Ricardo supports European Commission in developing new 'Fit for 55' climate package

Ricardo supports European Commission in developing new 'Fit for 55' climate package
14 July 2021

Specialists from Ricardo have provided the technical analysis underpinning many of the new and updated policy measures announced today (14 July) by the European Commission (EC) in the “Fit for 55” climate package for the European Union (EU). 

The package is aimed at ensuring the EU can reach its goal of reducing greenhouse gas (GHG) emissions by at least 55% by 2030, compared to 1990 levels, with the longer term aim of supporting Europe’s ambition to become the world’s first climate-neutral continent by 2050.

Sujith Kollamthodi, Director of Ricardo’s Policy, Strategy & Economics Practice, said: “Our involvement with the Fit for 55 package is linked to other work we are carrying out to support the European Commission, governments and industry in helping meet the EU’s Green Deal objectives and is something we are very proud of. The overall package is very ambitious and businesses across all sectors of the economy will need to understand the implications of each Fit for 55 initiative on their current and future strategies and operations. Our experts already have deep insights on these implications through our direct involvement in supporting the Commission with technical and economic analysis that underpins key elements of the package.”

Ricardo’s specialist teams have provided analytical support to the European Commission to support the following initiatives in the package:

 

Ricardo’s expertise in policy analysis across a wide range of topic areas has contributed to the EU’s ambition to make Europe the world’s first climate-neutral continent by 2050.

Revisions to the EU Emissions Trading System (ETS)
Ricardo has delivered recent in-depth studies to develop and assess revised approaches to protecting the industries most exposed to carbon-leakage in the EU. This work has helped the European Commission decide on its new policy for allowance allocation and how it relates to wider competition measures like indirect cost compensation schemes and the planned Carbon Border Adjustment Mechanism (CBAM).  The work has helped to preserve the competitive position of key EU industries, including the iron and steel sector, the chemicals industry and the cement manufacturing industry, while also ensuring a robust incentive for these sectors to play their part in tackling climate change.

Revisions to the CO emission performance standards for new cars and vans
In support of the proposed revisions to these standards, Ricardo carried out analysis of technology costs, options for incentive mechanisms, and potential impacts of tougher standards on consumers and employment.

A significant part of the work involved assessing the emissions abatement performance and costs of advanced vehicle powertrains and technologies that could be used to reduce CO2 emissions from new cars and light commercial vehicles over the coming years. Our analysis means we have detailed insights on the actions vehicle manufacturers and equipment suppliers will need to take in order to reduce CO2 emissions from new cars and vans in the years to 2030 and beyond.

Revision of the Directive on deployment of alternative fuels infrastructure
Ricardo led the evaluation of the current Alternative Fuels Infrastructure Directive (AFID) and the impact assessment of the potential revisions to the Directive.

The work helped to assess how successful the Directive has been to date in supporting the uptake of electric and other alternative fuel vehicles across different transport modes. It also assessed the potential impacts of several possible policy changes and the role these could play in accelerating the deployment of the required infrastructure to achieve a more rapid decarbonisation of the EU’s transport fleet.  

This work is highly relevant to key industry sector stakeholders, such as EV charging and hydrogen refuelling infrastructure providers, energy companies, transport operators and vehicle manufacturers. It helps to understand the expected scale of deployment, anticipated demand, as well as key barriers and opportunities for alternative fuel infrastructure in relation to the EU Green Deal objectives. 
In addition, Ricardo led an assessment of aspects of the Fuel Quality Directive (FQD) with the aim to identify options for improving relevant provisions in the Directive. This included consideration of increasing the linkages to the Renewable Energy Directive (RED) in view of take up of biofuels and other renewable fuels.  Twelve research themes were identified, under each of which several options for potential changes to the fuel quality standards are identified.

Each of these options was assessed in terms of impact on health, the environment, greenhouse gas emissions; the EU internal market; vehicle compatibility and economic implications.

Addressing GHG emissions from the maritime shipping sector
Ricardo supported the European Commission in assessing options to address GHG emissions from the maritime sector. Specialists analysed possible options to incorporate maritime transport into the EU Emissions Trading System, as well as possible alternative options or combinations for the sector to contribute to climate mitigation efforts.

This assessment for the maritime sector has fed into the Commission’s wider review of the EU ETS. The study considered different scope options for a trading system (geographical and emissions) and other design elements, such as regulated entity, potential exemptions, and revenue recycling.  Our analysis has provided insights on how the maritime transport sector may need to adapt and evolve in the near future (including through the applications of new technologies and fuels) as the need to reduce GHG emissions becomes ever more important.

Supporting the decarbonisation of aviation sector
As part of the “ReFuelEU Aviation” initiative, our experts analysed potential policy measures that could support the supply of, and demand for, sustainable aviation fuels (SAF) in the EU while maintaining the competitiveness of the EU’s aviation sector. 

The study also assessed the timing and level of investments needed to help the aviation sector transition to cleaner fuels and achieve reductions in greenhouse gas emissions aligned with the aims of the EU Green Deal, while supporting the development and growth of the SAF industry in the EU.  As part of a separate study, we also assessed the potential impacts of introducing new taxation measures to the aviation sector to strengthen climate-related policy signals in this sector. 

In particular, we assessed the potential impacts of introducing a fuel tax, a ticket tax and a combined fuel/ticket tax.  Our analysis assessed both impacts on the aviation sector (travel demand, environmental emissions, sector revenues), and wider socio-economic impacts (including impacts on employment and GDP).