scrub and coastal wetlands. Focusing on damaged and carbon-rich ecosystems is thought to be cost-efficient (as well as critical for climate change mitigation) because the monetised benefits from carbon storage could outweigh the cost of restoring ecosystems by a factor of six. It is still unclear how the Commission expects to monetise carbon removals through nature restoration, but it has proposed that Member States fund their restoration efforts through the EU, national and private sources.
Under the proposed regulation, agricultural ecosystems across Member States must achieve a trend of increasing organic carbon stocks in cropland and mineral soils. This trend must be evident at the national level, be measured at least every three years and is mandated to increase until satisfactory levels have been attained. Moreover, many ‘high-diversity landscape’ agricultural practices overlap with good soil management protocols for reducing soil loss, such as terracing and buffer strips. Reducing topsoil erosion is fundamental to soil carbon sequestration.
What's on the Horizon?
The draft Law faced is facing political opposition from the EPP and the Conservatives and was almost withdrawn.
The EU Council recently adopted its general approach and the EU Parliament needs to adopt its position. On 27 June, the ENVI Committee rejected the Commission’s proposal on the Nature Restoration Law.
The Parliament as a whole will need to take a position, probably during the July plenary. On 12 July, the Parliament rejected the EPP’s call to reject the law. It voted in favour of a common approach to the file, which had to be watered down to gather support.
Now, interinstitutional negotiations will start. The Spanish Presidency has signaled that the Nature Restoration Law will be one of its priorities.
Giving teeth to EU environmental rules
The proposed Nature Restoration Law sits at the intersection between European climate and biodiversity policies, demonstrating the interconnected nature of these crises. If passed, the Law would contribute toward the EU’s delivery of its 2050 climate neutrality target, especially if the range of ecosystems in scope remains as broad and numerous as proposed. Many ecosystems constitute natural carbon sinks; restoring them can help draw down more carbon from the atmosphere and the Law’s legally binding targets will prioritise the restoration of those that have the highest potential to capture and store carbon. According to the Commission, restoring degraded ecosystems such as forests through management and afforestation has the capability to remove approximately 500 Mt CO2e annually by 2050.
In general, this law would add rigor to the EU’s existing environmental law regime. To date, the efficacy of these schemes has suffered from lack of targets, deadlines and procedural clarity. The EU has, so far, failed to meet its voluntary goals (for example, the Convention on Biological Diversity’s voluntary target to restore at least 15% of its degraded ecosystems by 2020 was missed).
Another advantage of the law would be new data sources that will be gathered as part of the national Restoration Plans and reports, such as mapping any agricultural and forest areas that need restoration that would highlight areas of carbon depletion, which may help fill data gaps on terrestrial carbon flows.
Additionality and the CRCF
It is still unclear how the Nature Restoration Law would intersect with the EU Carbon Removal Certification Framework (CRCF). The Commission has proposed that carbon farming through restoration of peatlands and other ecosystems be eligible for certification under CRCF. However, the introduction of the Nature Restoration Law will have implications for the additionality rules in the CRCF, which state that carbon removal activities must exceed standard practices and legal requirements to be certified. By changing legalities and norms governing nature restoration, and by extension terrestrial and aquatic carbon-enhancing practices, the Nature Restoration Law might limit which carbon farming projects can be certified under the CRCF.
Status of the stakeholder debate
There is a strong case for increased ambition for the Nature Restoration Law. Parliament’s rapporteur, MEP César Luena, is advocating for raising the proposed target of restoring 20% of the EU’s land and seas by 2030 to 30% in line with the global decision adopted in December at the COP15 UN Biodiversity Conference in Montreal. Additionally, under the current proposal, the majority of the restoration action is postponed until after 2030; it takes time for the carbon benefits of nature restoration measures to materialise. Hence, policy-makers should bring the timeline forward to ensure these measures contribute to the EU’s net zero and biodiversity goals.
Questions remain as to how much flexibility Member States will have in their implementation of the law. Some are particularly concerned about the impact of this regulation on farmers and foresters and, by extension, European food security and sovereignty (although the perceived trade-off between ecological restoration and EU food security has been challenged). For example, farmers and foresters may be obligated to transition to more sustainable practices, which may result in additional costs. Several voices in the Parliament’s Agriculture Committee argue that the proposed law should better integrate the interests of farmers by excluding agriculture from the scope, or ensuring nature restoration is economically attractive to farmers with new non-CAP financing.
