Saturday

25th Jun 2022

ETS expansion to homes and cars raises bills fears

  • Expanding the carbon market to include maritime transport has seen prices on the carbon markets double, to around €50-a-tonne, since April (Photo: dawvon)

On Wednesday (14 July), the European Commission revealed its ambitious new climate strategy for 2030 and beyond.

'Fit for 55', as the complex set of proposals is called, aims to reduce EU carbon emissions by 55 percent by 2030, compared to 1990. It is an important milestone in the EU's effort to become the first continent to reach net-zero by 2050.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

"Reeaaally Epic" was how commission vice-president Frans Timmermans described the massive two year-long effort that led to this package. If everything goes according to plan, the proposals will come into effect in 2024.

A market-based solution

At the heart of the proposal is a revision and expansion of the EU's carbon emissions trading scheme (ETS).

Currently, the ETS scheme limits emissions in the power sector, and manufacturing industry, and aviation operating in Europe. Now it is set to expand to include housing and shipping, and impose stricter limits on emitters.

According to the EU, infrastructure covered by the ETS reduced emissions by about 35 percent between 2005 and 2019.

However, transport and housing have lagged behind their emission-reduction goals. Expanding the carbon market to include these sectors could be an effective solution.

In expectation of this further tightening by the EU, prices on the carbon markets have already doubled, to around €50-a-tonne, since April.

According to a Bloomberg report, some analysts expect prices to rise to €100 by the end of this year. This will set up the industry for a reduction of 60 percent.

Low-income households hit disproportionately

The expansion of the ETS scheme to include housing and transport will significantly raise fuel- and energy prices for households in the coming years.

Following a similar scheme, Germany earlier this year already introduced carbon-pricing on housing and transport.

In assessing the impact the German Institute for Economic Research (DIW) reported that higher carbon prices in the housing and transportation sectors will disproportionately affect low-income households.

"Extending the carbon market to heating and fuel gave us the 'Yellow Vests'," MEP Pascal Canfin, who chairs the European Parliament's environment committee, warned Timmermans in a parliamentary debate in June.

Similar worries are voiced by the European Environmental Bureau, which called the plan "unfit and unfair."

A 'Social Climate Fund'?

Timmermans for his part acknowledged the regressive nature of the ETS scheme and proposes a Social Climate Fund. This will provide the EU with €20bn a year in spending power to help counter so-called 'energy poverty.'

Countries disproportionally reliant on fossil fuels, or with a large rural population and poor access to public transport, will be especially disadvantaged - but it is still unclear how the funds will be distributed.

According to the commission, that initiative lies with member states, who will need to set up 'climate plans', to soften the effects of the higher fuel and energy prices, themselves. The commission will pay 50 percent of those proposals.

Lucie Matterna, head of EU politics at the E3G climate change think-tank, told EUobserver that she welcomes the social fund, but said it will likely struggle to provide income support and investment across all member states.

Revenues from the social climate fund will be low, and will not be commensurate with the massive task of renovating 35 million homes and getting millions of cars off the road.

According to EU commission president Ursula von der Leyen, 'Fit for 55' represents "a clear and guiding principle, that will incentivise consumers and producers." But he political debate on who will foot the bill is only just beginning.

Author bio

Wester van Gaal is a freelance journalist with a focus on green finance and climate science. Previously, he was editor-in-chief of Vice, Motherboard, a science-based website, and climate economy journalist for The Correspondent.

Column

How to make 'Fit for 55' fit for citizens

The first battle of the 'Fit for 55' package has to be fought on the home front. Europe will also have to win the battle for the hearts and minds of citizens, mindful of the 'yellow vests'-style protests.

Analysis

'Fit for 55': what is it, and why now?

The European Commission will unveil its 'Fit for 55' package of revised climate and energy laws this week. We take a look at what is expected to be in it - and why it matters.

Industry lobbied against quick climate action in 'Fit-for 55'

A new report reveals how key industry groups in Europe have been actively lobbying against some of the upcoming proposals under the 'Fit for 55' package, to weaken climate regulation - despite their public support for net-zero emissions by 2050.

EU agency warns ETS emission-cuts are off track

The European Environment Agency warned current projections indicate emissions-reductions in member states covered by the EU's cap-and-trade carbon market are insufficient to meet the bloc's new climate targets for 2030 and 2050.

Poland threatens to veto EU's Fit for 55

Poland's climate minister threatened to veto the bloc's landmark climate policy Fit for 55, with Portugal accusing others of lies over consumer energy prices.

News in Brief

  1. Possible terror attack halts gay pride in Norway
  2. Belgian PM: Gas shortage requires joint response
  3. Bulgarian MPs set conditions for lifting enlargement veto
  4. Latvia: We need a brigade-size Nato force to 'feel safe'
  5. Deal reached on controversial energy treaty reform
  6. EU carbon emissions from energy up 6% in 2021
  7. Germany step closer to gas rationing
  8. Albania: EU 'disgrace' at lack of enlargement progress

Stakeholders' Highlights

  1. Nordic Council of MinistersEmerging journalists from the Nordics and Canada report the facts of the climate crisis
  2. Council of the EUEU: new rules on corporate sustainability reporting
  3. Nordic Council of MinistersNordic ministers for culture: Protect Ukraine’s cultural heritage!
  4. Reuters InstituteDigital News Report 2022
  5. EFBWW – EFBH – FETBBHow price increases affect construction workers
  6. Nordic Council of MinistersNew Nordic think tank examines influence of tech giants

Latest News

  1. EU summit's uncertainty in the face of economic war
  2. Next winter's gas looms large at EU summer summit
  3. Ukraine becomes EU candidate after 120 days of war
  4. How to enhance EU cybersecurity
  5. Competing options for EU enlargement
  6. MEPs demand to exit 'ecocide treaty' after reforms 'fail'
  7. Finland optimistic in Turkey talks over Nato
  8. Hungary's global-tax veto seen as 'blackmail'

Join EUobserver

Support quality EU news

Join us