The EU Climate Law and the European Green Deal have set the European Union on an ambitious path to cut greenhouse gas emissions by 55% by 2030, and to reach net zero by 2050. To reach these targets, the EU has adopted the Fit for 55 package of policies and regulations, which is designed to provide a robust economic incentive for the EU's industry, transport, and building sectors towards decarbonisation.
Alongside financial incentives to support the green transition, the Fit for 55 package introduces a range of tax-like measures poised to significantly raise the financial liability of companies with direct or hidden environmental and climate impacts.
In the coming years, we will see a marked rise in the costs associated with the consumption of fossil fuels for industrial use and transportation, the purchase of carbon-intensive goods, and the use of plastic packaging.
Since the impact of the Green Deal extends beyond the Fit for 55 package, our tailored solution also offers a high-level assessment of a company's exposure to upcoming EU environmental regulations contained in other policy packages such as the Circular Economy Action Plan, the Corporate sustainability Due Diligence Directive (CSDDD), and the Sustainable Finance Strategy.
Solution
Have you ever considered the potential financial impact on your bottom line of climate inaction?
Our solution offers an overview of tax costs within a low-carbon regulatory environment and helps you prioritise your actions to mitigate such costs.
The FF55 Impact Assessment solution, developed by PwC's experienced team of environmental engineers and climate legal experts, helps companies anticipate the financial impact of the Fit for 55 package on their bottom line. This is done through carbon pricing and tax modelling of operations and supply chain. Leveraging your own data, we generate forecasts for short and medium-term actions over a 10-year period.
Our approach
Why our FF55 solution could be relevant for you
Compliance
Environmental laws are put in place to mitigate impacts on the environment. Non-compliance can lead to severe legal repercussions including penalties, fines and potential legal action like the suspension/ revocation of the licence to operate.
Be compliant with the latest environmental standards is not only important from a legal perspective but also to mitigate risks (e.g. reputational) and for a long-term sustainability strategy.
We can support your compliance journey with our Green Taxes module. Once tailored to your needs, you’ll be able to create reports and be in line with legal requirements.
Cost Control
Companies having a decarbonisation trajectory requiring significant investments must monitor accurately that projects remain on track (e.g., carbon footprints, NPVs, DCF models). The environmental taxation adds a layer of complexity for decision-makers. When it comes to project budgeting, taxation can play a crucial role in the decision-making process.
With the Green Taxes module, you’ll be able to better estimate project costs and the return on investment. This additional information will help you in your decision-making process when it comes to energy, logistics, raw materials flows.
Cost Forecasting
Environmental taxes, particularly carbon taxes, have far-reaching effects that extend across your organsation's operations. From supply chains to operations and stakeholder engagement, these taxes influence various aspects of your business. Having a comprehensive understanding of the implications allows you to strategize and implement targeted solutions in the long run.
With the Green Taxes module, you would be able to forecast upcoming taxation cost and simulate different scenarios (e.g., energy, logistics).
Cash
Environmental taxation differs from direct taxation as it impacts the business above-the-line. In addition, planet taxes constitute cash expenditures impacting companies’ cash flow statements. It is important for the companies’ management to identify and prioritise actions to reduce cash outflows, thus protecting company’s bottom line.
The Green Taxes module will help to improve the company cash position by identifying sustainable practices that reduce energy consumption, waste, and carbon-related costs throughout the supply chain.
This assessment will help identify your activities’ exposure to environmental taxes and determine what elements should be prioritised in your decision-making process. This is for example relevant in the following cases:
Your CFO wants to integrate environmental taxes in the strategy
An ESG/Sustainability Officer wanting to make the data actionable for investments
Companies who want to map their environmental tax exposure for new CAPEX investments (energy transition, activity expansion, etc.)
Companies who want to have better control on their carbon cost
You want to get a better view on ROI for energy transition and/or low-carbon projects
Scope of the assessment
- EU Emission Trading System
- EU ETS 2
- Carbon Border Adjustment Mechanism (CBAM)
- Energy Taxation Directive (ETD)
- Plastic Taxes
- Other Policies
EU Emission Trading System
The EU Emission Trading System (EU ETS) is a carbon pricing scheme that aims to reduce greenhouse gas emissions by carbon intensive industries across the EU since 2005.
EU ETS - Phase out free allowances: So far, the EU provided industries with carbon certificates (the right to emit 1 ton of CO2e free of charge) to avoid impacting the competitiveness of European industries. But starting in 2026, these free allowances will gradually phase out, which will lead to an increase in carbon pricing. We will identify your exposure to this new reality based on specific procurement data, and estimate the potential (hidden) cost of carbon your company is facing.
- EU ETS Maritime: The maritime sector has been included in the EU ETS since January 2024. Based on your logistics information, we will estimate the (hidden) cost of carbon your company’s maritime transport represents.
EU ETS 2
Complementing the EU ETS, the EU ETS 2 seeks to establish a carbon pricing mechanism for carbon emissions originating from building heating, small industries, and road transport.
Based on information from your energy consumption and transport activities, we will estimate the upcoming carbon costs your company will face.
Carbon Border Adjustment Mechanism (CBAM)
The CBAM aims to impose a carbon price on imported goods based on their carbon footprint. CBAM has a far-reaching effect as it impacts 700+ references of goods (CN Codes) among the following commodities: Iron & Steel, Aluminium, Cement, Fertilisers, Electricity and Hydrogen.
Since October 2023, impacted companies have to report on their imports and the corresponding embedded emissions on a quarterly basis.
Based on your customs data, we will identify your exposure to CBAM and calculate potential financial costs for your company.
Energy Taxation Directive (ETD)
The ETD revision aims to introduce higher tax rates on energy consumption, considering the environmental impact of the energy source. It is important to note that the directive is currently in the proposal stage.
Based on your energy consumption, we will estimate the resulting energy taxes you might face.
Plastic Taxes
Plastic pollution is raising concerns worldwide, and an International treaty to tackle plastic waste is soon to be signed at UN level. To achieve the goal of reducing plastic pollution, a number of European countries, including Spain, Italy, and the United Kingdom, are implementing plastic packaging taxes, with many more expected to follow.
Based on your plastic consumption, we will estimate the plastic taxes your company will pay.
Other Policies
Depending on your activities, we can also provide additional insights on the possible impacts from other Green Deal policies, including:
The Renewable Energy Directive (RED)
The Energy Efficiency Directive (EED)
The Corporate Sustainability Reporting Directive (CSRD)
EU Deforestation Regulation
The Green Claims Directive
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