The very principle of the Social Climate Fund and its financing in conjunction with the future ‘ETS 2’, which aims to extend the greenhouse gas emissions trading system to the construction and road sectors, were the subject of a major division among Member States during an exchange of views at the ‘Environment’ Council, on Thursday 17 March.
Following the example of the debates in the European Parliament (see EUROPE 12913/29), three groups of countries have emerged.
A first group spoke out against the Fund, mainly consisting of the so-called ‘frugal’ Member States, such as Sweden, Denmark, Germany, the Netherlands and Finland.
For these Member States, there are already several financial instruments to help Member States, such as the European Recovery Plan, the Just Transition Fund and the Modernisation Fund.
Hungary has once again opposed the extension of the ETS. If this extension were to be abandoned, the Social Climate Fund would no longer be necessary, Budapest claims.
On the other hand, other Member States, such as Poland, want to see the creation of a Social Climate Fund that is disconnected from the ‘ETS 2’.
Warsaw says that the fund should be financed outside the EU budget, along the lines of the Modernisation Fund. Such an approach would ensure the dynamic nature of the size of the Fund and its continuity beyond 2027, irrespective of decisions on own resources in the EU budget and the post-2027 Multiannual Financial Framework.
The third group is the most significant. These are the Member States that accept the main principles of the European Commission’s proposal, in particular the way it is financed, such as Belgium and Austria (which has rejected any reopening of the Multiannual Financial Framework).
Estonia advocated for a two-step approach. First of all, an agreement must be reached on the new ETS. Once the modalities of the revised ETS, the potential revenue and its impact on vulnerable populations are known, the negotiations can turn to the Social Climate Fund.
Several side issues were regularly mentioned in the ministerial debate. A handful of Member States wanted to review the proposed distribution key, as they said they felt it did not reflect the realities on the ground. Portugal, Lithuania, Malta or Cyprus have been particularly clear on this point.
The shift from centralised management to shared management, inspired by the management of cohesion policy, has been suggested by Lithuania, Croatia, the Czech Republic and Estonia.
Some Member States have stressed the importance of supporting SMEs and microenterprises.
However, the debate on the balance between income support for vulnerable populations and investment was hardly mentioned.
Car emission standards
While the ministers’ discussion focused on the issue of ETS2 and the Social Climate Fund, as requested by the French Presidency of the Council of the EU, many Member States also addressed, on Thursday, other issues in the ‘Fit for 55’ package.
Sweden, Denmark, the Netherlands, Finland, Belgium, Greece, Ireland and Luxembourg have argued for further tightening of the EU’s CO2 emission standards for new cars and vans compared to the Commission’s review proposal (see EUROPE 12762/3).
While the EU plans to ban the sale of new cars and vans with internal combustion engines by 2035, Sweden, the Netherlands, Belgium, Greece, Ireland and Luxembourg want to bring this date forward to 2030. Denmark and Finland are in favour of an earlier timeframe, but have not specified a date.
Luxembourg and the Netherlands also recommended strengthening the 2025 target - to reduce average emissions from the EU’s newly registered car fleet by 15% compared to 2021 - and introducing an intermediate target in 2027.
Germany, on the other hand, wants to keep the Commission’s approach, while Romania advocated for “a realistic and feasible framework”.
LULUCF
Another topic was the revision of the regulation (2018/841) concerning greenhouse gas emissions and removals from land use, land-use change and forestry (LULUCF).
On this point, Sweden, Latvia, Romania, Ireland, Estonia, Portugal and Spain expressed concerns about the Commission’s proposal (see EUROPE 12762/4) which, in their view, does not take sufficient account of national specificities and does not leave enough flexibility to Member States.
Some countries - Sweden, Latvia, Ireland and Estonia - have also criticised the binding targets set for them to increase their net carbon removals in the land use and forestry sector between 2026 and 2030 as being too ambitious or disproportionate compared to the targets of other Member States.
Effort Sharing
Sweden, Germany, the Netherlands, Latvia and Romania were also keen to comment on the revision of the regulation (2018/842) setting national targets for the reduction of greenhouse gas emissions by 2030 that are not covered by the current ETS nor by the LULUCF regulation, i.e. emissions mainly from road transport, heating of buildings, agriculture, small-scale industrial installations and waste management (‘ESR’ Regulation - see EUROPE 12762/2).
While the first three countries mentioned above called for more convergence between these targets to ensure that each Member State contributes sufficiently to the collective effort towards climate neutrality by 2050, Latvia and Romania claimed that their respective targets do not take sufficient account of national circumstances.
Finally, it should be noted that Malta and Cyprus have criticised the proposal to include the maritime sector in the current ETS (see EUROPE 12762/1) as well as the proposed revision of the ETS for the aviation sector (see EUROPE 12764/10). (Original version in French by Damien Genicot and Pascal Hansens)