Explanatory Memorandum to COM(2021)554 - Amendment of Regulations (EU) 2018/841 as regards the scope, simplifying the compliance rules, setting out the targets of the Member States for 2030 and committing to the collective achievement of climate neutrality by 2035 in the land use, forestry and agriculture sector, and (EU) 2018/1999 as regards improvement in monitoring, reporting, tracking of progress and review - Main contents
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| dossier | COM(2021)554 - Amendment of Regulations (EU) 2018/841 as regards the scope, simplifying the compliance rules, setting out the targets of ... |
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| source | COM(2021)554  |
| date | 14-07-2021 |
1. CONTEXT OF THE PROPOSAL
• Reasons for and objectives of the proposal
The European Green Deal Communication 1 launched a new growth strategy for the EU that aims to transform the EU into a fair and prosperous society with a modern, resource-efficient and competitive economy. It reaffirms the Commission’s ambition to increase its climate targets and make Europe the first climate-neutral continent by 2050. Furthermore, it aims to protect the health and well-being of citizens from environment-related risks and impacts. The necessity and value of the European Green Deal have only grown in light of the very severe effects of the COVID-19 pandemic on the health and economic well-being of the Union’s citizens.
Tackling climate change is an urgent challenge. In line with the scientific findings of the Intergovernmental Panel on Climate Change (IPCC) Special Report, global net-zero CO2 emissions need to be achieved around 2050, and neutrality for all other greenhouse gases later in the century. This urgent challenge requires the EU to step up its action and demonstrate global leadership by becoming climate neutral by 2050. This objective is set out in the Communication ‘A Clean Planet for all’ - A European strategic long-term vision for a prosperous, modern, competitive and climate-neutral economy’ 2 .
Based on a comprehensive impact assessment, the Commission’s Communication of 17 September 2020 on Stepping up Europe’s 2030 climate ambition 3 proposed to raise the EU’s ambition and put forward a comprehensive plan to increase the European Union’s binding target for 2030 towards at least 55% net emission reduction, in a responsible way. Raising the 2030 ambition now helps give certainty to policymakers and investors, so that decisions made in the coming years do not lock in emission levels inconsistent with the EU’s objective to be climate neutral by 2050. The 2030 target is in line with the Paris Agreement objective to keep the global temperature increase to well below 2°C and pursue efforts to keep it to 1.5°C.
The Communication proposes to move towards a more stringent contribution from the LULUCF sector and, as a further step, to combine the agriculture non-CO2 greenhouse gas emissions with the land use, land use change and forestry sector, thereby creating a newly regulated land sector (covering emissions and removals from agriculture, forestry and other land use). This can promote synergies between land-based mitigation actions and enable more integrated policymaking and policy implementation at the national and EU level. The analysis underpinning the Communication shows that the land sector would have the potential to become climate-neutral by around 2035 in a cost-effective manner, and subsequently generate more CO2 removals than greenhouse gas emissions.
The European Council endorsed the new EU binding target for 2030 at its meeting of December 2020 4 . It also called on the Commission “to assess how all economic sectors can best contribute to the 2030 target and to make the necessary proposals, accompanied by an in-depth examination of the environmental, economic and social impact at Member State level, taking into account national energy and climate plans and reviewing existing flexibilities”.
To this end, the European Climate Law makes the EU’s climate neutrality target legally binding, and raises the 2030 ambition by setting the target of at least 55% net emission reduction by 2030 compared to 1990.
In order to follow the pathway proposed in the European Climate Law, and deliver this increased level of ambition for 2030, the Commission has reviewed the climate and energy legislation currently in place that is expected to reduce greenhouse gas emissions by 40% by 2030 and by 60% by 2050.
This ‘Fit for 55’ legislative package, as announced in the Commission's Climate Target Plan, is the most comprehensive building block in the efforts to implement the ambitious new 2030 climate target, and all economic sectors and policies will need to make their contribution.
