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Implications of EU Fit for 55 Package for Korean Carbon Neutrality Policy

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  • Kang, Ji Hyun

    (Korea Institute for Industrial Economics and Trade)

Abstract

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. The purpose of this paper is analyze the potential impacts of the Fit for 55 initiative and emphasize the importance of transparency and data sharing in building public support for the policy.

Suggested Citation

  • Kang, Ji Hyun, 2021. "Implications of EU Fit for 55 Package for Korean Carbon Neutrality Policy," Industrial Economic Review 21-22, Korea Institute for Industrial Economics and Trade.
    • Handle: RePEc:ris:kieter:2021_022
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    Keywords

    EU Fit for 55; carbon neutrality; environmental policy; emissions; emissions policy; climate change; carbon neutrality policy;
    All these keywords.

    JEL classification:

    • F55 - International Economics - - International Relations, National Security, and International Political Economy - - - International Institutional Arrangements
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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