There are similar concerns as to whether the new regulation adequately accounts for the socioeconomic role of forests. The proposed law aims to legally protect all remaining primary and old-growth forests. This stipulation is a particularly contentious issue for Nordic and Baltic countries with large forestry sectors. The European Landowners’ Organisation (ELO) decries the lack of new financing or market-based incentives for forest owners to preserve their land under the new law.
Overall, policymakers should assess the existing EU funding available for nature restoration and what further financial support is needed while also establishing dialogue and coordination with landowners and farmers. For example, the ENVI Committee’s report could require the Commission to reflect on the creation of a dedicated nature restoration fund. Policymakers should also not overlook the potential for new green jobs to be created as a result of the regulation.
European Commission Biodiversity strategy for 2030 setting out the long-term plan to protect nature and reverse the degradation of ecosystems
European Commission adopts the proposal for a Nature Restoration Law
The EU Council agreed on a general approach on the proposal for a Nature Restoration Law.
The ENVI committee (the lead EU Parliament committee for this file) rejected the Commission’s proposal for the EU nature restoration law as amended by the ENVI Rapporteur of the file (44 pro, 44 against)
The EU Parliament adopted a common approach to the Law and rejected the EPP’s call to reject the Law.
- Inception impact assessment on protecting biodiversity: nature restoration targets under EU biodiversity strategy, European Commission, 2020
- Biodiversity strategy for 2030, European Commission, 2020
- Regulation on nature restoration, European Parliament briefing, 2022
Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on nature restoration
Key Institutional Stakeholders
European CommissionDG Environment (ENV) Unit D.2: Biodiversity
European ParliamentCommitee responsible: ENVI Rapporteur: César Luena (S&D, ES) Shadow rapporteur: Christine Schneider (EPP, DE) Shadow rapporteur: María Soraya Rodrígues Ramos (Renew, ES) Shadow rapporteur: Jutta Paulus (Greens/EFA, DE) Shadow rapporteur: Alexandr Vondra (ECR, CZ) Shadow rapporteur: Mick Wallace (GUE/NGL, IE)
Council of the European UnionCouncil configuration: ENV
In a Nutshell
The LULUCF Regulation is designed to ensure that emissions and removals from land use, land use change and forestry (LULUCF) activities are accurately accounted for in the EU’s climate targets. The LULUCF sector covers the use of soils, trees, plants, biomass and timber and is responsible for both emitting and absorbing CO2 from the atmosphere. The Regulation’s objective is to progressively increase removals and reduce emissions in the sector.
Following its latest amendment, the Regulation aligns with the legally binding target to reduce greenhouse gas (GHG) emissions by 55% below 1990 levels by 2030 and strengthen the sector’s role in climate action.
The amended Regulation sets out an overall EU-level objective of 310 Mt CO2e of net removals in the LULUCF sector by 2030. Member states are be responsible for caring for and expanding their carbon sinks to meet the new EU target. To that end, the Regulation introduces rules enhancing the quality of monitoring, reporting and verification of emissions and removals, using more accurate and precise data monitoring.
The amended Regulation maintains the “no debit rule” that emissions (debits) from LULUCF sectors should not exceed removals (credits) until 2025. Should emissions exceed removals, the member state is obliged to increase sink capacity through afforestation or reforestation, or by making use of flexibility mechanisms (e.g., trading emissions credits). In 2026, removals should start exceeding emissions. Each member state will be assigned a binding national target for 2030 and a commitment to achieve a sum of net GHG emissions and removals for the whole period of 2026-2029, the budget for which will be set in the future.
The amended Regulation keeps the possibility to trade removals between member states and use surplus annual emission allocations under the Effort Sharing Regulation to reach LULUCF targets. There is also a mechanism to account for natural disturbances affecting a member states’ ability to deliver on the national target (e.g., wildfires or pests), provided that the EU as a whole meets its 2030 target.
What's on the Horizon?
The European Parliament and the Council have adopted the amended directive, which has now entered into force:
- 14/03/2023: Formal adoption by the European Parliament
- 28/03/2023: Formal adoption by the Council of the European Union
- 21/04/2023: Publication in the Official Journal of the European Union
- 11/05/2023: Entry into force
Looking further ahead, the Commission will submit a report within six months of the first global stocktake under the Paris Agreement (to be carried out in 2023), on including non-CO2 GHG emissions from agriculture in the scope of the Regulation and the setting of post-2030 targets for the LULUCF sector.
