The EU’s new carbon pricing scheme may result in higher-than-expected gas and oil prices

Key lawmakers told Euroactiv that the new carbon pricing mechanism for transport and heating fuels (ETS2), which is scheduled to be implemented throughout the EU in 2027, may result in larger price increases than first anticipated.

“As of 2027, the EU will start pricing CO2 emissions from buildings and road transport, with a new carbon pricing scheme, known as the Emissions Trading System 2 (ETS2).

When the system was agreed in 2023, EU lawmakers promised that prices would remain below €45 per tonne of CO2, meaning a price surcharge of about 10 cents per litre diesel or petrol.

Peter Liese (CDU/EPP), who was the European Parliament’s chief negotiator on the file, told Euractiv he was “a little more pessimistic now” that the €45 limit could be kept, “because we are experiencing setbacks in terms of both mobility and buildings.”

Since the ETS2 is market-based, if Europe is less successful at phasing out its reliance  on CO2-intensive energy sources, demand for CO2 emission certificates will rise and the price of carbon will jump accordingly. However, Liese added that “it is our joint task to avoid this scenario”.

Emissions from buildings, mostly caused by heating systems, and road transport, mostly caused by cars and lorries, are currently falling slower than the European Commission forecast.

Meanwhile, additional laws to reduce emissions in those sectors – such as the EU buildings directive or a German law to ban new gas and oil boilers (heating law) – have been watered down substantially, or will only take full effect at a later stage, such as the de facto phase-out of internal combustion engines by 2035.

These developments could lead to higher demand for emission allowances in 2027, and therefore to a higher carbon price.”

Carbox tax is the stick that will hold us to the ground. How will Malta be affected?

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