Endorse the Statement on the EU’s legislative proposals on climate change by signing it!

The Policy Outreach Committee (POC) of the European Association of Environmental and Resource Economists (EAERE) prepared a statement on the EU’s legislative proposals on climate change that is presented for endorsement to the whole scientific community in Europe and worldwide. The statement has already been signed by POC members and EAERE Council members. It aims to draw the attention of policy-makers and public opinion on the implications of the legislative package and on some key challenges that need to be addressed in the future. While the package can be further improved, it takes a step in the right direction if we want to raise the ambition of the European climate policy and achieve climate neutrality by mid-century. A rapid implementation of more ambitious policies is of crucial importance to fulfil our commitments, particularly after COP26.

Statement on the EU’s legislative proposals on climate change

Climate change causes severe consequences as documented by the 6th Assessment Report of the IPCC (Intergovernmental Panel on Climate Change). This calls for urgent and more ambitious climate policies. In July 2021 the European Commission presented the ‘Fit for 55 package’ which contains a number of legislative proposals to reduce greenhouse gas emissions by 55% in 2030 compared to 1990, and reach climate neutrality by 2050. Guided by sound economic principles, we are united on the following:

  1. The package is consistent with the above targets. It will provide an efficient and stable framework to mobilize efforts in all sectors, by diversified instruments. The setting of a price on carbon under the EU’s Emissions Trading System (EU ETS) remains a central element of Europe’s climate policy. The deepening and widening of carbon pricing, including the proposal to revise the Energy Taxation Directive, is welcome. EU ETS carbon prices in Europe are today within the range of 50-100€/tonne CO2 indicated by the Stern and Stiglitz Report [1] as the level needed by 2030. To date this has contributed to a cost-effective reduction of emissions covered by the EU ETS of over 40% since 2005.
  2. The legislative package addresses the distributional consequences of climate policy. The way the distributional aspects are perceived by the public opinion plays a key role for the social acceptability and ultimate success of the proposed policies. While some measures may have regressive effects, the recent increase in carbon prices that followed past reforms of the EU ETS raises revenues that can be used for redistribution purposes. It is important politically to address the social impacts on low-income households [2]. The Social Climate Fund, that complements the new ETS for building and transport, can provide a framework to address these distributive impacts.
  3. Higher carbon prices can lead to so-called ‘carbon leakage’, which is a delocalization of polluting activities towards countries with less ambitious environmental regulations. This could be a problem as EU ETS prices rise, though possibly just a temporary one if other major players will also adopt a more stringent climate policy following the European example. Two main routes have been identified to prevent carbon leakage: free allowances to sectors at risk of carbon leakage, or a Carbon Border Adjustment Mechanism (CBAM). Free allocation of allowances has been used so far and should be abandoned. The CBAM can create a level playing field but is challenging both from a technical and trade policy perspective. It is to be welcomed that the Commission’s proposal on a CBAM allows for time for consultation with the EU’s trading partners.
  4. Although the EU has a relatively low share of global emissions, it can play a crucial role in inspiring other countries and demonstrating that the adoption of more ambitious environmental policies does not harm overall economic welfare and the wellbeing of citizens. To that end, green and low-carbon innovations need to be rolled out in massive investments. Macro-economic policy instruments should reflect this need.
  5. The window of opportunities to reach the Paris Agreement targets is rapidly closing. All countries, in particular G-20 countries, need to strengthen their climate policies. More efforts should be devoted to step up international cooperation in the field of environmental and climate governance. In addition, more financial support needs to go to developing countries which are particularly vulnerable to climate change.

[1] https://www.carbonpricingleadership.org/report-of-the-highlevel-commission-on-carbon-prices

[2] On this issue see SDSN 2021.Transformations for the Joint Implementation of Agenda 2030 for Sustainable Development and the European Green Deal. Sustainable Development Solutions Network (SDSN). See also Feindt, S., Kornek, U., Labeaga, J.M., Sterner, T., & Ward, H. (2021). Understanding Regressivity: Challenges and Opportunities of European Carbon Pricing. Energy Economics, 105550, DOI: https://doi.org/10.1016/j.eneco.2021.105550

Statement on the EU’s legislative proposals on climate change

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Climate change causes severe consequences as documented by the 6th Assessment Report of the IPCC (Intergovernmental Panel on Climate Change). This calls for urgent and more ambitious climate policies. In July 2021 the European Commission presented the 'Fit for 55 package’ which contains a number of legislative proposals to reduce greenhouse gas emissions by 55% in 2030 compared to 1990, and reach climate neutrality by 2050. Guided by sound economic principles, we are united on the following:

  1. The package is consistent with the above targets. It will provide an efficient and stable framework to mobilize efforts in all sectors, by diversified instruments. The setting of a price on carbon under the EU’s Emissions Trading System (EU ETS) remains a central element of Europe’s climate policy. The deepening and widening of carbon pricing, including the proposal to revise the Energy Taxation Directive, is welcome. EU ETS carbon prices in Europe are today within the range of 50-100€/tonne CO2 indicated by the Stern and Stiglitz Report (1) as the level needed by 2030. To date this has contributed to a cost-effective reduction of emissions covered by the EU ETS of over 40% since 2005.

  2. The legislative package addresses the distributional consequences of climate policy. The way the distributional aspects are perceived by the public opinion plays a key role for the social acceptability and ultimate success of the proposed policies. While some measures may have regressive effects, the recent increase in carbon prices that followed past reforms of the EU ETS raises revenues that can be used for redistribution purposes. It is important politically to address the social impacts on low-income households (2). The Social Climate Fund, that complements the new ETS for building and transport, can provide a framework to address these distributive impacts.

