A “Fit for 55” Package Based on Environmental Integrity and Solidarity

To guarantee both, the architecture must have a robust compliance mechanism. Whatever EU climate policy architecture is chosen, each ton of CO2 must be governed by the ETS or the Effort Sharing mechanism. At the same time, the target achievement must be a collective endeavor that supports lower-income Member States and poorer households.

A standalone ETS for transport and/or buildings, an enlarged EU ETS, or tightened effort sharing are all options that could work, and each has their pros and cons. The important thing is to define who is accountable for reducing emissions, and who will be responsible if targets are not met. When emissions trading serves as the central compliance mechanism, prices must be allowed to rise as high as necessary to reach the emission reduction target – which means not introducing a price cap.

This holds especially true for households and transport. Companion policies in these sectors guide investment decisions and drive innovation, while the carbon price ad-dresses the use of existing cars and heating systems. Strengthening EU-policies such as CO2 standards for vehicles, building codes, or support programs for low-carbon heat grids gives consumers the low-carbon options they need to respond to rising carbon prices and to reduce emissions in line with the 55% target.

100% of revenues from carbon pricing must flow back to consumers in one way or another – as targeted support for vulnerable households, as a fund for climate policy measures, or as lump-sum payments. Using carbon pricing revenues for other purposes such as repaying EU debt threaten to undermine support for higher CO2 prices. It is better to use tools that enable consumers to reduce their CO2 footprint, and thus their exposure to higher prices, rather than simply trying to exempt consumer

groups generally.