THE STATE OF THE EUROPEAN UNION Towards a new legislative term

105 Following three years of intense negotiations among the European institutions, April 2023 saw the approval of climate legislation that lays the foundations of Europe’s decarbonisation strategy for the coming decades. The directive amending the Emissions Trading System and the Carbon Border Adjustment Mechanism are two in- terconnected regulations that form part of the European Commission’s flagship climate package, “Fit for 55”. It aims to make Europe the first climate-neutral continent and lead the global charge against climate change. The two pieces of legislation reviewed here will raise the price of polluting and lead to a reduction in emis- sions. But they will also ensure there is a just transition that takes account of the interests of the most vulner- able sectors. To better appreciate the importance of the recent- ly completed EU reform, we must rewind to the Paris Agreement, signed in December 2015 during the United Nations Climate Change Conference. The agreement es- tablished an ambitious decarbonisation agenda, one which most of the international community adopted. The commitment consists of keeping the increase in global temperature this century under 2 °C above pre- industrial (1990) levels and pursuing efforts to limit the temperature increase to 1.5 °C. A second major milestone to understand the EU’s reform was undoubtedly the approval of the European Green Deal (EGD). The current European Commission presented the EGD at the start of its term as its primary government programme for the coming years. Its scope, as we shall see, will extend far beyond the current leg- islative period. The EGD is fully aligned with the decarbonisation goals of the Paris Agreement and adopts the deal’s limit regarding temperature increase. It also sets the target of reaching a net-zero greenhouse gas (GHG) emissions economy by 2050, making the EU the zone with the most rigorous decarbonisation time frames globally. The EGD charts a real road map for climate neutrality. It provides for phasing in a series of transformative poli- cies that encompass not just reducing GHG emissions, but a broad array of other interconnected and mutually reinforcing matters, like supplying clean energy to the entire economy, preserving biodiversity, or the circular economy. It also affects issues closely linked to citizens’ everyday lives, such as household energy consumption, food, road transport or buildings. Ultimately, the EGD comprises a comprehensive long- term strategy to achieve the green transition of the entire economy, decoupling economic growth from the use of re- The European Green Deal and the Carbon Pricing Policies to Reach a Net- Zero Economy: The Revised Emission Trading System and the Carbon Border Adjustement Mechanism José Luis Escario