Amid fears of rising heating and gasoline costs in the coming years, the European Commission has proposed changes to the EU’s carbon pricing system. Brussels wants to expand an emergency mechanism that would be triggered whenever the price of carbon dioxide rises too sharply, the Commission announced on Thursday. This is primarily a response to concerns from Eastern European member states.
At its core, the issue concerns the European Emissions Trading System (ETS2) for the building and transport sectors, scheduled to begin in 2028. Fossil fuel companies will then be required to purchase CO2 certificates corresponding to the emissions generated by the fuels they sell. The companies are expected to pass on the additional costs to consumers, making refueling and heating more expensive.
An emergency mechanism already exists in case prices rise too sharply. In such a case, the EU can release additional certificates from the so-called Market Stability Reserve (MSR) onto the market, thereby lowering the price. The Commission has now proposed that twice as many certificates be issued annually under this framework as currently planned.
The change is intended to stabilize prices, but it also means that emissions could fall less sharply than originally planned. If the reserve were fully utilized, this would result in certificates for more CO2 than emissions trading is actually designed to save annually. Such intervention could therefore jeopardize the EU’s climate targets.
To ease the burden on consumers and businesses, a large portion of the revenue from emissions trading is to be channeled into a climate social fund. The Commission also plans to bring this financing forward: EU countries should be able to finance corresponding projects as early as next year. The European Investment Bank (EIB) is to provide the initial funding for these projects.
In Germany, the introduction of the EU system is not expected to cause a sharp rise in prices initially, because a similar system already exists here – unlike in Eastern Europe, for example. However, the German government is also planning changes to the German pricing system: In 2027, the German CO2 price will not increase as previously planned, but will remain at the 2026 level.
Some EU countries, such as Poland and Slovakia, want to postpone the European system by several years or even abolish it altogether. They have already partially succeeded in recent weeks: Instead of a target date at the beginning of 2027, both the European Parliament and the Council of the 27 EU member states have voted in favor of a start in 2028. The postponement still needs to be officially approved.
AFP – Translated by Blackout News