  3. Higher carbon prices can lead to so-called ‘carbon leakage’, which is a delocalization of polluting activities towards countries with less ambitious environmental regulations. This could be a problem as EU ETS prices rise, though possibly just a temporary one if other major players will also adopt a more stringent climate policy following the European example. Two main routes have been identified to prevent carbon leakage: free allowances to sectors at risk of carbon leakage, or a Carbon Border Adjustment Mechanism (CBAM). Free allocation of allowances has been used so far and should be abandoned. The CBAM can create a level playing field but is challenging both from a technical and trade policy perspective. It is to be welcomed that the Commission’s proposal on a CBAM allows for time for consultation with the EU’s trading partners.

  4. Although the EU has a relatively low share of global emissions, it can play a crucial role in inspiring other countries and demonstrating that the adoption of more ambitious environmental policies does not harm overall economic welfare and the wellbeing of citizens. To that end, green and low-carbon innovations need to be rolled out in massive investments. Macro-economic policy instruments should reflect this need.

  5. The window of opportunities to reach the Paris Agreement targets is rapidly closing. All countries, in particular G-20 countries, need to strengthen their climate policies. More efforts should be devoted to step up international cooperation in the field of environmental and climate governance. In addition, more financial support needs to go to developing countries which are particularly vulnerable to climate change.


(1) https://www.carbonpricingleadership.org/report-of-the-highlevel-commission-on-carbon-prices
(2) On this issue see SDSN 2021.Transformations for the Joint Implementation of Agenda 2030 for Sustainable Development and the European Green Deal. Sustainable Development Solutions Network (SDSN). See also Feindt, S., Kornek, U., Labeaga, J.M., Sterner, T., & Ward, H. (2021). Understanding Regressivity: Challenges and Opportunities of European Carbon Pricing. Energy Economics, 105550, DOI: https://doi.org/10.1016/j.eneco.2021.105550

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1 Jos Delbeke Belgium
2 Christian Gollier France
3 Simone Borghesi Italy
4 Phoebe Koundouri Greece
5 Xavier Labandeira Spain
6 Aldo RAVAZZI DOUVAN Italy
7 Dominique Bureau France
8 Simon Dietz United Kingdom
9 Andrea Tilche Italy
10 Ben Groom United Kingdom
11 Thomas Sterner Sweden
12 Ottmar Edenhofer Germany
13 Herman Vollebergh Netherlands
14 Cameron Hepburn United Kingdom
15 Maria Loureiro Spain
16 Pierre DE SAINTE AGATHE France
17 Andreas Löschel Germany
18 Robert Pietzcker Germany
19 Eswaran Somanathan India
20 Pierre-Henri Morand France
21 Sylvain Chabé-Ferret France
22 Joelle Noailly Switzerland
23 Ingmar Schumacher Luxembourg
24 Pierre-Henri Morand France
25 Régis GAIGNAULT France
26 Yann Kervinio France
27 Paul Dumas France
28 Olivier Gossner France
29 Julius Andersson Sweden
30 Jean-Christophe Poudou France
31 Knut Einar Rosendahl Norway
32 Sebastian Buhai France
33 Sandra Rousseau Belgium
34 Anni Huhtala Finland
35 Loic Berger France
36 Elisa Delpiazzo Italy
37 rick van der Ploeg United Kingdom
38 Marten Ovaere Belgium
39 Mathias Reynaert France
40 Eirik Romstad Norway
41 Joachim Schleich France
42 Giovanni Signorello Italy
43 Alessandro Spiganti Italy
44 Natalie Struwe Austria
45 Stefan Baumgärtner Germany
46 MASSIMILIANO MAZZANTI Italy
47 Philipp Steinbrunner Italy
48 Armon Rezai Austria
49 Arnaud Goussebaile Switzerland
50 Marc Brightman Italy
51 Giuseppe Cucuzza Italy
52 Mark Koetse Netherlands
53 Achim Hagen Germany
54 Thomas Stoerk Belgium
55 Johanna Jussila Hammes Sweden
56 Carlo Giupponi Italy
57 Jakob Mayer Austria
58 MªDolores Garza-Gil Spain
59 PHILIPPE DE DONDER France
60 Alena Miftakhova Switzerland
61 Eleanor Bacani Philippines
62 Giulio Galdi Italy
63 Esther Blanco Austria
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65 Christoph Rheinberger Finland
66 David Wuepper Switzerland
67 Thomas Douenne Netherlands
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70 Carlo Carraro Italy
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95 Stephen Smith United Kingdom
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97 Sudeep Budhaditya Deb India
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100 Edwin Woerdman Netherlands
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111 Paula Castro Switzerland
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115 Erin Baker United States
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117 Håkan Eggert Sweden
118 Torben Mideksa Sweden
119 Richard Schmalensee United States
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122 william shaw United States
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161 Anke Leroux Australia
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164 Franklin Amuakwa-Mensah Sweden
165 Karen Pittel Germany
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167 Heinz Welsch Germany
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193 Maryam Fallah Iran
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198 Frank Convery Ireland
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206 Baruti Likoyi Belgium
207 Jeremy van Dijk Switzerland
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217 Jessica Reyes United States
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219 Johannes Diederich Germany
220 Giovanni Marin Italy
221 Edwin van der Werf Netherlands
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226 Alain Henry Belgium
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