Three key elements of the “Fit for 55” legislative package have come into force: the carbon border tax, the Just Transition Fund, and the carbon price for petrol and residential heating.

On 25 April, the EU Council adopted the final versions of three major changes to EU climate legislation, and they have now come into effect. Significant changes lie ahead for businesses and citizens in the coming years. This trio of changes forms the basis of the “Fit for 55” legislative package proposed in the summer of 2021, which aims to reduce greenhouse gas emissions in the EU by 55% by 2030 compared to 1990 levels and implements the EU Green Deal set out by European Commission President Ursula von der Leyen.

German MEP Peter Liese, who represented the centre-right European People's Party in the negotiations, described the adopted “Fit for 55” package as the “most significant climate protection legislation ever”, surpassing the US Inflation Reduction Act in terms of regulatory changes.

CBAM (Carbon Border Adjustment Mechanism): the world's first carbon border tax

The adoption of the world's first carbon border tax, known as the Carbon Border Adjustment Mechanism (CBAM), will likely attract the most international attention. Goods imported into the EU from countries with less stringent climate legislation will be subject to an import duty to avoid “carbon leakage”, where European companies might shift production outside the EU to avoid carbon pricing or face unfair global competition. The EU has given this measure an unfortunate name, as calling it a tax or tariff would have required a unanimous vote in the Council, which would have been subject to a veto and easier to challenge at the World Trade Organisation.
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