Investment Institute
Macroeconomic Research

Fit for 55: A carbon pricing upheaval


Key points

  • The European Commission (EC) has unveiled a suite of measures, known as ‘Fit for 55’, to help deliver the European Union (EU)’s Green Deal objective of at least a 55% reduction in greenhouse gas emissions from 1990 levels by 2030.
  • The core of the proposals relies on carbon pricing. In this report, we explore the underlying mechanisms of the EU Emissions Trading System (ETS) and the Carbon Border Adjustment Mechanism (CBAM).
  • Phase 4 of the EU ETS revision (2021-2030) introduces more ambitious emissions reduction targets, extends the system to aviation and shipping and creates a new ETS scheme for fuels in road transport and buildings.
  • The EC also proposed phasing in a CBAM from 2023 to 2026. This would apply to sectors with a high risk of carbon leakage – iron and steel, cement, fertiliser, aluminium and electricity generation.
  • Carbon pricing also raises revenues. We discuss the different initiatives proposed by the EC to increase its financing capacity and smooth the financial impact on the most vulnerable households.
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    This document is for informational purposes only and does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities. 

    It has been established on the basis of data, projections, forecasts, anticipations and hypothesis which are subjective. Its analysis and conclusions are the expression of an opinion, based on available data at a specific date. 
    All information in this document is established on data made public by official providers of economic and market statistics. AXA Investment Managers disclaims any and all liability relating to a decision based on or for reliance on this document. All exhibits included in this document, unless stated otherwise, are as of the publication date of this document. 
    Furthermore, due to the subjective nature of these opinions and analysis, these data, projections, forecasts, anticipations, hypothesis, etc. are not necessary used or followed by AXA IM’s portfolio management teams or its affiliates, who may act based on their own opinions. Any reproduction of this information, in whole or in part is, unless otherwise authorised by AXA IM, prohibited. 

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