HOTREC welcomes agreement on Emission Trading Scheme for buildings and transport

On 18 December 2022, the European Parliament and the Council of the European Union reached a provisional political agreement on the revision of the EU’s Emissions Trading System (ETS). 

The agreement provides for the creation of a second ETS covering greenhouse gas emissions from building heating and road transport (ETS2). 

This new carbon market, separate from the current one, will apply to distributors who supply fuel to buildings and road transport, but also to other sectors (excluding agriculture and fisheries). 

Positively, the co-legislators agreed that ETS2 will start in 2027, one year later than in the Commission’s original text. In addition, the agreement introduces a temporary exemption possibility proposed by the EU Council, until the end of 2030, for Member States that have already introduced a carbon tax at national level. 

Overall, HOTREC welcomes the co-legislators’ approach and the fact that the Parliament has reconsidered its position, which envisaged applying ETS2 to public sector from 2025 and then private sector (e.g. households) from 2029 onwards. Instead, the ETS will apply, as HOTREC has advocated for, to both private and public sectors.  

To contain the socio-economic impact of the ETS2, the definition of a price cap was introduced, as well as the inclusion of a mechanism to take into account energy prices (‘emergency break’). In the event that oil or gas prices get too high, the start of the ETS2 will be postponed to 2028. 

Another measure to mitigate the socioeconomic impact of the ETS is the creation of a Social Climate Fund to help the most vulnerable households. In this respect, the co-legislators agreed to increase the size of the Fund to € 65 billion (not including co-financing) and set it up for 2026 before the launch of ETS2.