The initial regulatory framework for the land use, land use change and forestry (LULUCF) sector, as laid down in Regulation (EU) 2018/841, was adopted in 2018 and covers CO2 emissions and removals and greenhouse gas emissions of CH4 and N2O resulting from the management of land, forests and biomass during the period from 2021 to 2030. It contributes to the previous Union’s emission reduction target of at least 40% by 2030 compared to 1990, by ensuring that the sum of total emissions does not exceed the sum of total removals generated by the sector after the application of the accounting rules and of the flexibility with the “effort sharing” (or ESR) sector set out by Regulation (EU) 2018/842.
The proposal to amend Regulation (EU) 2018/841 as part of the ‘Fit for 55’ package aims to strengthen the contribution of the LULUCF sector to the increased overall climate ambition for 2030. To this end, the proposal: sets out the overall Union target of net greenhouse gas removals in the LULUCF sector to 310 million tonnes of CO2 equivalent in 2030; reinforces the obligation for Member States to submit integrated mitigation plans for the land sector and enhances monitoring requirements using digital technologies; aligns the objectives with related policy initiatives of biodiversity and bioenergy; determines the Union target of climate neutrality for 2035 in the land sector (which combines the LULUCF sector and the non-CO2 agricultural sector); and commits the Commission to make proposals for national contributions to the 2035 target by 2025.
The proposed amendment introduces only minor, non-substantive, changes in the LULUCF regulatory framework for the first compliance period, i.e. from 2021 to 2025. In contrast, significant change takes place with the beginning of the second compliance period from 2026 to 2030. In order to simplify implementation and compliance, the Kyoto-inspired land accounting rules will no longer be applied post 2025, and the flexibility between LULUCF and with the “effort sharing” sectors will be adjusted, in line with the European Climate Law. The overall Union target of net greenhouse gas removals of 310 million tonnes of CO2 equivalent will be distributed between Member States as annual national targets for the period from 2026 to 2030, and be based on the emissions and removals reported in the greenhouse gas inventories and the areas of managed land. A new system of governance of the target compliance will be introduced and the land use flexibility mechanism addressing risk of non-compliance by Member States will be adjusted. From 2031 onwards, the scope of the Regulation will be expanded to include non-CO2 emissions from the agriculture sector, thus covering the whole land sector framework for the first time with one climate policy instrument.
• Consistency with existing policy provisions in the policy area
The ‘Fit for 55’ climate and energy package is a comprehensive step in overhauling Union legislation to align it with the EU’s increased climate ambition. All initiatives in the package are closely interlinked.
This legislative proposal is complementary to the proposals made in the package and maintains consistency with the:
(a)Revision of the EU Emissions Trading System (ETS) Directive 2003/87/EC 5 ;
(b)Effort Sharing Regulation (EU) 2018/842 6 ;
(c)Amendment to the Renewable Energy Directive (EU) 2018/2001 7 to implement the ambition of the new 2030 climate target;
There are also strong interlinkages with other Commission initiatives on protecting and enhancing nature-based carbon removals, improving the resilience of the EU’s forests to climate change, restoring degraded land and ecosystems, rewetting peatlands and promoting the bio-economy, including the use of durable harvested wood products, in full respect of ecological principles fostering biodiversity:
a) EU Biodiversity Strategy for 2030 8 ;
b) Farm to Fork Strategy for a fair, healthy and environmentally-friendly food system 9 ;
c) [EU Forest Strategy 10 ];
d) [EU Nature Restoration Targets] 11 ;
e) EU Strategy on Adaptation to Climate Change 12 ;
f) EU Strategy to Reduce Methane Emissions 13 ;
g) [EU Soil Strategy 14 ];
h) A sustainable Bioeconomy for Europe 15 ;
i) Circular Economy Action Plan for a cleaner and more competitive Europe 16 ;
j) Zero Pollution Action Plan 17 ;
k) A long-term Vision for the EU’s Rural Areas 18 .