Within one year of the implementation of the proposed certification framework for carbon removals, the Commission will have to assess the potential inclusion of carbon storage in products in scope of the LULUCF Regulation.
A more ambitious regulation
The LULUCF Regulation was amended to include the EU’s revised 2030 climate target to reduce GHG emissions by 55% below 1990 levels, which acknowledged the need to enhance the EU’s carbon sink. The revision was proposed as part of the ‘Fit for 55 package’ (together with the EU emissions Trading System and the Effort Sharing Regulation).
The key objectives for the revision were:
- reversing the current trend of declining removals in the land sector and delivering, by 2030, 310 Mt CO2e removals from the LULUCF sector;
- a climate-neutral land sector by 2035, combining emissions from agriculture with net removals from LULUCF;
- simplification of reporting requirements for Member States.
The agreement tightens the criteria to assess whether the EU-wide target is being met and consequently if the flexibility mechanism can be used. Member states will be allowed to use the flexibility mechanism up to a fixed limit, provided, among other conditions, that they submit evidence to the Commission following a well-defined methodology.
To ensure delivery, the revised LULUCF includes stricter reporting requirements, improved transparency and a review by 2025. During the period 2026-2029, Member States can be penalised by an additional 8% on their national 2030 target, if the reporting shows insufficient progress towards their national targets.
…that risks not delivering
In 2020, the EU LULUCF sector removed 230 Mt CO2e from the atmosphere. However, carbon sinks have been declining in almost every Member State. Based on projections, current measures will not be sufficient to reverse this trend. By implementing the additional measures planned by Member States, the EU’s carbon sink would increase between 2021 and 2040, but by only by 3%. This would mean 209 Mt CO2e by 2030, missing the proposed target of 310 Mt CO2e. If the EU is to achieve the LULUCF goal, more ambitious removal measures are needed from Member States, along with further emissions reductions.
The Regulation is comprehensive in scope – it covers all land use, land use change, and forestry activities, ensuring that emissions and removals from these sectors are accurately accounted for in the EU’s overall emissions reduction target. Overall, however, the scope for emissions reductions is limited– LULUCF activities account for a relatively small share of the EU’s total greenhouse gas emissions (equal to 7% of the EU’s annual GHG emissions).
The proposed revision also extends the scope to cover emissions from biomass used in energy production and ensures these will be recorded and counted towards each Member State’s 2030 climate commitments. This is particularly relevant for bioenergy with carbon capture and storage (BECCS), which extracts bioenergy from biomass, and captures and stores the carbon. As forest management is the main source of biomass for energy and wood production, the more robust accounting rules and governance for forest management will affect the availability and sustainability of the biomass feedstock for BECCS.
Entry into force of the original LULUCF Regulation
European Commission proposal for a revision of the LULUCF Regulation released as a part of the Fit for 55 package
Provisional political agreement on the LULUCF legislative proposal between co-legislators
Entry into force of the revised regulation
Commission to report on including non-CO2 GHG emissions from agriculture in the scope of the regulation and the setting of post-2030 targets for the land-use sector
Commission to report on the potential inclusion of carbon storage in products in scope of the LULUCF Regulation
Regulation (EU) 2023/839 of the European Parliament and of the Council of 19 April 2023 amending Regulation (EU) 2018/841 as regards the scope, simplifying the reporting and compliance rules, and setting out the targets of the Member States for 2030, and Regulation (EU) 2018/1999 as regards improvement in monitoring, reporting, tracking of progress and review (Text with EEA relevance)
Key Institutional Stakeholders
European CommissionDG Climate Action (CLIMA), Unit C.3: Land economy and carbon removals
European ParliamentCommittee Responsible: ENVI Rapporteur: Ville Niinisto (Greens/EFA, FI)
Council of the European UnionEuropean Council formation: ENV
In a Nutshell
The Effort Sharing Regulation (ESR) is one of the three central pillars of EU climate policy, together with the LULUCF Regulation and the EU ETS. The ESR primarily governs greenhouse gas emissions (GHG) from sectors currently not covered by the EU ETS, including transport, buildings, agriculture, and non-ETS industry and waste, which generate nearly 60% of total EU GHG emissions. It spans all EU Member States, as well as Iceland and Norway.
