Implications of EU Fit for 55 Package for Korean Carbon Neutrality Policy
On July 14, 2021, the European Union announced EU Fit for 55, a climate target package comprising 13 policies representing legislation and new initiatives. Among the proposals were those related to the transition toward a more competitive industrial structure, including a stronger and expanded EU Emissions Trading System (ETS), the Effort Sharing Regulation Mechanism (CBAM). Also mentioned were the phased abolition of the free allocation of emission rights in aviation, the inclusion of maritime transportation in the ETS framework, and addition of a separate ETS for buildings and road transportation. Stronger ESR targets were announced for areas not originally included in the ETS framework, and full-scale CBAM implementation in five areas was scheduled to begin in 2026 after a transitional period from 2023 to 2025. To support a fair transition and alleviate inequality and energy poverty, Fit for 55 proposes the creation of the Social Climate Fund (SCF), raised through a portion of revenues from the new ETS to encourage clean investment and resolve social distribution issues that may arise amid the green transition. The process behind the EU’s development of carbon neutrality policy leading up to Fit for 55 carries useful implications to Korea. Additional tax revenues or profits resulting from stronger policies may be used contribute to forming a separate fund for carbon neutrality. The ensuing side effects from the shift can be minimized through early impact assessments and the gathering of opinions on carbon neutrality policy and legislation from industry figures and other stakeholders