European instruments aimed at reducing greenhouse gas emissions

The European Commission's 'Fit for 55' legislative package aims to equip the European Union (EU) with the means to reach climate neutrality by 2050 by reducing greenhouse gas emissions. It proposes (i) to revise the emissions trading system to set a higher carbon price, (ii) to set up a carbon border adjustment mechanism at the EU's borders to reduce 'carbon leakage' and (iii) to encourage third countries to commit to reducing their emissions. The characteristics of these mechanisms pose several challenges: succeeding in decarbonising economies while preserving the competitiveness of European companies, complying with the rules of the World Trade Organization and the EU's other international requirements, and cushioning the macroeconomic and social impacts. The French Presidency of the EU, which ended last June, made significant progress in these priority areas. (authors)