EU Green Deal: What is FIT for 55? A guide for boards and investors
The EU's "Fit for 55" package aims to make all sectors of the EU economy meet climate targets through the Green Deal. These measures collectively put the EU on track to reduce its net greenhouse gas emissions by at least 55% by 2030, contributing to achieving climate neutrality by 2050.
This article and video offer a practical overview of the critical pillars businesses and investors can use to navigate the emerging compliance and liability risks their companies may face.
Increase focus on Fit for 55
Throughout 2024, we have seen a steady increase in requests from investors, financial institutions, and companies seeking to identify the main business and investment risks driven by Fit for 55. Due to increasing compliance and liability risks, they are under pressure to accurately identify where their portfolios, supply chains, or organisations are at risk.
Areas of Concern
Based on the conversations that Martello Carbon Stream Map has had, it has become apparent that investors and businesses are increasingly concerned about the time frame and speed of compliance. They are worried about how it will affect their internal carbon pricing mechanisms, the returns on their investments in brown to green funds, and the targets that will drive their ESG strategy and changes to their business model.
Boards and investors prioritize their attention on identifying and mitigating potential risks.
Operations and Supply Chains are Key
When working with Martello, we examine the operational and supply chain levels that drive emissions across all three scopes before taking a sectoral approach to map interlinking risks and processes.
Investors, boards, and organizations should review macro-level pillars of Fit for 55 to identify their Green Deal risks and vulnerabilities, which are driven from a variety of angles, including:
EU Emissions Trading System (ETS) Reform: This reform aims to enhance the EU ETS, a market-based mechanism for reducing greenhouse gas emissions. It sets a carbon price and covers various sectors, including power generation, aviation, and industry.
New EU Emissions Trading System for Building and Road Transport Fuels: This extension of the ETS includes the building and road transport sectors, encouraging emission reductions in these areas.
Social Climate Fund: The Social Climate Fund supports vulnerable households and communities while transitioning to a low-carbon economy.
Effort Sharing Regulation: This regulation sets binding national targets for reducing emissions in sectors not covered by the ETS, such as agriculture, waste, and buildings.
Regulation on Land Use, Forestry, and Agriculture (LULUCF): This regulation addresses emissions and removals related to land use, forestry, and agriculture.
CO2 Emissions Standards for Cars and Vans: Stricter vehicle emissions standards aim to accelerate the transition to electric vehicles.
Carbon Border Adjustment Mechanism (CBAM): CBAM aims to prevent carbon leakage by imposing a carbon price on certain imported goods.
Renewable Energy Directive: This directive promotes using renewable energy sources across the EU.
Energy Efficiency Directive: Measures to improve energy efficiency in buildings, industry, and transport.
Alternative Fuels Infrastructure Regulation (AFIR): Encourages infrastructure development for alternative fuels.
ReFuel EU Aviation Regulation: Aims to reduce emissions from aviation.
FuelEU Maritime Regulation: Addresses emissions from maritime transport.
Energy Performance of Buildings Directive: Focuses on improving energy efficiency in buildings.
EU Methane Regulation for the Energy Sector: Aims to reduce methane emissions.
Updated EU Rules to Decarbonize Gas Markets and Promote Hydrogen: Supports the transition to cleaner gas and hydrogen.
How should businesses respond to the legislation?
1. Understand what legislation will affect your business now and in the future.
2. Develop a robust ESG strategy and framework.
3. Measure your business and supply chain carbon emissions. This will enable you to uncover and mitigate your carbon liabilities.
How can Martello help?
1. Understand which legislation will affect your company in the next five years.
2. Help you develop your ESG Strategy and Operating model.
3. Measure your supply chain's carbon liabilities.
4. Create an action plan to reduce your liability.
More about Martello and the Carbon Stream Map
Martello supports businesses and investors in reducing costs and liabilities in response to global carbon, climate, and net zero legislation.
The Martello Carbon Stream Map (CSM) unlocks the blueprint for boards and investors to decarbonise an organisation, supply chain, or portfolio by quickly calculating end-to-end operational and supply chain costs and liabilities.
The CSM is a highly visual tool that identifies the systematic options to affect emissions within one operation or down through its global supply chain.
If you believe we can help with your compliance needs for the Corporate Sustainability Reporting Directive (CSRD), the EU Green Deal, Net Zero compliance, or other areas of ESG, please schedule a time for a consultation.
We can measure and map any business in any sector or geographical region. The data allows business leaders to execute their plans at any point in their net zero transformation journey, supporting any level of operational maturity.
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