• Consistency with other Union policies
The proposals of the ‘Fit for 55’ package should be consistent with all EU actions and policies and help the EU achieve the increased 2030 target and a successful and just transition towards the 2050 climate neutrality objective, as stated by the Commission in the European Green Deal Communication. As such, this initiative is linked to many other policy areas, including the Union’s external policies.
The Commission is improving its better regulation guidelines and supporting tools with the objective that all EU initiatives live up to a green oath to ‘do no harm’.
The Technical Support Instrument supports Member States in designing and implementing reforms. The support is provided upon request and covers a wide range of policy areas, including the Recovery Resilience Plans, the green transition and LULUCF related issues.
The LULUCF sector is connected to all ecosystems and economic activities that rely on the land and the services it provides. Therefore, the LULUCF Regulation presents synergies with other EU policies that cover land-related activities, mainly the Common Agricultural Policy 19 , environmental policies and the energy policy, particularly in respect of renewable energy.
2. LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY
• Legal basis
The legal basis for this proposal is Article 192 of the Treaty on the Functioning of the European Union (TFEU). In accordance with Article 191 and 192(1) TFEU, the European Union shall contribute to the pursuit, inter alia, of the following objectives: preserving, protecting and improving the quality of the environment; promoting measures at international level to deal with regional or worldwide environmental problems, and in particular combating climate change.
• Subsidiarity (for non-exclusive competence)
Climate change is a trans-boundary problem, which cannot be solved by national or local action alone. Coordination of climate action must be taken at European level and, where possible, at global level. EU action is justified on grounds of subsidiarity as set out in Article 5 of the Treaty on European Union. Since 1992, the European Union has worked to develop joint solutions and drive forward global action to tackle climate change. More specifically, action at EU level will provide for cost effective delivery of the 2030 and long-term emission reduction objectives while ensuring fairness and environmental integrity. Articles 191 to 193 of the TFEU confirm and specify EU competencies in the area of climate change.
An increase in the 2030 target for EU GHG reductions will impact most, if not all, sectors across the EU economy. The increase of that target may furthermore require policy responses in many fields, including beyond climate, forestry and land use policy. The actions taken by Member States under the LULUCF Regulation framework have strong linkages with other policies, in particular agriculture, biodiversity and habitat protection, adaptation, and also energy policy due to the renewable energy aspects. Interdependencies between the different policies involved have a cross-national impact, emissions reduction and removal targets are determined per Member State, and principles, on which basis the Member States will report on their achievements and measure their progress towards reaching their individual targets and targets of the EU as a whole are laid down in Regulation (EU) 2018/1999 20 . Action at the EU level is indispensable and coordinated EU policies have a much bigger chance of leading to a true transformation towards a climate neutral economy by 2050.
• Proportionality
This proposal complies with the proportionality principle because it does not go beyond what is necessary in order to achieve the objectives of implementing the EU's target for reducing greenhouse gas emissions for the period 2021 to 2030 in a cost-effective manner, while ensuring fairness and environmental integrity.
The European Climate Law sets out the binding Union 2030 climate target for a domestic reduction of net greenhouse gas emissions by at least 55% compared to 1990 levels by 2030. This proposal covers a large part of these greenhouse gas emissions, and revises the LULUCF Regulation in order to achieve this objective.
• Choice of the instrument
The objectives of the present proposal can best be pursued through an amendment of the existing LULUCF Regulation, introducing changes to the established legislative framework in order to reach increased Union’ climate ambition and ensuring direct and uniform applicability of the provisions throughout the Union at the same time.
3. RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS
• Ex-post evaluations/fitness checks of existing legislation
The LULUCF Regulation entered into force in 2018 but applies since the beginning of 2021, hence so far only first steps have been carried out to prepare for its implementation; these activities have highlighted some implementation challenges. In particular, the analysis of the integrated national energy and climate plans (NECPs) 21 as submitted by the Member States end-2019 showed that the LULUCF sector is yet to be treated as an integrated component of Member States’ climate strategies. The process of establishing the Forest Reference Levels for each Member State revealed the challenges behind the implementation of this complex accounting rule, and capacity building activities to support a large number of Member States in preparing for the implementation of the LULUCF Regulation highlighted the challenges behind the gaps in national monitoring and reporting systems.