The original ESR, adopted in 2018, foresaw overall emissions reductions across all EU member states in the covered sectors by 30% in 2030 below 2005 levels. The 2021 proposed revision is part of the ‘Fit for 55′ package, which aims to reduce EU-wide net GHG emissions by 55% in 2030 below 1990 levels and to decrease GHG emissions in the sectors covered by ESR to 40% by 2030 below 2005 levels (compared with the existing target of a 29% emission reduction).
The Regulation establishes binding emissions reduction targets for Member States, which differ from country to country, primarily depending on the countries’ GDP per capita (spanning from 10% to 50%). The new proposal aims to establish more ambitious national targets for 2023-2030. Together with the LULUCF Regulation and the ETS, the ESR allows for flexibilities in net emissions reductions among the three policies to achieve climate change mitigation goals more efficiently.
While the ESR is not primarily concerned with carbon removals, it allows countries to make use of excess carbon removals achieved in the LULUCF sector to reach their ESR targets. The EU-wide maximum for carbon removals, which may be used to reach the 55% emissions reduction goal, is limited to net 225 million tons of CO2e until 2030.
What's on the Horizon?
The provisional political agreement reached between the European Parliament and Council in December 2022 needs to be formally adopted before the Regulation can enter into force:
- 14/03/2023: Formal adoption by the European Parliament.
- 28/03/2023: Formal adoption by the Council of the European Union.
- 26/04/2023: Publication in the Official Journal of the European Union.
17/05/2023: Entry into force.
Agreed changes compared to the Commission proposal include eliminating an initially proposed additional voluntary reserve of unused LULUCF removal credits that would have been allowed to count towards Member States’ 2030 ESR target.
Together with the ETS and LULUCF, the ESR is one of the three central pieces of EU climate legislation, which steer efforts to reduce total greenhouse gas emissions by 55% in 2030 below 1990 levels as outlined in the European Climate Law. All three have been revised to increase ambition and ratchet up the 2030 target through the ‘Fit for 55’ package and negative emissions will potentially be able to play a role in each of them.
A key aspect of the ESR is the flexibilities of countries to reach their targets more efficiently. These flexibilities are intended to decrease a country’s burden, and give the ESR some characteristics of a carbon market:
1.Temporal and international flexibilities:
- Banking: If a country’s GHG emissions are lower than its annual allocation under the ESR, it may use part of its surplus in the following years and until 2030;
- Borrowing: If a country’s GHG emissions are higher than its annual allocation under the ESR, it may borrow from the following year’s allocation (up to 7.5% of the annual allocations from 2021 to 2025 and up to 5% from 2026 to 2030);
- Trading: Countries may buy or sell allocations to meet their annual targets (up to 10% of their annual allocations from 2021 to 2025 and 15% from 2026 to 2030).
2. Sectoral flexibilities:
- ETS and ESR: Nine Member States’ allowances (with national reduction targets above the EU average and their cost-efficient reduction potential, and Malta) may make use of a limited percentage of ETS emissions to reach their ESR reduction targets;
- LULUCF and ESR: Countries may use a constrained number of net carbon removals in the LULUCF sector to meet their emission reduction targets under the ETS.
Under the proposed amendment of the ESR, the total net carbon removals, which may be considered for reaching ESR targets, may not exceed 225 Mt CO2e across all Member States. Previously the maximum was 280 Mt CO2e. The quantity of net carbon removal was also determined and limited for each Member State individually. To avoid emission reduction deterrence, the new proposal also foresees additionally capping the use of carbon removals under the ESR in two time periods, the maximum allowance equally split between 2021-2025 and 2026-2030.
Entry into force of the original Effort Sharing Regulation
Commission Implementing Decision setting out annual emission allocations of the Member States for 2021- 2030
Proposal to revise the Effort Sharing Regulation as part of the Fit for 55 package
Provisional political agreement between co-legislators on the revised Effort Sharing Regulation
- Effort sharing: Member States’ emission targets, European Commission
- Revising the Effort-sharing Regulation for 2021-2030, European Parliament briefing, 2023
- Revision of the effort sharing regulation explained, European Council
Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulation (EU) 2018/842 on binding annual greenhouse gas emission reductions by Member States from 2021 to 2030 contributing to climate action to meet commitments under the Paris Agreement