New EU Carbon Market Set To Hammer Households And Small Businesses

Authored by Charles Kennedy via OilPrice.com,

The European Union’s new emissions trading system, expected to take effect in 2027, is set to hike prices for home heating and transportation, research firm BloombergNEF says in a new report.

The new EU Emissions Trading System for buildings, road transport, and small industry, dubbed ETS2, is scheduled to become fully operational in 2027.

ETS2 will cover and address the carbon dioxide (CO2) emissions from fuel combustion in buildings, road transport, and additional sectors, mainly small industry not covered by the existing Emissions Trading System – EU ETS.

“So far, emission reductions in those sectors have been insufficient to put the EU on a firm path towards its 2050 climate neutrality goal. The carbon price set by the ETS2 will provide a market incentive for investments in building renovations and low-emissions mobility,” the European Commission says.

Although it will be a ‘cap and trade’ system like the existing EU ETS, the ETS2 will cover emissions upstream. 

This means that it will be fuel suppliers, rather than end consumers such as households or car users, that will be required to monitor and report their emissions.

User may not pay directly, but fuel suppliers are likely to pass on the higher costs due to the carbon emissions trading.

Two years after the 2027 launch, the price of CO2 could jump to as much as $161 (149 euros) per metric ton in 2029, according to BloombergNEF’s analysis. This would be more than double the current price of CO2 under the existing EU ETS trading system for emissions from industry and power plants.

The carbon price in EU ETS2 could hike costs for road transportation by 27%, while bills for home heating could spike by as much as 41%, BNEF’s analysis has found.

“Ambitious targets and high costs risk making households and small businesses the losers,” the report reads.