• Stakeholder consultations
The Inception Impact Assessment was published for feedback on 29 October 2020 for four weeks, and received a total of 93 responses. Furthermore, in order to collect evidence and ensure greater transparency, the Commission organised a public consultation for each of the proposals from 13 November 2020 to 5 February 2021; the consultation on the revision of the LULUCF Regulation received 235 respondents. These indicated a preference for more ambitious removal targets for the LULUCF sector, an option selected by 45% of respondents (mostly, academia, EU citizens and NGOs). In second place, integrated targets for the land sector were preferred by 35% of the respondents, mostly from the private sector. A strengthening of flexibility with the ESR was the most preferred option among 20% of respondents, mostly public authorities. A detailed summary of the feedback to the Inception Impact Assessment and of the results of the public consultation are presented in Annex 2 of the Impact Assessment for this proposal.
• Collection and use of expertise
The quantitative assessment of the economic, social and environmental impacts is based on integrated economic land use modelling by IIASA with GLOBIOM and G4M. The policy scenario (MIX) takes into account likely biomass demands from other sectors and follows the assumptions of the 1.5TECH scenario of the EU long-term strategy 22 , 23 . The MIX scenario projects that the net LULUCF sink by 2030 will be at similar levels as in the period 2016-2018. The impact of specific measures for emission reduction or enhanced removals was modelled with marginal abatement cost curves. This analysis demonstrated that significant increases in the land sink can be achieved at relatively low costs (5-10 EUR/tonne of CO2). It also showed cost-efficient emission reductions require action on all land uses, such as improved forest management, afforestation, avoided deforestation for forest lands, set aside of land use on organic soils and improved cropland management strategies on agricultural land.
Information on the contribution of the LULUCF sector to the Green Deal was gained through a service contract carried out by a consortium of external experts, which focused among other tasks on problems, objectives and options for the revision of the LULUCF Regulation and analysis of reports submitted by Member States under the LULUCF Decision (529/2013).
Additional information was gathered through numerous external studies such as the LULUCF compliance study, Capacity building for greenhouse gas inventories, Carbon farming pilot study, etc.
• Impact assessment
The Impact Assessments for the different initiatives are based on integrated modelling scenarios that reflect the interaction of different policy instruments on economic operators, in order to ensure complementarity, coherence and effectiveness in achieving the 2030 and 2050 climate ambition.
The Impact Assessment accompanying this proposal complements the analysis conducted in the 2020 impact assessment supporting the 2030 Climate Target Plan. This formed the analytical basis to set the objective of at least net 55% reduction in GHG emissions by 2030 compared to 1990, the climate neutrality objective in the land sector for 2035, and the Union-wide climate neutrality objective by 2050.
Moreover, the Impact Assessment accompanying this proposal has been prepared and developed in line with the applicable Better Regulation guidance and recommendations of the Regulatory Scrutiny Board, who issued a positive opinion with reservations on 19 April 2021. The recommended improvements suggested by the Board were addressed in the final version.
Contents
- Problems and objectives
- Policy options
- Article 2 Scope
- Article 4 Commitments and targets
- Commitments for 2021-2025
- Member States targets for 2026-2030
- Commitments to climate neutrality in 2035
- Article 9 Accounting for harvested wood products
- Article 12 General flexibilities
- Article 13 Managed Forest Land Flexibility
- Article 13a Additional compensations
- Article 13b Land use flexibility mechanism for the years 2026 to 2030
- Article 13c Governance of the targets
- Amendment of Regulation (EU) 2018/1999
The Impact Assessment identified three main problems, with corresponding drivers and objectives.
