Filenews 10 July 2022 - by Angelos Nicolaou
The legislative "tools" through which the new ambitious climate target set by the European Commission to reduce greenhouse gas emissions by at least 55% by 2030 will be achieved, were agreed at the Council of Environment Ministers of the European Union, in the morning hours of June 29, 2022. Achieving the target for the five proposals of the Fit for 55 Package is considered a milestone in achieving the wider goal set by the European Union of becoming climate neutral by 2050. On the basis of these proposals, the Council of Environment Ministers will negotiate with the European Parliament in the political trilogues that are expected to take place next autumn.
Climate policies through the "Fit for 55" package are expected to cause a cumulative impact on the sustainability of certain sectors affected by a number of pieces of legislation, with a consequent impact on the country's connectivity, competitiveness and the economy at large.
Cyprus, through its active participation in the negotiations, has secured recognition of its peculiarities as an island member state in the periphery of the Union. The introduction of provisions that recognize the peculiarities of Cyprus was based on the European Climate Law of 2021, which provides that the implementation of the green transition measures should be done in a fair way and in solidarity between the member states, taking into account their national conditions, including the peculiarities of the islands. It is worth noting that this reference to the European Climate Law was included upon the recommendation of Cyprus.
Most of the legislations of the "Fit for 55" package include special provisions that recognize the peculiarities of Cyprus, or even more general provisions, which are positive, among others, for Cyprus. This applies above all to the legislation in the field of air transport, shipping and energy, which are of particular interest to our country.
It is worth noting that, due to the particular importance of this issue for Cyprus, the Council of Ministers set up a mechanism for monitoring and coordinating the actions to be taken so that the green transition can be achieved in the most effective way, without causing unbearable effects on the economy and society of Cyprus. The mechanism is supervised by an interministerial committee chaired by the ministers for the environment and finance. The Ministers of Energy, Transport and Foreign Affairs, as well as the Deputy Ministers of Shipping and Innovation, participate. Ministers participated in a series of targeted meetings held with the French Presidency, the European Commission and the European Parliament. The effort was assisted at official level by the competent services of the state in Cyprus and the Permanent Representation of Cyprus in Brussels, while the President of the Republic and the Council of Ministers were kept informed of the developments.
The most important council decisions include the revision of the Emissions Trading System (ETS) with the gradual integration of shipping from 2024, and the creation of the autonomous ETS for road transport and buildings in 2027. It was also decided to establish the Social Climate Fund, to which part of the revenues from the autonomous ETS will be channelled to compensate for the possible socio-economic impact and to support citizens and small and medium-sized enterprises. The proposal for a Regulation on CO2 emission performance standards for new passenger and light commercial vehicles was also adopted. The aim is to accelerate the transition to zero-emission mobility, with the requirement to reduce average emissions of new cars by 55% from 2030 and 100% from 2035, compared to 2021 levels, and by 50% and 100% for new vans respectively. Thus, from 2035 all new cars and light trucks will have zero emissions.
Agreement was also reached on the revision of the LULUCF Regulation, which sets an overall EU target for the removal of carbon from natural sinks (such as forests and woodland), equivalent to 310 million tons of CO2 emissions by 2030, according to the European Climate Law.
Finally, the Effort Sharing Regulation was revised, which increases the target of reducing emissions in non-ETS sectors to 40% by 2030 compared to 2005, compared to the current 30% rate of 30%.
Kadis: Cyprus is ready
Environment Minister Costas Kadis told "F" that:
"Cyprus, from the very beginning, supported the ambitious target set at European Union level to reduce greenhouse gas emissions by at least 55% by 2030. Achieving this objective is key to achieving the union's broader goal of becoming the world's first climate-neutral region by 2050. In collaboration with the scientific community, we have formulated the measures that will lead us to meet this goal. Indicatively, I would like to mention that, in addition to 40% of the budget of the Recovery and Resilience Plan and the "Cyprus tomorrow" Program, will be allocated to projects that directly or indirectly contribute to tackling climate change.
Cyprus is ready to take its share of the responsibility in this effort. However, it would be unfair not to take into account the particular challenges it faces, particularly as an island state, with an isolated energy system, with limited connectivity and with a heavier dependence on polluting air transport.
With a lot of methodical work, with the cooperation of many ministries and services of the state, with the significant contribution of the Permanent Representation of Cyprus in Brussels, but also the support of President Anastasiades himself, we succeeded in recognizing these particularities, without calling into question the ambition of our effort. With the same seriousness we will continue to work on the next stage of the consultations with the European Parliament. Warm thanks to everyone and all the colleagues and executives who worked to get this very positive result."
Karousos: Essential benefit
The Minister of Transport Giannis Karousos stood on the benefits achieved by our country, pointing out that:
"I am very pleased with the outcome of the negotiation. At the initiative of Cyprus, the text of the Directive included the SAF Allowance Mechanism, a mechanism that will help mitigate the increase in fuel costs that will initially be observed with the use of sustainable aviation fuels.
20 million free allowances for greenhouse gas emissions will be made available to assist the use of sustainable aviation fuels to cover the cost increase over conventional fuels to 70%. With this mechanism, the European aviation sector, including Cyprus, will have a substantial benefit amounting to around €1.1 billion.
In addition, we managed to highlight the disproportionate impact on the island member states of the EU from the implementation of the new provisions in ETS Aviation and thus in the text of the Directive a special reference was included to island states of less than 10,000 km² in size for which the difference in fuel costs will be covered at 100%. In this way, a subsidy pool is created that will reach €500 million that Cyprus will also have access to.
