Roll-out of the EU’s ambitious “Fit for 55” package of climate legislation continues at pace.  The Fit for 55 package directs the EU’s policies in line with the legally binding target set by the European Climate Law (Regulation (EU) 2021/1119) to reduce greenhouse gas emissions by at least 55% by 2030 compared to 1990.  Although the UK is not bound by the Fit for 55 package, UK companies which operate in or trade with the EU are likely to feel direct and indirect impacts.  

Last week, the European Parliament adopted at first reading two Fit for 55 regulation proposals regarding sustainable fuels:

1. A regulation on deployment of alternative fuels infrastructure.  This sets mandatory deployment targets for electric recharging and hydrogen refuelling infrastructure.  The aim is to increase public access to electric recharging and hydrogen refuelling stations.  The regulation will require recharging stations every 60km for cars and every 120km for trucks and buses, and hydrogen refuelling stations every 200km.  For UK companies in the recharging/refuelling sectors, there will be opportunities to be part of the required rapid roll-out of infrastructure in EU member states.
2. A regulation on the use of renewable and low-carbon fuels in maritime transport.  This will require ships to reduce the greenhouse gas intensity of the energy they use, to support decarbonisation of the maritime transport sector.  Maximum limits on greenhouse gas intensity will increase over time: rising from a 2% reduction below 2020 levels in 2025 to 80% by 2050.  These limits will affect UK companies in the maritime transport sector to the extent they are using EU ports.

Each regulation will require European Council approval before it becomes law.  Assuming this is granted, the alternative fuels infrastructure requirements will apply from six months after their entry into force and the sustainable maritime fuels requirements will apply from 1 January 2025.

These are just two of a raft of pieces of legislation within the Fit for 55 package.  The different elements of the package are at varying stages of adoption and implementation and have differing sector relevance and impacts.  Fit for 55 measures which have already been made law include:

1. An EU Emissions Trading System (EU ETS) amending directive.  This commits the EU to a greater emissions reduction under the ETS setting a target of 62% below 2005 levels by 2030 (the previous target was 43%) and seeks to achieve this through a range of measures including accelerating reductions to the total cap on emissions allowances and phasing out some free allowances.
2. A Carbon Border Allocation Mechanism (CBAM) regulation.  This is designed to prevent carbon leakage by ensuring equivalent carbon pricing for imports and EU domestic products, requiring EU importers of goods covered by CBAM to buy CBAM certificates with pricing based on the weekly average auction price of EU ETS allowances.

Examples of Fit for 55 measures still in the pipeline include a revised Energy Performance of Buildings Directive, a Renewable Energy Directive and an Energy Efficiency Directive.

As noted at the outset, UK companies which operate in or trade with the EU should consider the direct and indirect impacts for them of the Fit for 55 measures.  We are also seeing similar themes in climate law evolution at UK level as the government seeks to deliver its net zero agenda so this also merits monitoring.  For example, we are expecting the government to consult before the end of 2023 on details of its proposed expansion of the UK Emissions Trading System (UK ETS) and to publish its vision for the long-term development of the UK ETS.  

The Burges Salmon environment team is following climate law developments closely at both EU and UK level.  If you would like any further information, please contact Michael Barlow (michael.barlow@burges-salmon.com), Sarah Sackville Hamilton (sarah.sackvillehamilton@burges-salmon.com) or another member of the environment team.