The first problem is that carbon removals in the land sector have been decreasing in recent years: due to increasing harvesting rates related to wood demand and forest aging, continued emissions from organic soils, natural disasters and a lack of policy and financial incentives. Thus, the first objective of this proposal is to stop and reverse this trend, in line with an ambition to achieve a climate-neutral land sector in 2035.
The second problem is the insufficient integration of the land sector into climate policies, due to the fact that the Agriculture and LULUCF sectors have no integrated target, are covered by two different pieces of legislation, and are linked by flexibility rules which presented some limitations. The corresponding objective is to ensure a fair, flexible and integrated climate policy framework to incentivise effective policymaking and implementation, and to enhance cost-efficient and synergistic mitigation action in the land sector. This is of particular importance given the high potential to increase the synergies between climate mitigation measures and environmental protection measures related to land management both in areas under agriculture and forestry as well as natural and semi-natural areas. The restoration of carbon rich ecosystems as well as the sustainable use of soils and forests will both contribute to addressing the climate and biodiversity crisis.
The third problem is that the accounting, monitoring and reporting rules as set out in the current LULUCF Regulation present implementation challenges: in particular, the process to establish Forest Reference Levels has proven to be burdensome and there are still many gaps in the accuracy of LULUCF estimates. This problem corresponds to an objective to simplify the accounting rules and to exploit the opportunities created by existing land monitoring technologies and datasets to better monitor the climate performance of the LULUCF sector.
Following this analysis and the elements outlined in the Communication on Stepping up Europe’s 2030 climate ambition, the Impact Assessment described three options.
The first option looks at alternative ways to design national LULUCF targets, assuming that no flexibility channel exists between the LULUCF sector and the ESR sectors. One proposed way of doing this is to simplify the accounting benchmark for managed forest land by using a historic average instead of the Forest Reference Level. Another way is to set a single removal target based on all emissions and removals reported in the inventory and to distribute it among Member States according to the recent emissions and removals and the area of managed land; the EU target is set in line with a trajectory towards a climate-neutral land sector in 2035.
The second option also sets a single removal target based on reported emissions and removals, but it proposes a lower EU target for 2030 corresponding to the recent performance of the LULUCF sector (i.e. the 2016-2018 average); by adding the possibility to generate LULUCF credits for compliance with ESR targets, this option creates incentives to overachieve the LULUCF targets, potentially reaching a level of removals in line with a trajectory towards a climate-neutral land sector in 2035.
The third option combines emissions from the Agriculture sector and emissions and removals from the LULUCF sector under a single “land sector” pillar, and features three elements: a planning process to ensure land-based climate neutrality in 2035, national binding targets for the land sector in 2030, and national binding targets for the land sector in 2035.
The preferred option is to combine simplified and more ambitious LULUCF national targets in 2030 (as in Option 1.2 or Option 2, depending on the ESR targets) with an EU-wide objective of land-based climate-neutrality in 2035. The preferred option also features a planning process for land-based mitigation, national land targets for 2035 to be established at a later stage, and upgraded monitoring and reporting requirements.
• Regulatory fitness and simplification
In line with the Commission commitment to Better Regulation, the proposal has been prepared inclusively, based on transparency and continuous engagement with stakeholders.
• Fundamental rights
The proposal respects the fundamental rights and observes the principles recognised in particular by the Charter of Fundamental Rights of the European Union 24 . In particular, it contributes to the objective of a high level of environmental protection in accordance with the principle of sustainable development as laid down in Article 37 of the Charter of Fundamental Rights of the European Union.
4. BUDGETARY IMPLICATIONS
Budgetary implications for the Member States are related to the possibility of trading surpluses when overachieving their targets, and to the necessity of high quality monitoring and reporting in the LULUCF sector involving e.g. re-use of EU programmes (e.g. Copernicus) and data sources already used for other policies.