When a small country like Cyprus proposes solutions and tools that are adopted at European level, then we can only feel proud. We took initiatives at European level, starting with the Declaration on Air Connectivity supported by 12 EU Member States, and we proceeded with a detailed investigation of the impact of the Fit-for-55 legislative package on aviation, which we shared with all Member States."
What will apply to Energy, Air Transport and Shipping
Below we attempt to present the most important provisions for Cyprus, which have been incorporated in the texts of the "Fit for55" Package, through the activation and activation of the mechanism.
>Energy: In the field of energy, it is important to provide for a differentiated approach specifically for Cyprus and Malta in the Revision of the Energy Efficiency Directive. This differentiated approach foresees an increase in the energy efficiency target of the two island Member States from 0.24% to 0.45%. Ensuring this differentiated approach was a top objective for Cyprus, since the initially projected increase from 0.24% to 1.5% would be very difficult to achieve and would entail a significant financial burden. In the context of the Revision of the Renewable Energy Sources Directive, a 5% cap was ensured for the island Member States, Cyprus and Malta, for the sub-targets related to maritime transport.
>Airports: In the aviation sector, at the initiative of Cyprus, a provision for a Reward Mechanism for the use of Sustainable Aviation Fuels ("SAF Allowance Mechanism") was included in the Revision of the Aviation Emissions Trading System. This Mechanism is expected to help mitigate the increase in fuel costs that is expected to be observed, initially with the use of sustainable aviation fuels (SAFs). Support (in the form of free emission allowances) is foreseen, which will be used to promote the use of sustainable aviation fuels. In this way, it is estimated that the increased costs compared to conventional fuels will be covered by 70%. For islands less than 10,000 square kilometres in size, such as Cyprus, the cost difference between kerosene and sustainable aviation fuel will be covered at 100%. In addition, at the request of Cyprus, an obligation was included for the Commission to carry out an evaluation and prepare a relevant report on the impact that the implementation of this legislation will have on the connectivity and competitiveness of the islands and remote areas of the European Union. Similar provisions are also important in the Proposal for a Regulation on Sustainable Aviation ("ReFuel EU Aviation"), both for the SAF Reward Mechanism and for a detailed assessment by the Commission of the impact of the Regulation, inter alia, on the connectivity of islands and remote areas and on the competitiveness of the European Union. Also, with the support of Cyprus, it was possible to introduce a provision for extending the transition period to 10 years and broadening the definition of sustainable aviation fuels, in order to bridge the price gap between sustainable and conventional aviation fuels more quickly and to enable more sustainable and synthetic aviation fuel production facilities across Europe. As regards the obligation to refuell aircraft, a number of provisions have been included to ensure a level playing field for the sector in order to avoid monopolistic behaviour at Union airports.
>Maritime: In the vital maritime sector, a fairer distribution of allowances from the Emissions Trading System was achieved, on the initiative of Cyprus, through a special arrangement that provides that a percentage of these rights will be channelled exclusively to the shipping member states Greece, Cyprus and Malta. Also important is the provision of the Regulation for the use of renewable and low-carbon fuels in maritime transport ("Fuel EU Maritime"), which provides that the revenues from the sanctions resulting from the Regulation will be allocated to the Member States. The above-mentioned provisions of the two proposals can be used to support the energy transition of the maritime transport sector. The provisions of the two proposals for the exemption from the above Regulation of the maritime interconnection of Cyprus with other member states are also important. This provision implies an exception to the Limassol-Piraeus maritime interconnection, which began after persistent efforts by the Government. A special and favourable reference for Cyprus to the financing of shipping by the Innovation Fund was also reached.
>Transportation: In the transport sector, the provisions of the Regulation for the Development of Alternative Fuels Infrastructure (AFIR) are important, which aims to ensure a sufficient network of infrastructure for the charging and refuelling of road vehicles or vessels with sustainable fuels.
This Regulation only gives an exemption for Cyprus for heavy vehicle recharging stations, following a detailed request to the Commission. The agreed text attributes this special exception for Cyprus to its island geography, the absence of a land connection with other member states, its limited road network, and the limited traffic of heavy vehicles. Therefore, it fully recognizes the peculiarities of Cyprus, on the basis of the European Climate Law. Cyprus' exemption from the obligation to create "safe and secure parking spaces" for heavy vehicles was also ensured. Since the revision of the Regulation on Subsidy Standards for CO2 Emissions from New Passenger Vehicles and New Light Commercial Vehicles ("CO2 CARS"), the provision for inclusion in the biennial evaluation of the used car market, which Cyprus also supported, is contained.
The contribution of our country was appreciated
The contribution of Cyprus, through the submission of specific constructive and bridging proposals, was greatly appreciated, both during the consultation period and during the Council of Ministers. It is expected that Cyprus will maintain its own constructive stance in view of the start of the Council's negotiations with the European Parliament next autumn, with the aim of adopting the measures that will make a significant contribution to tackling climate change, as soon as possible.
Raising funds to address social consequences
In order to limit the economic and social consequences of the green transition, Cyprus placed particular emphasis on the economic aspects of the package, supporting positions that will help it to draw European funds and more rights from the auctioning of air pollutant emissions. In relation to the newly established Social Climate Fund, which aims to help address the social consequences of the introduction of the Greenhouse Gas Emission Allowance Trading Scheme for buildings and road transport ("ETS BRT"), Cyprus, together with other Member States, has succeeded in not reducing the size of the Fund, amounting to €59 billion. It has also succeeded in broadening the potential beneficiaries who can benefit from the Fund.
The provision for the possibility of exempting entities that are already subject to a national carbon tax from the Greenhouse Gas Emission Allowance Trading Scheme in buildings and road transport ('ETS BRT'), as a request by Ireland, supported by Cyprus and from which it can benefit, under certain conditions, during the period 2027-2030, is also being restrained.
