EU environment ministers agree on approach to climate package

TALLINN – In their meeting in Luxembourg, European Union environment ministers agreed on general approaches to five pieces of legislation under the Fit for 55 package for countering climate change, which concern the overhaul of the EU emissions trading scheme, effort-sharing between member states, the creation of a social fund for climate action, carbon dioxide emission standards for vehicles, and land use, land-use change and forestry (LULUCF).

Minister of Rural Affairs Urmas Kruuse, who represented Estonia in the negotiations, said that one of the key issues for Estonia was the review the unit price control mechanism for emission allowances in order to prevent excessive fluctuations in the unit price.

"The compromise reached allows for an automatic response to large changes in the unit price of emissions. In the current situation of high energy prices and inflation, it is particularly important to reduce uncertainty for energy and industrial enterprises and consumers," Kruuse said in a press release, speaking of the deal struck in the early hours of Wednesday.

According to Kruuse, it was also agreed that in sectors that do not fall under the carbon limit measure, the allocation of free allowances to operators will continue on much the same basis as before.

As regards the inclusion of maritime transport in the EU emission allowance trading system, a one-year postponement has now been provided compared to the previous proposal, while the transition period remains. The proposal of Estonia and Finland to take into account the higher fuel consumption that comes with ice-class ships has also been taken into account.

In discussions on the emissions trading scheme for road transport and buildings, Estonia made it a condition that, if the scheme is introduced, it should be implemented later than initially proposed and, as with the current trading scheme, sufficient measures to respond to price shocks must be in place. As a compromise, an agreement was reached to postpone the start date of the new scheme until 2027 and to strengthen price control mechanisms.

The ministers agreed that a just transition is needed to ensure the success of ambitious climate goals and decided to set up a social fund for climate action. The total volume of the fund is 59 billion euros for the period 2027-2032. The funds will be used to support more vulnerable groups and help them with the transition to cleaner transport, energy efficiency and cleaner energy.

Regarding the national emission reduction targets set by the Effort Sharing Regulation for sectors outside the trading scheme, the Estonian Ministry of the Environment says it can be satisfied with the compromise, which maintains the targets of the original proposal, meaning that  Estonia's current 2030 emissions reduction target, compared to 2005, rises to 24 percent from the current 13 percent. 

"We stood for maintaining the initial goals, as several countries wanted more similar goals for the member states, which would have entailed an additional increase in the target for Estonia," the minister said.

In the debate on CO2 emission standards for vehicles, Estonia was in favor of an agreement that from 2035 onwards only new vehicles using carbon-neutral fuel will be sold. This should help to meet the effort-sharing targets by decarbonizing the road transport sector, which has a high potential when it comes to reducing greenhouse gas emissions. It will also improve air quality and is expected to make green vehicles more affordable.

In LULUCF, Estonia did not achieve everything it would have wanted in the negotiations, but according to the Ministry of the Environment, it can be satisfied that Estonia has been awarded several reliefs in meeting the set goal.

In addition to the climate package, the ministers discussed a regulation on halting deforestation and forest degradation, the overall approach of which was supported by the member states. This regulation applies to certain groups of goods, such as live cattle and beef, soy, palm oil, coffee, cocoa and wood, meaning raw materials and products derived from such materials, in the case of which it must be proved when such items are placed on the market in the EU or exported that their production and cultivation has not resulted in deforestation or forest degradation.

Estonia's main concerns were to do with the scope of application, the exception for semi-natural habitats, the definition of degradation, and also the increasing administrative burden and costs. The provisions concerning these topics have been significantly improved in the text, and in the spirit of compromise Estonia was able to support them.

The compromise reached in the Environment Council is not a final agreement, as the agreement between the environment ministers will be followed by trilogues with the European Parliament and the European Commission.