This proposal foresees a comprehensive review, in 2025, of the national inventory data submitted by Member States pursuant to Article 26 i of Regulation (EU) 2018/1999 (‘the Governance Regulation’). The review will allow the Commission to determine the LULUCF annual targets of the Member States for the period 2026-2030, based upon the average of greenhouse gas emissions of each Member State during the years 2021, 2022 and 2023. The review will also update the 2030 emission allocation path for the ESR and revise the annual allocations for the years 2026 to 2030. Furthermore, the 2027 comprehensive review for the purpose of compliance foreseen in the Governance Regulation will be maintained. Such tasks will require the support of an external contractor, for an estimated price of EUR 2M for each review (2025, 2027).
Secondary legislation will also be required setting out detailed rules related to LULUCF on the Union Registry, and monitoring and reporting of emissions and verification of compliance reports. The implementation will require elaborate IT developments in the Union Registry to deal with new type of allowances linked to LULUCF-ESR flexibility, and new operators (Member States).
Furthermore, following the change in 2026 of the reporting and compliance mechanism, the implementation will require upgraded and enhanced provision of monitoring using the European Environment Agency and related data services under the Copernicus programme.
The implications for the EU budget are presented in the attached legislative financial statement. IT development and procurement choices will be subject to pre-approval by the European Commission Information Technology and Cybersecurity Board.
5. OTHER ELEMENTS
• Implementation plans and monitoring, evaluation and reporting arrangements
Transparent, regular reporting of Member State obligations coupled with robust compliance checks are fundamental elements ensuring progress in delivering the EU long-term emission reduction commitments. The initiative builds on the process based on integrated national energy and climate plans and the robust transparency framework for greenhouse gas emissions and other climate information that is contained in Regulation (EU) 2018/1999 on the Governance of the Energy Union and Climate Action. The Commission will use inter alia the information reported by Member States under the Governance Regulation as a basis for its regular assessment of progress. This includes information on greenhouse gas emissions, policies and measures, projections and adaptation. The Commission will also make use of this information for the Environmental Implementation Reviews and the monitoring of the Environment Action Programmes. Information obtained from Member States may be complemented by systematic atmospheric observations through in situ as well as remote sensing observations, such as those provided by Copernicus.
Enhanced quality of monitoring and reporting of emissions and removals in the land use, land use change and the forestry sector becomes more prominent with the introduction of the EU net emissions reduction target based on the numbers reported in the greenhouse gas inventories. Coherence with other EU policies that also rely on land monitoring – such as the Common Agricultural Policy, biodiversity policies, and the Renewable Energy Directive – is also of strong significance, providing important administrative and cost synergies. Thanks to evolutions in land monitoring technologies, there are abundant opportunities to monitor land use changes at low cost and in a timely fashion (e.g. by using approaches based on remote sensing, including from the Copernicus Sentinel satellites or commercially available services). Such timely, EU coverage digital geo-data will not only facilitate GHG reporting but also guide mitigation action to areas with the highest potential for emission reductions, and more generally enable environmental action, biodiversity, nature protection and land use planning. Upgrading the monitoring approach in the LULUCF Regulation, thereby introducing a level playing field for all Member States with respect to using comparable and standardized approaches in line with available tools and technologies, is therefore of major importance and will ensure adoption of best practices for monitoring.
• Detailed explanation of the specific provisions of the proposal
The most important changes in the legal LULUCF framework contributing to reach the increased climate ambition of the Union concern the following Articles:
The initial scope setting out the “land accounting categories” applies only for the period 2021-2025 in the amended Regulation. Managed Wetlands is included within the scope of the amendment for 2021-2025 only for MS that notified the intention to include it by 31 December 2020 (selected by just two Member States).
The scope for the period 2026-2030, is based directly upon reported emissions and removals for the greenhouse gas inventory pursuant to Regulation (EU) 2018/1999 and reflects exactly the reporting categories as set out in the Common Reporting Format under the UNFCCC reporting guidelines (e.g. peatlands and peat-extraction is included in the reporting category Wetlands).
The scope for a combined land use and non-CO2 agriculture sector from 2031 onwards is introduced in the last paragraph, also reflecting the reporting categories as set out in the Common Reporting Format.
In the original Article 4, the term “commitments” was used to express the obligation without a specific numerical target. The new Article 4 “Commitments and targets” will be revised to reflect the three periods:
Under the current rules, the Member States are committed to ensure that the greenhouse gas emissions do not exceed removals, calculated as the sum of total emissions and total removals in the accounting categories as defined in the scope (Article 2(1)); the “no-debit rule”. These commitments will be limited only to the first period of the application of the amended Regulation, i.e. from 2021 to 2025.
For the period from 2026 to 2030, the Union target will be set out to reach net removals of 310 million tonnes CO2 equivalent by 2030, based on the greenhouse gas inventory from the years 2016, 2017 and 2018. The Union target of 310 million tonnes CO2 equivalent of net removals will be distributed among the Member States in order to determine binding national targets of minimum net removals to achieve in 2030 according to a table in Annex IIa.
Two considerations make the use of recent data preferable. First, the start point for the trajectory should be as close to the compliance period as possible – this has a technical impact that eliminates the need for setting a benchmark like the Forest Reference Level. Second, the LULUCF inventories starting with the 2023 submission will be the first to be under conditions of the Governance Regulation, and thus of a higher standard. In 2025, based on the results of a comprehensive review of the reported greenhouse gas inventory, the Commission will adopt an implementing act determining the annual targets based on the verified emissions and removals from years 2021, 2022 and 2023 for each Member State. The most recent reviewed data will therefore serve as a basis for setting the annual targets trajectory for 2026-2029 towards achieving the national net removal targets for 2030.
The 2030 target will be the starting point of the land sector pathway between 2030 and 2050 for achieving economy-wide climate neutrality, and allow monitoring progress towards net zero greenhouse gas emissions by 2050.
From 2031 onwards, the LULUCF sector will include the non-CO2 emissions from agriculture sector and the amended Regulation will aim towards the objective to achieve climate neutrality in the Union-wide greenhouse gas emissions and removals in the combined sectors at the latest by 2035; reducing emissions to net zero by that date and generating negative emissions thereafter. The Member States are obliged to contribute to reach the collective target and need to present how they intend to achieve this objective in their updated integrated national energy and climate plans by June 2024. In view of the submitted plans, the Commission will propose, by the end of 2025, individual Member State targets and EU-wide measures for post-2030 period. The post-2030 individual targets for the Member States will be the subject to an impact assessment and a new legislative proposal.
From 2036 onwards, the combined sector will need to generate further carbon removals to balance remaining emissions in other sectors, based on a robust carbon removal certification system. This policy framework could start to progressively combine the land sector with other sectors (beyond agriculture) that have exhausted their emissions reduction possibilities, or that have achieved for instance over 90% emission reductions. Thus, an incentive to steadily increase carbon removals in the combined sectors for period up to 2050 would be preserved.
The Communication Stepping up Europe’s 2030 climate ambition points towards initiatives concerning carbon farming and certification of carbon removals that should increasingly be deployed in the run up to 2030. Hence, such new business models to increase carbon sequestration need to be promoted while at the same time, land users must make the necessary efforts to avoid depleting further their carbon stock, especially in soils.
The proposal will introduce a more explicit pathway towards new products (construction materials, fibres/polymers) and re-direct the sense of the article to act as a chapeau for carbon removal/farming certification, encapsulating harvested wood products as one such example.
Under the amended Regulation, the Member States will not be able any more to ‘bank’ surplus removals at the end of the period 2021-2025. However, the amendment ensures the allocation of a share of Member States’ surplus removals at the end of the period 2021-2025 to an established flexibility mechanism under the second period from 2026 to 2030 (see the newly inserted Article 13b).
In addition, the Member States will be obliged to report on the use of the revenues from trading and expected to reinvest these revenues into climate projects.
The scope of present Article 13 will be limited to the 2021 to 2025 accounting period, with the total available flexibility amounting to a share of the flexibility surplus, which was unused by the Member States during the period from 2021 to 2025 under Article 13.
A surplus after the first period is expected, given that currently forest net removals in major Member States are significantly larger than the adopted Forest Reference Levels. Consequently, nearly all forest rich Member States will likely meet their commitments for the period from 2021 to 2025 under the LULUCF Regulation without the need to use their flexibility. It is therefore probable that this would leave a significant share of the available flexibility unused, which can supply the newly established mechanism for the redistribution of any unused Managed Forest Land compensation for Member States hit by natural disturbances.
In addition, the current provision concerning the special flexibility for Finland will be removed and replaced by Article 13a in the amended Regulation.
Similarly to Article 13, the application of this article will be limited to the accounting against the first compliance period, 2021-2025 and the main motivation for its existence is to avoid any ambiguity in the interpretation of the extent of special flexibility assigned to Finland.
The amendment will specify the amount of the available compensation to 5 million tonnes of CO2 equivalent, i.e. half of the current amount, since applicable only until the end of 2025. Furthermore, the compensation to forest land reported as converted to other land will be limited until the end of 2017. The compensation will be allowed to be used only for the purpose of compliance with the 2021-2025 commitment, ensuring that no credits are used for trading, nor banked to the second period 2026-2030.
Since the change towards the reporting-based national target makes the current Articles 10 (Natural disturbances) and 13 (Managed forest land flexibility) redundant from 2025, a new flexibility mechanism is introduced in the amended Regulation for the period from 2026 to 2030 to help Member States deal with the uncertainties of the sector, in particular from natural disasters. It will operate under similar principles to the current Article 13, extending the scope from forest land to all the land relevant for the target compliance. The mechanism would then deal with any unexpected decrease in net removals on all land categories, not only forest, due to pest, fire, and storms, on condition of clear evidence to be submitted by the Member States in accordance with existing criteria (Annex VI) .
The new elements (compared to the original Art 13) will be:
During the period 2026-2030, units from the flexibility mechanism can be used to cover the full scope between target and reporting in each Member State, not just for forest land.
The access to the flexibility mechanism, in 2032 for the period 2026-2030, is set at half of the maximum amount set out in Annex VII, i.e. 178 million tonnes of CO2 equivalent.
Any unused amount could be reallocated by Commission decision and through the Registry to Member States where their need in particular in relation to natural disturbances is demonstrated in accordance with principles in Annex VI, and this has exceeded the pre-defined per Member State levels in Annex VII.
With the shift towards the national annual targets for net removals in the period from 2026 to 2030, similar principles will be introduced as exist in the compliance framework under the Effort Sharing Regulation (EU) 2018/842, such as a penalty of non-compliance of 8% on the gap to compliance in 2030, with respect to the subsequent target/allocation setting post-2030. In the case where a Member State fails to comply with its 2030 target at the end of the second compliance period, despite the transfer option from another MS and the relevant share of the flexibility mechanism, the gap between its 2030 target and the net emissions reduction really achieved in 2030 will be added to its target determined for 2031.
The reason why Regulation (EU) 2018/1999 25 is amended together with Regulation (EU) 2018/841 is that it includes the rules for monitoring and reporting on greenhouse gas emissions and removals and for tracking the progress of the Member States towards achieving the targets under Regulation (EU) 2018/841.
Amendment to Article 4 of Regulation (EU) 2018/1999 reflects in the National Energy and Climate Plans the national targets set for the period from 2026 to 2030 and the commitment of climate neutrality in 2035. Amendment to Article 38 enables to carry out a comprehensive review of national inventory data in 2025, in order to be able to set out the national annual targets of the Member States during 2026 to 2030. In addition, amendment to Annex V, Part 3, put in place measures increasing the accuracy of the monitoring and reporting of the greenhouse gas emissions and removals in the LULUCF sector.